Converting Physical Mutual Funds to Demat: A Step by Step Guide

September 6, 2025

0 Comments

Most Indian investors for years have purchased and held mutual funds in physical form, with unit statements serving as proof of ownership. Even though this process worked, the landscape of investing in India has rapidly developed over the past 15 years. With the growing use of demat accounts, increasing numbers of investors now prefer to retain their holdings, including shares, bonds, and mutual funds, in electronic form.

Conversion of mutual fund units held in physical form to demat is not mandatory, but it can bring vast convenience, transparency, and ease of handling. This guide discusses why one may opt for the conversion, the process of conversion, and also things one should keep in mind.

Why Convert Physical Mutual Funds into Demat?

• Consolidation of Holdings: Demat accounts allow the investor to maintain all the investments (equity, ETFs, bonds, and mutual funds) under one statement. This saves the investor the hassle of handling multiple folios and paper statements. No need to check multiple fund house statements separately.

• Convenience of Tracking and Monitoring: Upon conversion, mutual funds can be monitored in real-time along with other investments. The entire portfolio can be reviewed in one place which is essential for getting accurate financial advice, eliminating the need to cross-check various physical statements or depend solely on AMC updates.

• Reduced Paperwork: Transactions such as redemptions, switches, or additional purchases can be initiated using the demat account platform, reducing paperwork.

• Security and Transparency: Physical holdings are at risk of being misplaced or damaged. Demat holdings are safely stored with depositories like NSDL and CDSL, with increased security.

• Easier Nomination and Transmission: With physical mutual funds, you can’t transfer units directly from one person’s name to another. In demat form, this becomes very easy; you can gift or transfer units to family members in just a few clicks. Nomination can also be done online in a simple and paperless manner, ensuring that in the event of the investor’s demise, the units are smoothly transmitted to the registered nominees or legal heirs without delays or the hassle of paperwork.

• Faster Transactions: Buying, selling, or switching mutual funds online is quick and simple. There’s no waiting for forms to be processed, everything happens instantly through your demat account.

• Reduced Errors: Since everything is digital, there’s no risk of errors like wrong signatures or missing documents. This makes the entire process smoother and more accurate.

• Consolidated Statements: You get a Consolidated Account Statement (CAS) that shows all your investments in one place. No more juggling multiple statements from different mutual fund companies.

• All Investments in One View: Your demat account doesn’t just show mutual funds, it also includes shares, bonds, ETFs, NPS, and more. This gives you a complete view of your wealth on one platform, making financial planning easier.

• Complete Convenience: In short, demat removes the hassles of paperwork, speeds up transactions, keeps everything secure, and gives you a clear picture of your portfolio; all in one place.

The Conversion Process

The Securities and Exchange Board of India (SEBI) has formalised procedures for investors to transfer their units of mutual funds from physical to demat. The process typically occurs as follows:

• Open a Demat Account

Investors must possess an active demat account with a Depository Participant (DP) such as a bank or broker.

• Fill a Conversion Request Form (CRF)

The CRF can be obtained from the DP. Investors need to specify the mutual fund folios they wish to convert. Make sure your other information (name, PAN, bank account) is exactly as in mutual fund records.

• Submit Documents

Along with the CRF, the investors have to provide their current physical unit statements or account statements from the Asset Management Company (AMC) and valid KYC documents.

• DP and Depository processing

The DP verifies the documents and forwards the request to the Registrar and Transfer Agent (RTA) of the mutual fund. The units are then credited in electronic form to the demat account of the investor after verification.

• Confirmation

Confirmation is provided to investors once the units are duly converted and reflected in their demat accounts.

Things You Should Keep in Mind

• Fees: Some DPs may charge small fees for conversion. It is prudent to check ahead of time.

• Freedom: Investors with units in direct holding with AMCs are at liberty to continue without demat. Demat is voluntary, not compulsory.

• Redemption Process: Redemptions must be routed through the DP or the trading platform and not directly with the AMC when units are in demat.

