Now it’s easy to transfer your shares to other individuals in a way that is very similar to money transfer done through net banking. The off-market share transfer allows individuals to transfer shares without waiting for market hours. This transfer process from demat account has been revised with effect from January 1, 2024. As per the new rule, if you wish to transfer your shares to another person, you must add the Target Beneficiary Demat Account (one-time) details before executing the off-market transfer, otherwise the transfer won’t happen.
“The process for submission of off-market transfer instructions (i.e., transfer of securities from one investor’s demat account to other investor’s demat account) has undergone a change with effect from Monday, January 1, 2024,” said ICICI Bank in an email to its customers.
What is the new off-market share transfer process
According to the email by ICICI Bank to its customers, there are certain steps that must be followed for conducting an off-market share transfer:
A step-by-step guide to do off-market share transfer
Step 1: Add the Target Demat Account (DP ID, Client ID and PAN details) as “Beneficiary” in your Demat Account by submitting the requisite form as prescribed to your stockbroker. Check with your stock broker about accessing the prescribed form.
Step 2: Once you have added the target beneficiary demat account details in the depository system, a short URL link will be generated and sent by the depository to the registered mobile number and e-mail address mentioned in your demat account.
Step 3: On clicking the short URL link, you will be redirected to a web page displaying the details of the target beneficiary demat account (as mentioned by you in the prescribed form). Verify and confirm the target beneficiary demat account details and enter the OTP received from the depository.
Step 4: On submitting the correct OTP, the target beneficiary demat account will be added to your demat account and the requisite depository will send a confirmation on your registered mobile number and e-mail to this effect.
“Post this addition, submit the Delivery Instruction Slip (DIS) for initiating Off-Market Transfers, as per the existing process,” said ICICI Bank in the email.
There are two depositories in India- National Securities Depository (NSDL) and Central Depository Services (CDSL). Enquire with your stockbroker about which depository is maintaining your demat account and then use that respective depository’s system to conduct an off-market demat transfer.
Also read: Axis Bank stops redemption of credit card reward points earned by these customers.
How can the revised off-market transfer process help
Experts say that the revised process for off-market share transfer from demat account would help all market participants. “The new mechanism provides a much needed fall back in cases where fetching otp from the receiving party was turning out to be a challenge due to limited incentive as they ideally got free shares, also there wasn’t any further alternative/proceedings if the receiving party did not share the OTP. Now, with the added feature of adding beneficiary before the transfer & setting up an internal committee who can see the merit of the cases on a one by one basis, the new mechanism should definitely help stock market investors and other market participants,” says Devendra Agarwal, Founder- Dexter Capital, a boutique investment firm.
Why was the off-market share transfer process revised
The Securities and Exchange Board of India (SEBI) had specified certain rules applicable for off-market share transfers. SEBI said in a master circular dated May 17, 2023, “All off-market transfer of securities shall be permitted by the Depositories only by execution of Physical Delivery Instruction Slip (DIS) duly signed by the client himself or by way of electronic DIS. The Depositories shall also put in place a system of obtaining client’s consent through One Time Password (OTP) for such off market transfer of securities from client’s demat account.”
However depositories voiced concerns about implementing the guidelines laid by SEBI. “SEBI has received representations from depositories regarding the challenges being faced with regard to obtaining OTP in case of reversal of erroneous transfers in the demat accounts, and was requested to address the issue,” said SEBI in a circular dated August 8, 2023.
“SEBI proposed OTP based stock transfer to avoid any misuse of the physical delivery instructions slip (DIS) as there was no validation mechanism to authenticate the transaction with the client. This led to the misuse of the clients’ stocks without any prior intimation to the client. With OTP, the customer was able to use the automated facility and self-validate the movement of their stocks,” says Sarvjeet Virk, Co-Founder and MD at Finvasia, a FinTech company.
According to an NSDL circular dated December 28, 2023, “The Procedure for adding Target Beneficiary Demat Account(s) by Participant through File upload facility provided at eDPM portal.” The link to the portal is this: https://edpm.nsdl.com/. Apart from eDPM portal, individuals can also use the NSDL SPEED-e application
According to a CDSL circular dated December 22, 2024, “DPs are advised to note that effective from December 30, 2023, off-market transactions will be considered for execution ONLY IF, Demat Account of Buyer is added as a Beneficiary under the Demat Account of Seller. The CDSL system will not allow execution of off-market transfers without the buyer account being added as a beneficiary under the seller account. Registration / adding buyer account (s) as beneficiary under seller account (s) would be a mandatory requirement while executing intra-depository (i.e. within CDSL) or inter-depository (between the Depositories) off-market transactions. Seller client will have options to register the buyer account as beneficiary either through his / her DP or through his / her Easi / Easiest Login.”
