India, Feb. 5 -- India's dematerialisation journey formally began with the enactment of the Depositories Act, 1996, which enabled electronic holding of securities. This legislation led to the establishment of the National Securities Depository Limited (NSDL) in 1996 and the Central Depository Services Limited (CDSL) in 1999. Under Section 9(1) of the Act, securities held by depositories are required to exist in dematerialised and fungible form.

Regulatory concerns around physical certificates were highlighted as early as 2004, when a SEBI-appointed group flagged risks such as bad delivery, theft, postal delays, high custodial costs, and infrastructure inefficiencies. These vulnerabilities strengthened the regulator's resolve to phase out...