If your demat account’s depository is the National Securities Depository Limited (NSDL), then the process of converting the mutual fund units can be done both online and offline. However, if the depository is Central Depository Services Limited (CDSL), then the process is still offline only. Hence, you need to first check and confirm your depository before initiating the process of conversion.
According to NSDL’s October 2023 newsletter “From May 2023, convert your MF Folios/statement of account into demat account online using NSDL e-CAS.”
“Investors looking to convert their physical mode mutual fund holdings into demat mode and vice versa have two options. The first option is the traditional offline method, which involves collaborating with Depositories i.e., NSDL and CDSL. The second option is using NSDL’s online platform for converting physical mode mutual fund units into demat mode and vice-versa. The second option is a fully digital process. CDSL does not offer the option of conversion in online mode,” says G. Senthil, Chief Business Development Officer, KFinTech Limited, registrar and transfer (RTA) agent to mutual funds and companies.
Mutual funds held in demat account are held with depositories, while in physical mode it is held with the Registrar and Transfer Agents (RTAs). When units are held in physical form, one can ask the mutual fund house to send the Statement of Account (SOA) either to the registered address or by email. The statement will show all the details related to investment. If the units are held in demat form, then one should ask the stockbroker for the statement showing the same.
Prerequisites to convert mutual fund units to demat
Before you start the process of converting mutual fund units from physical to demat or vice versa, there are certain things you must keep in mind.Firstly, an individual must receive the Consolidated Account Statement from NSDL by email. Regardless of where the mutual fund units are held, each month depositories and RTAs will send an investment statement in the form of CAS. This is either sent to either your registered email ID or physically at your registered address, if no email ID is not registered every month. CAS is a PAN-based stock and mutual fund investment statement. This means that all stocks held in a demat account and mutual fund units in demat, or physical units will be reflected in the CAS.
CAS received from NSDL has a customised unique link that helps in the conversion of units. NSDL e-CAS statement can be subscribed to by going to https://nsdlcas.nsdl.com/ and typing in your CAS ID and PAN in the dedicated box on the website.
Secondly, the mode of holding and joint holders in mutual fund units in physical form must be the same in the demat account.
“In both physical and demat mode, the mode of holding the mutual fund investment must be the same. If the mode of holding physically held mutual fund is joint holder, then in demat accounts too should be joint holder. The mutual fund units cannot be converted if the mode of holding them differs upon conversion from physical to demat or vice-versa. Further, the joint holders must be same in both physical and demat mode,” says Roshan Moondra, Executive Vice President – Operations, Anand Rathi Shares and Stockbrokers.
Thirdly, “Individuals should ask their depository participant (DP) if the mutual fund units held by them are eligible for conversion. This is because ELSS mutual funds under the lock-in period, or mutual fund units pledged with any financial institution or stockbroker are not eligible for conversion,” says Tejas Khoday, CEO and co-founder, FYERS, a stockbroker.
Step-by-step guide on converting mutual fund units from physical to demat
Online process (Only for NSDL demat account holders)Step 1: Open the NSDL e-CAS received on your email.
Step 2: There is a dedicated link in the NSDL e-CAS. This link can be found on top of mutual fund details.
Source: NSDL’s YouTube Channel
Presently, there is no dedicated website link for conversion of physical mutual fund units into demat. According to NSDL, the customised link is unique for each individual and serves as a soft authentication since only the intended parties would receive it. When the customised link is clicked, an OTP authentication needs to be done to start the conversion process.
Step 3: A new tab will open on your screen. Here you will be required to enter PAN details and fill in the verification captcha code. Then click ‘Generate OTP’.
Source: NSDL YouTube Video
Enter the OTP received on the NSDL demat account registered mobile and email ID (the same OTP is received on both) in the designated box on a new webpage. Click ‘Submit’ once OTP is typed.
Source: NSDL YouTube Video
Step 5: Now an individual has to select the demat account where the physical to demat converted mutual fund units will reside. Click ‘Submit’ once the demat account is selected.
Source: NSDL YouTube channel
Step 6: A new webpage detailing every mutual fund scheme held in physical units’ mode and are eligible for conversion to demat mode will be displayed. An individual can click on the small box next to the scheme name and then choose to convert them to demat mode. Click ‘Review’ once selection is finalised all units of the mutual fund scheme will be dematerialised. Dematerialisation of partial mutual fund units is not allowed using the online process. This can be done using offline process only.
Source: NSDL YouTube channel
Step 7: The final step is the review step. Check carefully if the selected mutual fund schemes for conversion (in Step 6) is shown here. If not, then go back and select them again. If they are selected, click on ‘Apply for conversion’ button.
“In this NSDL online process no physical documents are required to be submitted. It generally takes 2 to 15 days for processing and converting the mutual fund units from physical units to demat form,” says G. Senthil from KFinTech.
Offline conversion process
There is an offline process to convert physical mutual fund holdings to demat mode. This mode can be used by both CDSL and NSDL account holders.
Here’s a step-by-step guide on how to convert physical units of mutual fund to demat form:
Step 1: Contact your DP who are usually stockbrokers and ask for MF-DRF i.e., Mutual Fund -Destatementised Request Form. Fill in the form and submit it to the stockbroker along with the latest SOAs physically. These documents can either be sent to the registered office or nearest branch office of the stockbroker.
“If there are joint holders, then all holders should sign the form. MF-DRF detail should be properly filled and duly signed by holder(s) on ‘Signature with DP’ and ‘Signature with AMC/RTA’ option. If an individual has put same signature both with DP and AMC/RTA then the signature in both the boxes will be same,” says Moondra.
Step 2: Once the stockbroker or DP gets the MF-DRF and the SOAs, a two-level verification will happen. “The first verification is done by a stockbroker. They will verify the ISIN number of the mutual fund scheme, quantity of mutual fund units, mutual fund folio number, etc. with the details mentioned in the SOA. If the data is correct, then the conversion form along with the documents is sent to RTAs and AMCs. After due verification, the AMC / RTA will confirm the conversion request executed by stockbroker or DP and the mutual fund units will be credited in your demat account,” says Khoday.
According to Moondra, the timeline for such a conversion request will be as follows:
- DP level: Upon receiving the conversion form along with the supporting documents it is generally processed and sent to RTA/AMC by 2 to 3 working days.
- In-Transit: Hard copies of the form and documents will be couriered to RTA/AMCs. It might take 3 to 4 working days for this.
- Processing the conversion: RTA/AMCs typically takes about 21 days to complete the conversion process.
Khoday says that once the conversion starts, a formal confirmation intimation via SMS and email will be sent to the investor, thereby providing a record of the conversion transaction. After the conversion process is completed, another intimation will be sent.
Conversion of demat held mutual fund units to physical units
If an individual wants to convert the demat-held mutual fund units to physical units, then there is no online process either with NSDL or CDSL. An individual will have to submit an offline request for this.
An individual needs to approach his RTAs servicing the respective mutual fund houses. Generally, it takes about 2 to 4 weeks for the process to complete and the mutual fund units conversion form also needs to be filled. The conversion form is specific to the RTA where an individual has gone to convert the mutual fund units. Along with the conversion form an individual needs to submit copies of his demat account statement which shows the mutual fund holdings.