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AxisDirect-O-Nomics
Jul 04, 2019 | Source: www.livemint.com
Redeeming your mutual fund (MF) units has been pretty simple; fill the transaction slip that comes at the bottom of your account statement and submit it to your fund house or registrar and transfer (R&T) agent and it’s done. But redeeming your dematerialized (demat) units can be tricky.
How the system works
Once you buy demat units on the stock exchange or in any other way, your fund house creates those units and deposits them in your demat account. After that, your fund house has no control over them; it is your depository participant (DP) who holds the reins. This means that if you wish to redeem these units, you must go to a DP only. Your fund house, through its R&T, has records only of those units that lie in the statement of account (SOA) form.
The world of demat account was envisaged to be a paperless world where investments were held in an electronic form. Originally, equity shares were held in demat form, but over time, non-convertible debentures, bonds, and now, even MFs are held in the demat form.
The added benefit of the demat format is that you get to see all your investments in one account statement. However, having demat units also entails that it is your DP who gets to hold—and, therefore, control on your behalf—all your dematerialized investments.
Here’s an example of how this arrangement effects you. Say, you want to pledge some MF units (held in demat form) with a bank to procure a loan. To do this, you need to inform your DP, and not your fund house. Your fund house won’t even come to know if you have pledged or sold your units. It’s only when your fund house declares a dividend or bonus units does it pull out information from your DP to ascertain the number of units in your account. It declares your dividend based on this information.
SIP in demat units
If you have an ongoing systematic investment plan (SIP) in your MF schemes held in the demat form, and you wish to completely terminate your account, first stop your SIPs. For this, a simple letter to your fund houses would do, if you have initiated your SIP with the fund house. If you had initiated your SIP through a broker on the stock exchange platform, you need to go to your broker. Give about 30 days’ time to your fund house to close your SIP before you redeem your units and close your account.
How to redeem demat units
To start with, fill up a redemption slip. If you have bought “direct plan" units, even then a redemption slip to your DP would do. Else, approach your broker. Once the application is processed, the units will move out of your account and you’ll get your money. This process takes 2-3 days.
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