Holding mutual funds in a demat account

Investors can now hold their mutual fund units in dematerialised form. Investor who own a demat account can use it to hold mutual fund units. It is however not mandatory to convert units into demat form. Investors can also use the electronic platforms of stock exchanges to transact in their mutual fund units through the brokers of the stock exchange.

For this, investors have to use a standard form specified by the depository (CDSL or NSDL) called the conversion request form ( CRF) or destatementisation request form (DRF). This form is available with the depository participant (DP). The completed form, along with the statement of account (SoA) which shows the unit holdings of the investor, has to be submitted to the DP. The DP will verify and forward it to the registrar and transfer agent, who in turn will confirm the details of units held in the SoA. Units will be credited to the demat account after this confirmation.

1. ISIN: Each mutual fund is assigned an ISIN ( International Security Identification Number). It can be obtained from NSDL or CSDL and has to be included in the CRF/DRF.

2. Details: The details of each scheme with respect to scheme name, ISIN and number of units held should be correctly mentioned in the CRF/DRF and should tally with the SoA being attached.

3. Holding Pattern
The holding pattern of the mutual fund folios and that of the demat account should be the same, and in the same order.

4. Free & Lock-in Units
Mutual fund units such as those of tax-saving schemes may be subject to lock-in. Different forms have to be used for free and locked-in units of the same scheme even if held under the same folio.

Points to note
Signatures: The CRF/DRF has to be signed by all the unit holders of the folio, irrespective of the mode of operation of the folio.

Transacting with the mutual fund: Once units are dematerialised, investors cannot transact in them directly with the mutual fund or investor service centres. Transactions are routed through the stock exchange platform or through the DP.

Re-materialsation of units: Investors can also make an application for re-materialisation of the dematerialised units and only then transact with the mutual fund.