Demat System in India 2

- A REPORT ON -
THE SUMMER TRAINING

AT
ANAGRAM SECURITIES LIMITED
MIT VORA CHITRA GOTHI CHRISTINA D)SOU*A
GUJARAT UNIVERSITY
M! A PRO GRA MME "##$-#%&
N'R' INSTITUTE O( !USINESS MANAGEMENT&
Demat System in India
A+,n-./ed0ement
In our summer training at Anagram Securities Ltd., we got a very pleasant experience of practically working in an organization. Every student owes a great deal to others and we are no exception ecause learning is a process which entails give and take! exchange of ideas and value addition through discussions. So it gives us immense pleasure to e a le to express our gratitude to one and all who have contri uted to the successful completion of our pro"ect with a great learning.
#irst and foremost, we would like to thank our pro"ect guide, $r. Suresh %a"agopalan. &e gave us an in'depth knowledge of the working of the demat system and enhanced our understanding on its various aspects. &is invalua le and significant guidelines improved our outlook and contri uted in making our pro"ect a real learning experience. &e also encouraged us to put in our est efforts and ring out the est of our a ilities.
(e would also like to thank, the &% executive, $r. )m *rakash who helped us out at each stage of our pro"ect. $oreover we are also grateful to the entire staff of Anagram Securities Ltd. for their co'operation and support.
+his acknowledgement would remain incomplete without mentioning the role of our college faculty in guiding us. (e thank our director $r. ,handelwal for giving us a platform through which we got the opportunity of a knowledgea le training experience. $it -ora .hitra /othi .hristina 01souza
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E1e+2ti3e S2mma4y
+he Indian #inancial System has undergone a considera le change in the recent past. +he #inancial Sector reforms, along with technological advancement have integrated international markets, which have facilitated the scope for uninterrupted mo ility of funds in various financial markets. It has also led to efficient and low'cost transactions related to securities. +his can e seen in the Indian financial sector reforms also, which started in the early 2334s.
0ematerialization of financial securities is the first sign of financial reforms in India. #inance $inistry and SE5I realized the need of more efficient financial system. As a result of this 6S0L and .0SL came into picture. It aims at ensuring the safety and soundness of Indian marketplaces y developing settlement solutions that increase efficiency, minimize risk and reduce costs.
)ur pro"ect on 5Demat System in India6 gave us a detailed picture of how securities are transferred electronically in the share market. In our pro"ect we had done a comparative study of the various 0epository *articipants in Ahmeda ad on the asis of their services and charges. +his study helped us in finding out what additional services other 0*s provide and how the charges differ. Another aspect of our pro"ect was to get a feed ack from the clients regarding the 0emat services provided at Anagram Securities Ltd. 5y meeting the various clients we were a le to find out the scope of improvement in the services provided at Anagram.
It ecomes increasingly important for students of management to understand the developments in the financial infrastructure that facilitates the whole financial system. (e were fortunate enough to get an opportunity to do our summer training in such an area as it gave us a wide understanding of the entire demat system in our country.
