Q I invest only in mutual funds and not equity shares.
I buy directly from the AMCs’ through their websites.
I have three SIPs (systematic investment plans), which are smoothly deducted from my accounts.
I wanted to sell some of the units and I went to the AMCs’ websites where I bought directly.
When I clicked on the redemption option, in all three AMCs, it says “your mutual fund units are not redeemable here as they are in demat”.
My queries are:
1) Investors like me want to buy directly from an AMC to save on commission but why are the AMCs not giving a redemption option?
Is it wrong to have converted the units into demat?
2) The NSDL sends monthly statements and has an app called SPEEDE. In this app, too, there is an option to enable redemption, but when you click to activate it asks you to contact the DP.
3) When I contacted DP, the answer is — give redemption form physically.
I feel this is an unwanted hassle. In a way, the investment is online, but redemption doesn’t happen online the same way without an intermediary.
How to rectify this? Please advise.
Dr. Hemakumar
A Your hassle is understandable. But unfortunately, you were not aware of the implications of converting MF units into demat. Let us deal with them one by one.
First, it is neither efficient or necessary to hold mutual fund units in demat unless you want to hold your funds and stocks in one place. Since you have stated you do not have shares, you could have kept your mutual funds in a non-demat form.
Cumbersome exercise
Second, there was no need for you to go to an individual AMC to buy their ‘direct’ plans. In fact, it is a cumbersome exercise since you need to visit each website for any transaction and keep three logins and so on.
There are now plenty of platforms with good user experience to buy direct plans of MFs.
And, if those do not instil confidence, then there are MF Central (a joint platform by the RTAs) and the mutual fund association MFU (AMFI’s MF Utility) platforms to transact online in one place for all your funds.
Third, if you had chosen to demat your units, for whatever reason, you should have made sure you do it with a brokerage platform that offers the facility to buy and redeem direct plan units online.
There are places where you can demat units but not transact online. They serve no purpose in these cases.
The AMCs are right in saying that your units must be sold through the exchange if they are in demat form.
They can process them directly only if it is in a non-demat form.
Two options
You have two options at this point. One option now is for you to move to an online brokerage platform by transferring the demat units. This is a one-time task and easy to handle.
Else, you can convert these back to physical units. Unlike converting physical units into demat, there’s no online process for switching demat units back to physical form (rematerialisation) with the NSDL or the CDSL.
You’ll need to visit your Depository Participant (DP) in person and submit a physical request.
Expect to fill out a rematerialisation form specific to the RTA (like CAMS/Karvy) handling your mutual fund house. This process, according to media reports, typically takes two-four weeks to complete.
(The writer is Co-founder, PrimeInvestor.in)