Q.Explain the following term/concept.
Dematerialisation

The underlined word is wrong. The correct word is Dematerialised (electronic) — securities are fungible only when held in dematerialised form.

Fungibility means that securities of the same class are mutually interchangeable and do not carry distinctive identification. In physical mode every share certificate bears distinctive certificate and folio numbers, so one certificate is not identical to another — they are not fungible.

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ISIN is a unique code allotted to each security to make it eligible for holding in demat form, and it is the company (issuer) that applies for it to the depository.

Under the depository system, physical certificates are replaced by electronic records. For a security to be dematerialised, it must first be identified uniquely:

• ISIN (International Securities Identification Number) is a unique code given to every distinct security (each type of equity share, preference share, debenture, etc.).
• The issuing company signs an agreement with a depository (NSDL or CDSL) and applies for allotment of ISIN for its securities. …