Given below are two statements:
Assertion (A): Holding shares in demat form removes the danger of loss, theft or forgery of share certificates.
Reason (R): Dematerialisation enables shares to be transferred to some other account just like cash.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Both (A) and (R) are true but (R) is not the correct explanation of (A).
Assertion (A): Holding shares in demat form removes the danger of loss, theft or forgery of share certificates. — True. Once shares are in demat form, there are no paper certificates to lose. So there is no danger of loss, theft or forgery of share certificates.
Reason (R): Dematerialisation enables shares to be transferred to some other account just like cash. — True. Demat shares can be transferred to another account just like cash.
Why R does not explain A?
R is about how easily demat shares move between accounts. Easy transfer does not remove any danger to certificates. The real reason is that the physical certificates are cancelled, and the investor gets an electronic entry, held as a balance in an account.
NCERT (Pre-rationalised Edition): “Dematerialisation and Depositories All trading in securities is now done through computer terminals. Since all systems are computerised, buying and selling of securities are settled through an electronic book entry form. This is mainly done to eliminate problems like theft, fake/forged transfers, transfer delays and paperwork associated with share certificates or debentures held in physical form. This is a process where securities held by the investor in the physical form are cancelled and the investor is given an electronic entry or number so that she/he can hold it as an electronic balance in an account. This process of holding securities in an electronic form is called dematerialisation. …” “…Dematerialisation enables shares to be transferred to some other account just like cash and ensures settlement of all trades through a single account in shares. These demat securities can even be pledged or hypothecated to get loans. There is no danger of loss, theft or forgery of share certificates. …” |