Notwithstanding the campaign against black money, the government is outlining to make it mandatory to keep shares of unlisted companies (companies which are not in the stock market) in the demat form. As per a government official, it will be first implemented for government limited companies and will be optional for unlisted companies. .

According to Securities and Exchange Board of India (SEBI) regulations, it is necessary for all the listed companies to have shares in the demat form. Presently in India 70,000 public limited companies are unlisted and more than 10 lakh private companies have been registered with the Ministry of Company Affairs. As per the experts, it will be easier to find out where the companies went, from where the shares went with the Compulsory Demat policy after strict action against the misuse of tax administration and black money. This will also increase the credibility of Institutional Investments in unlisted companies.

Physical shares in demat are converted into electronic form which not only helps in tracing the trading of shares but also helps prevent fraud and theft. Demat system in the country started in 1996. Today almost all the listed companies have shares in the demat form. The government had sealed bank accounts of 2 million suspected shell companies a few days ago and SEBI has been asked to take action against 331 suspected shell companies.

SEBI found that the Shell companies identified by the Serious Fraud Investigation Office (SFIO) and the company affairs ministry had broken several rules of listing in the stock market. According to SEBI, these companies were misusing the fund and changing the shares of unlisted companies in demat form will make it easier to keep an eye on them.