Dematerialisation and Rematerialisation of mutual fund units

Tue, 19 May 2026 00:00:00 +0000

Dematerialisation (demat) converts physical mutual fund unit holdings or folio-based statements into electronic demat-account form. Rematerialisation (remat) reverses the process, converting demat-form units back to folio-based holdings. Most modern Indian mutual fund investors use folio-based holdings as the default; demat is an optional alternative used for specific use cases (pledging, ETF holdings, broker-consolidation).

Folio vs Demat

Dimension	Folio-based	Demat-based
Default for most MF investors	Yes	No
Cost	Free	AMC charge (or BSDA Lite per BSDA Lite framework )
Pledging support	Limited	Full (broker pledge)
ETFs	Not applicable (ETFs always demat)	Required for ETFs
Multi-broker consolidation	Difficult	Easy

Use cases for demat

Holding ETFs (always demat).
Pledging units (per pledge of MF units ).
Loan against MFs (LAMF ).
Consolidation across brokers.
Margin pledge at Zerodha .

Operational mechanics

Demat conversion

Investor requests via AMC / depository participant.
Folio-based units converted to demat-form units.
Held in investor’s CDSL or NSDL demat account.

Remat conversion

Reverse process.
Units returned to folio-based holdings.
Used less frequently than demat conversion.

External references

References

SEBI (Mutual Funds) Regulations 1996.
AMFI Best Practice Guidelines.

Dematerialisation-Rematerialisation on WebNotes