Nsdl and Cdsl2

8/12/2019 Nsdl and Cdsl2

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Although India had a vibrant capital market which is morethan a century old, the paper-based settlement of tradescaused substantial problems like bad delivery and delayedtransfer of title till recently. The enactment of DepositoriesAct in August 1996 paved the way for establishment ofNSDL, the first depository in India. This depositorypromoted by institutions of national stature responsiblefor economic development of the country has since

established a national infrastructure of internationalstandards that handles most of the securities held andsettled in dematerialized form in the Indian capital market.

Using innovative and flexible technology systems, NSDLworks to support the investors and brokers in the capital

market of the country. NSDL aims at ensuring the safetyand soundness of Indian marketplaces by developingsettlement solutions that increase efficiency, minimize riskand reduce costs. At NSDL, we play a quiet but central rolein developing products and services that will continue tonurture the growing needs of the financial services

industry.


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In the depository system, securities are held indepository accounts, which is more or lesssimilar to holding funds in bank accounts.Transfer of ownership of securities is donethrough simple account transfers. This methoddoes away with all the risks and hasslesnormally associated with paperwork.Consequently, the cost of transacting in adepository environment is considerably lower ascompared to transacting in certificates.


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1 Core services

2 special services


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Maintenance of individual investorsbeneficial holding in an electronic form

Trade settlement


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Automatic delivery of securities to theclearing corporation.

Dematerialisation and rematerialisation ofsecurities.

Allotments in the electronic form in case ofinitial public offering.

Account transfer for settlement of trade in

electronic share. Facility for freezing/locking of investor

account


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NSDL depository reaches its services to investors through marketintermediaries called Depository Participants (DP), who as per SEBIregulations could be organisations involved in the business of providingfinancial services like banks, brokers, custodians, financial institutions,etc. This system of using the existing distribution channel helps NSDL to

reach to a wide cross section of investors spread across a largegeographical area.

The admission of DPs involves a detailed evaluation by NSDL and a furtherevaluation and approval by SEBI.

Realising the potential in this market, all the custodians in India and anumber of banks, financial institution and major brokers have already

joined NSDL as DPs and they are providing services in a number of cities.Many more organisations are in various stages of establishing connectivitywith NSDL.


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Dematerialisation

Rematerialisation


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Dematerialisation is the process by which a client can getphysical certificates converted into electronic balances.

An investor intending to dematerialise its securities needsto have an account with a DP. The client has to surrenderthe certificates registered in its name to the DP. After

intimating NSDL electronically, the DP sends the securitiesto the concerned Issuer/ R&T(registration & transfer)agent. NSDL in turn informs the Issuer / R&T agentelectronically, using NSDL Depository system , aboutthe request for dematerialisation. If the Issuer/ R&Tagent finds the certificates in order, it registers NSDL as

the holder of the securities (the investor will be thebeneficial owner) and communicates to NSDL theconfirmation of request electronically. On receiving suchconfirmation , NSDL credits the securities in thedepository account of the Investor with the DP.


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NSDL carries out its activities through variousfunctionaries called "Business Partners" who includeDepository Participants (DPs), Issuing companies and theirRegistrars and Share Transfer Agents, Clearingcorporations/ Clearing Houses of Stock Exchanges. NSDLis electronically linked to each of these business partnersvia a satellite link through Very Small Aperture Terminals

(VSATs) or through Leased land lines. The entireintegrated system (including the electronic links and thesoftware at NSDL and each business partner's end) iscalled the NEST [National Electronic Settlement &Transfer] system.


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In order to avail of depository facilities, aninvestor has to open a beneficiary account with adepository participant of his choice.This issimilar to opening a bank account to use thebanking services.

Just as one can hold funds in a bank account andtransfer funds across accounts without actuallyhandling cash; one can hold securities in adepository account and transfer securities acrossdepository accounts without actually handling

share certificates. The account holder is called 'beneficial owner' in

a depository system and the account is known as'beneficiary account'.


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Securities issued by issuers who have entered into an agreement withNSDL can be dematerialised in the NSDL depository. As per thisagreement, issuer agrees to verify the certificates submitted fordematerialisation before they are dematerialised and to maintainelectronic connectivity with NSDL. Electronic connectivity facilitates

dematerialisation, rematerialisation, daily reconciliation and corporateactions.


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The clearing corporations/houses of stockexchanges also have to be electronicallylinked to the depository in order to facilitatethe settlement of the trades done on the

stock exchanges for dematerialised shares. Atpresent, all the major clearingcorporations/houses of stock exchanges areelectronically connected to NSDL.


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Madras Stock Exchange Ltd. (MSE) National Stock Exchange of India Ltd.

(NSE)

Inter-connected Stock Exchange of IndiaLtd. (ISE) OTC Exchange of India (OTCEI) The Calcutta Stock Exchange Association

Ltd. (CSE) The Delhi Stock Exchange Association

Ltd. (DSE) The Stock Exchange, Mumbai (BSE) The Stock Exchange, Ahmadabad (ASE)


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Monetary benefits (dividends etc):NSDL will givethe beneficiary ownership details to the Issuer/R& T Agent. The Issuer/R & T Agent will carry outthe necessary processing and the distribution ofsuch benefits will be outside the system.

Non-monetary benefits (rights bonus etc):NSDLwill give the beneficiary ownership details to theIssuer/ R & T Agent. The Issuer/R & T Agent will

carry out the necessary processing and uploadthe beneficiary ownership details to NSDL. NSDLwill then credit the beneficiary owners' accountsby downloading the data to the DPs.


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CDSL was promoted by BombayStock Exchange Limited (BSE)

jointly with leading banks such asState Bank of India, Bank of India,

Bank of Baroda, HDFC Bank,Standard Chartered Bank, UnionBank of India and Centurion Bank.


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CDSL was set up with the objective of providing convenient,dependable and secure depository services at affordable cost toall market participants. Some of the important milestones ofCDSL system are:

CDSL received the certificate of commencement of business fromSEBI in February, 1999.

Honorable Union Finance Minister, Shri Yashwant Sinha flaggedoff the operations of CDSL on July 15, 1999.

Settlement of trades in the demat mode through BOIShareholding Limited, the clearing house of BSE, started in July1999.

All leading stock exchanges like the National Stock Exchange,Calcutta Stock Exchange, Delhi Stock Exchange, The StockExchange, Ahmedabad, etc have established connectivity with

CDSL.

As at the end of Dec 2007, over 5000 issuers have admitted theirsecurities (equities, bonds, debentures, commercial papers),units of mutual funds, certificate of deposits etc. into the CDSLsystem.


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1 BSE 5,663.46 54.20

2 Bank of India 582.00 5.57

3 Bank of Baroda 530.00 5.57

4 State Bank of India 1,000.00 9.575 HDFC Bank Limited 750.00 7.18

6 Standard Chartered Bank750.00 7.18

7 Canara Bank 674.46 6.45

8 Union Bank of India 200.00 1.919 Bank of Maharashtra 200.00 1.91

10 The Calcutta Stock 100.00 0.96

Exchange Limited

TOTAL 10,450.00 100.00

Sr.No. Name of shareholders

Value of holding(in Rupees Lacs)

% terms tototal equity


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OUSTDY FEE RS.0.50/MONTH NIL

RS.6Per Annum NIL

PURCHASE NIL NILALE RS.10/Transaction(rs.8

effective from jan 1,2004) RS 6Per

transaction

pledge creation Rs 25 Rs. 12

nnual fee NILL NILL

REMATEREAL Rs 10/certificate Rs10/certificate

ISATION

charges

NSDLCDSL

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Nsdl and Cdsl2