What you should know about holding mutual fund units in demat form

Mutual funds can either be held in physical or in demat form in the demat account held by the holder with a depository participant (DP). The advantage of holding units in a single demat account is the ease of transaction it allows.

Demat option at time of purchase
At the time of buying units, one can indicate if the units are to be held in demat form. Demat account details need to be mentioned in the application form. Once the details have been validated, the units are credited to the account.

Demat of units after initial purchase
Units held in physical form can be converted to demat form later. The unit holder has to fill up a Dematerialisation Request Form (DRF). Scheme name, folio number, demat account details must be mentioned and the DRF should be signed by the holder.


Documents to be submitted
The signed DRF should be accompanied by the latest account statement issued by the mutual fund reflecting the units to be converted in demat form. This application must be submitted to the DP for processing.

Verification and conversion to demat
The DP will verify the details submitted in the form and forward the same to the Registrar and Transfer (R&T) agent of the AMC which has issued the units. The R&T Agent, upon due verification, will issue necessary instructions to the DP and the units will be credited to the demat account.

Points to note

• NRIs can opt to hold units in demat mode, provided they have a demat account.
• If in future the demat units need to be converted to physical form, a rematerialisation request form must be filled and submitted to the DP.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)