Ta8/e -9 C-ntents
Acknowledgement Executive Summary .ertificates
728 Scope of the *ro"ect 999999999999999999999999999999999....: 7;8 A out Anagram Securities Ltd 999999999999999999999999999..3 7<8 0emat System in India9999999999999999999999999999999...2= 7=8 .omparative Study of 0*s in Ahmeda ad 99999999999999999999<> 7:8 A .lients1 *erspective 9999999999999999999999999999999...=? 7?8 0emat System @ *ro lems and Scope 9999999999999999999999...:4 7A8 Suggestions and %ecommendation 999999999999999999999999..:: 7>8 Annexure 999999999999999999999999999999999999999.?4 Annexure ' A 9999999999999999999..99999999999999999..?2 Annexure ' 5 9999999999999999999999999999999999999?A Annexure ' . 9999999999999999999999999999999999999A; Annexure ' 0 999999999999999999999999999.999999999...A:
5I5LI)/%A*&B999999999999999999999999.999999999999..AA
SCOPE O( THE PROJECT
INTRODUCTION
As a part of our summer training undertaken at Anagram Securities Ltd., we got an opportunity to learn and understand the process of the 0emat System. +he core of the pro"ect was to understand the working of a 0epository *articipant and there y get an overall view of how the securities transfer takes place electronically in the share azaar. O!JECTIVE +he asic o "ectives of the pro"ect were as followsC 2. #irstly, the core o "ective of our summer training was to understand the practical working of an organization, which so far we had only read a out in the ooks. +his training was our first experience of working in any organization which gave us an opportunity to look at the various aspects such as the hierarchy of employees in the organization, functioning of various departments, &% practices, flow of information etc. ;. +he next o "ective was to apply the theoretical knowledge gained during our course of $5A *rogramme. +his involves a wide area of topics like organization ehavior, structure and design of organization, research methodologies and application of statistical for Duantitative analysis. <. Another main o "ective was to get a first'hand experience of working in an organization, which would e helpful for our future endeavor. #or any $5A student it is crucial to get a good experience during the summer training. +his gives the student a closer view of the actual working, thus maturing the view of the student as regards to the same. =. +o understand the financial system etter, it is very necessary to understand the mechanism that facilitates it. .onsidering the contemporary developments in the Indian financial mechanism we felt that it would e etter for us to understand the 0emat system of Indian securities market. So the o "ective of the pro"ect was to study the various depository participants of Ahmeda ad, which would give us a etter idea of the part of the financial infrastructure. :. Ender the guidance of our pro"ect mentor, we realized that the conversion of physical securities into electronic form changed the way in which the security holders were looking at the things. It changed security level, convenience level, cost of holding and transacting in the securities and so on. So we decided to study these aspects along with the other o "ectives. +he comparative study of various 0*s followed y this ena led Anagram to take a re'look at its position regarding various aspects vis'F'vis other 0*s. ?. $oreover, we were asked to get a feed ack of the services of the clients of Anagram Securities Ltd. and to find out the scope of improvement in the same.
5y doing so we were a le to find out what the clients thought a out the services provided and also what additional services could e provided. SOURCES O( IN(ORMATION In our pro"ect we were given a complete view of the mechanism of the 0emat system as a ase. (e also gained some important knowledge a out the fundamentals of the system y referring to certain material provided y 6S0L as well as got a lot of information from the /LS li rary. A large amount of information on the related topics was retrieved from the Internet without which our knowledge would have remained shallow and incomplete. APPROACH (e had done the pro"ect in a group of three students. As we were reDuired to visit the different 0*s and gather the relevant information, the approach we thought to e the most appropriate was as followsC +wo of us approached the 0*s as students, who were interested in studying their services. +his was done y getting a Duestionnaire filled up y the 0* in'charge. )ne of us approached the 0*s as a prospective client, who was interested in opening an account in their 0*. Another aspect of our pro"ect was to get a feed ack from the clients of Anagram Securities Ltd. with regards to the services and scope of improvement. )ur approach with regards to this was a prior appointment with the clients, which consisted mostly of the su ' rokers, and some individual clients. Some of the clients were availa le at the office of Anagram itself. METHODOLOGY O( DATA COLLECTION (e used the Duestionnaire method of data collection to get the reDuired information from the 0*s as well as the clients. (e had also made phone calls to the 0*s to get accurate information for account opening. Another method to get the information was a direct approach in which we approached the 0*sGclients and got a direct response from them.
