Question

Demat shares are _______.

• A. non-transferable
• B. fungible
• C. bearer

Hint:

Think of Demat shares like currency in a bank account. You don't care which specific 10 dollar bill you get back from the ATM, as they are all interchangeable and have the same value. The same principle applies to dematerialized shares of a company.

Answer 1

The Correct Option is B

Step 1: Define Demat shares. 'Demat' is short for dematerialization, which is the process of converting physical share certificates into an electronic format. These electronic shares are held in a demat account.
Step 2: Define fungibility. Fungibility is the property of a good or a commodity whose individual units are essentially interchangeable. For example, one kilogram of gold is identical to any other kilogram of gold.
Step 3: Apply the concept to Demat shares. In a demat account, shares of a particular company are not identified by distinct certificate numbers as they were in physical form. One equity share of a company is identical to and interchangeable with any other equity share of the same company. This makes them fungible.