The Depository System


 Indian

Capital Market  Need of Depository System  The Depository System  NSDL & its business partners  Depository-Bank --an analogy  Depository-Bank --the differences  Functions of Depository System  Benefits of Depository System

Overview of Indian Capital Market
Financial Market
Money Market Unorganized Organized RBI as regulator Capital Market Primary (IPO) Secondary

SEBI as regulator

Need of Depository System
 Time

consuming trading system system of transfer of ownership

 Inefficient  Risk

of theft, forgery & mutilation of securities consuming & costlier settlement

 Time

The Depository System

Operations regulated by Depository Act 1996 and SEBI rules Solved the problems by
Making securities freely transferable Dematerialization in depository mode Ownership record in book entry form

d. e. f.

NSDL and Its Business Partners
 National

Securities Depository Limited participants

 Depositories  Issuers

and R&T agents Corporations\ Clearing House

 Clearing

Depository-Bank -- An Analogy
Holds Funds in accounts Transfer funds between accounts

Holds Securities in accounts

Transfer securities between accounts Transfers without handling physical securities Safekeeping of securities

Transfers without handling cash

Safekeeping of money

Depository- Bank --The Difference
Either of holder can sign instructions Minimum balance to be maintained Entitled for interest

All joint holders to sign instructions No minimum balance required Interest can be earned only by participating in stock lending schemes Does not move balances in account without account holders authorization Signature and photograph of nominee to be provided

Uses balances in accounts

Nomination is kept confidential

Functions Of Depository System
 Dematerialization  Account

transfer  Transfer and Registration  Corporate actions  Pledge and hypothecation  Linkages with clearing systems

Benefits of Depository System
 

  

 

Elimination of bad deliveries Immediate transfer and registration of securities Faster settlement cycle Buyer is secured Reduction in rate of interest on loans Periodic status report Reduction in handling of huge volumes of paper

 

Elimination of all risks associated with physical certificate No stamp duty Reduction in transaction cost and brokerage Elimination of problems related to nomination Convenient consolidation of accounts and portfolio monitoring


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