India’s great vanishing Act

Thirty years ago, an Act made physical securities disappear. Now it’s time to extend it to all paperwork

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September 20 marks the 30th anniversary of the Depositories Ordinance, 1995. Few imagined this quiet legislative initiative would trigger one of the boldest financial reforms in independent India. Over three decades, dematerialisation has evolved from a daring experiment to an everyday reality. Today, two depositories serve over 200 million investor accounts, holding securities of more than 100,000 companies, with a custody value exceeding %600 trillion. What began as a leap of faith in 1995 is now the backbone of India’s securities market.

Humans are fascinated by magic, the thrill of watching something vanish before our eyes—atrain, a plane, even the Taj Mahal, if only for a moment. Magicians, however, operate within limits: One trick, one stage at a time. In the mid-1990s, India attempted something more audacious — a grand illusion on a national scale. Not one object, but every share certificate. Not for seconds, but forever.

Two new institutions, National Securities Depository Limited (NSDL) (1996) and Central Depository Services Limited (1999), pulled it off. In the blink of regulatory eyes, those thick certificates with ornate borders and proud stamps disappeared. From every drawer, every almirah, every pillowcase across the land. No smoke, no mirrors, no trapdoors. The disappearance was total, final, and irreversible. No one asked for an encore.

Curiously, our “depositories” neither accept deposits nor store securities. The term was borrowed from contemporary global markets, where depositories safeguarded physical certificates while maintaining records electronically. India thought differently: Not to digitise papers, but to eliminate them. Out of the conviction was born “dematerialisation”, or simply, “demat”. There was no blueprint, no assurance of success. Reformers only knew that a paper-based securities system could never support the scale, speed, or integrity that India’s newly liberalised market economy required.