• Taxation: Tax treatment of mutual funds is unaffected by whether they are held in physical or demat. You'll pay the same taxes whether you keep paper or digital certificates.

Who Should Consider Converting?

Converting your mutual fund investments to a digital format can be a game-changer for many investors. You should definitely consider conversion if you have investments spread across multiple mutual fund companies, want the convenience of tracking everything online, plan to buy and sell frequently, worry about losing physical documents, or simply want to make things easier for your family to manage in the future.

On the other hand, conversion might not be a priority for you if you rarely check your investments, feel completely comfortable handling paper statements, have just one or two mutual funds, or don’t use online banking and prefer traditional methods of managing your money.

Real-Life Example

Meet Rajesh, a 35-year-old engineer. He had mutual funds with 4 different companies and received 4 different monthly statements. He often misplaced them and found it hard to calculate his total returns.

After converting to demat, Rajesh can now:

• See all investments on one screen

• Check daily performance on his phone

• Invest more money with just a few clicks

• Show his wife exactly how much they've saved and what return they are getting.

"It simplified everything for me," he says with a smile.

Common Questions

If you're thinking about converting your mutual fund investments from paper to digital, here are some of the most common questions investors ask:

1. Will I lose money during conversion?

No, you won’t lose any money. The value of your investment stays exactly the same. The process only changes the format of your holdings: from physical documents to a convenient digital format.

2. How long does the conversion take?

Typically, the process takes 10–30 working days, though the exact timeline depends on your bank and mutual fund company.

3. Can I convert back to paper later?

Yes, it’s possible to switch back to physical format, but it’s rarely needed. In most cases, there might be additional fees and paperwork involved.

4. What if I lose my paper statements before conversion?

Don’t worry. You can always reach out to your mutual fund company to request duplicate statements before initiating the conversion process.

Holding mutual funds in demat: benefits beyond convenience

Apart from tracking and consolidation, holding mutual funds in a demat account is particularly beneficial to investors actively trading across asset classes. For instance, an investor with equities and mutual funds can view his/her net portfolio value in real time from one window. This makes it easier for him/her to make sounder asset allocation decisions.

Additionally, with India shifting toward a purely digital investment scenario over time, the demat channel has the advantage of making investors future-ready. It also aligns with SEBI's long-term vision of paperless investing. To obtain official details, you may also check NSDL's investor guide, which explains the process and documentation.

Shifting physical mutual fund units to demat is a simple-to-accomplish feature with effectiveness, ease, and security. It may not be mandatory, but it is definitely worth considering, particularly for investors who would like to have all their investments in one place and make them more manageable to deal with.

-Sukalyan Halder & Akshit Bajaj

-Dayco India

Share With

FILED UNDER: Stock Market

Download Mobile Apps

Equity

Mutual Fund

IPO

NPS

International Market

Reports

Portfolio Tracker

Margin Trade Funding Facility

Pan services

Check your Risk Profile

Model Portfolio

Set your Goal

Investment Plans

Stock Dictionary

Mutual Fund White list

Portfolio X-Ray

Counsellor's Desk

Financial Planning

Protection Planning

Retirement Planning

Investment Planning

Tax Planning

Estate Planning

Calculator

Blog

FAQ

Video

Webinar

Research Dashboard

Newsletter

Stock Dictionary

MF Whitelist

Converting Physical Mutual Funds to Demat: A Step by Step Guide

Leave a Reply

Are you sure?

Enter Password

Enter Password

Filing Complaints on SCORES (SEBI) – Easy & Quick

Thanks !!

Thank you for Your Feedback!

Thanks !!

Thank You

Thank You

Thank You !!

Thank You!

Thank You!

Please Read!

Thank You !!

Thank You !!

Thank You !!

Thank You !!

Thank You !!

Set Your Goal

Set Your Goal

Thanks You !

Set your Goal

Thanks You!!

Clear form?

Email