Electronic Shareholding Analyzed

Key Points

• Stocks now mostly held electronically, up from just 1% in 1995.
• More companies using electronic shares – over 100,000 now.
• Unlisted shares growing faster than listed shares dematerializing.
• Mandates push companies to use electronic shares for all securities.
• Costs to switch to electronic shares can be high for companies.
• Electronic shares reduce fraud and errors in share transfers.

Back in the 1990s, most stocks weren’t kept on computers; they were paper. But things changed quickly! By 2001, almost all stocks were held electronically. This was a big step forward because it made it easier to track shares.

Now, more companies are switching to electronic shares too. Companies that don’t trade on big stock markets (called “unlisted” companies) are joining in. As of November 2025, over 100,000 of these companies are now using electronic shares, thanks to a system called a “demat” account.

The National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd (CDSL) are helping make this happen. They’re like special banks for shares. NSDL has seen about 100,000 companies using electronic shares, and CDSL has grown to over 40,000.

To learn about this, experts looked at data from the Securities and Exchange Board of India (SEBI), which is like a rule-maker for the stock market. They also got updated numbers from NSDL and CDSL. The data showed that a small number of big, listed companies switched to electronic shares, but many more unlisted companies did.

In October 2023, a government rule said all private companies needed to use electronic shares. This meant companies had to change their old paper shares into electronic ones. The government gave companies until June 2024 to do this. Someone named Gaurav Pingle explained that this makes things easier to check and track, and it can help with taxes.

Electronic shares also help stop cheating. Before, people could easily make fake shares or lose them. Now, because everything is kept on computers, it’s almost impossible to cheat. One company secretary said fraud has gone down to almost zero!

A new rule in December 2025 made it easier for smaller companies to use electronic shares. Companies with less than $100 million in sales and less than $10 million in money raised can now use electronic shares. This helps make things fairer for everyone.

Using electronic shares also stops people from changing the dates of share transfers. Since all shares are kept in electronic accounts, it’s impossible to change the date someone bought or sold a share. This prevents problems with taxes or lawsuits.

Experts think a lot of people will use electronic shares for unlisted companies. NSDL believes around 180,000 people could use the system if the rules are more helpful. CDSL expects about 30-32% of the unlisted market to use electronic shares.

There are still some challenges. The two electronic share “banks” (NSDL and CDSL) need to work together, and they’re testing a system to make it easier to move shares between them. Once this system is ready, things should be much smoother.

“The goal is a simpler, safer way to own and trade stocks.”