ANALYSIS O( DATA
After collecting the reDuired information from all the a ove'mentioned sources, what we got was raw data. Such raw data would not e of much help to anyone. As taught in our 5usiness %esearch $ethodology course, we tried to organize this data into a systematic report, which would ena le the reader to understand it etter. #ollowed y this we tried to read etween the lines and listed some important conclusions that we could draw from the information. +his analysis was very helpful in understanding in depth the various factors that affect the working of a 0* as a whole and the inter'relationships that exist among them. Another aspect of our analysis included a study of the type of services provided to the clients of Anagram Securities Ltd. and the scope of improvement if any in the same. +his information would e very helpful to Anagram Securities Ltd. in improving their services and customer satisfaction.
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A!OUT ANAGRAM
SECURITIES LTD'
INTRODUCTION
Anagram Securities Ltd. is part of the %s.;:44 crore Lal hai /roup, and one of India1s top roking houses, with mem erships of the 6SE, 5SE and ASE and a decade of hard'won experience. Anagram has grown steadily after its origin in 233= and has
always focused on the needs of the retail client. Apart from this it also caters to the needs of institutional clients. It has more than 60 branches all over India with a total clientele of more than 15000.
)ver the years it has had a stronghold in /u"arat and has now expanded to <> offices covering all the ma"or usiness centers spread across the country. +heir client ase, esides over 24444 individuals, also includes a su stantial amount of institutional usiness. The website of Anagram Securities td.! www.moneypore.com!
introduces itself as follows"
Moneypore is not a place. You dont need a passport to get there. Moneypore is that state of consciousness which enables retail investors to make intelligent decisions. You need not be rich to become a resident of Moneypore. All you need is an open mind and a desire to take charge of your financial affairs. Apart from conventional roking service, which is its main focus, it also offers online trading, and depository participant facilities with the 6S0L. It has also ventured into mutual funds, commodity roking, futures and options, primary market. It has maintained prompt payouts to the clients, winning a reputation for relia ility and transparency that is not too common a currency in this usiness. And it has done this despite the alarming and sudden slumps that the stock market and the economy have gone through over the last decade. THE COMPLETE INVESTMENT SERVICE DESTINATION Anagram provides its customers a comprehensive range of investment services, thus, giving them an advantage of having all the services they need under one roof. +he following services are providedC 1' STOC>!RO>ING
Anagram offers a complete range of pre'trade, trade, and post'trade services on the 5SE and 6SE. +heir highly trained and committed workforce and sophisticated eDuipment ensures smooth transactions and prompt services.
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E-!RO>ING AND ?E!-!ASED SERVICES
It was one of the first to offer online trading. +he site, www.moneypore.com, a high andwidth leased lines, secure servers and accustom' uilt user interface gives the customers an international trading experience. $oneypore also gives regular updates during trading hours, and access to information, analysis and research, and a range of monitoring tools. $' TRADING TERMINALS- MONEYPORE E@PRESS
Anagram offers its registered su ' rokers and approvedGauthorized users fully eDuipped trading terminals' $oneypore Express, at the location of their choice. It is a fully functional terminal, with a variety of helpful features like market watch, order entry, order confirmation, charts, and trading calls, all availa le in resiza le windows. And it can e operated through the key oard using #2 for uy, #; for sell, etc. 7' DEPOSITORY PARTICIPANTS SERVICES
Anagram is a depository participant with the 6S0L. 5eing an in'house 0*, it provides hassle'free and speedy settlements. %' PREMIUM RESEARCH SERVICES
+he package of fee' ased services provided y Anagram includes daily technical analysis, research reports, and advice on the clients existing investments. +he research goes eyond the desks and company reports as the team goes out and meets company heads and visits plants and factories. +he research covers all the ma"or sectors, the ma"or companies and the national and the glo al economies. OTHER INVESTMENT PRODUCTS +o help the clients manage their portfolio, Anagram offers a complete range of other investment products, including $utual #unds, 5onds, and Small Saving products. )n their site, a person would find huge amounts of information, updates and analysis, as well as a range of calculators and interactive tools to help himGher make their choices.
INVESTING ?ITH ANAGRAM In order to trade stock through Anagram, the client must have an account here. +here are two types of accounts, standard account and e'trading account. +he client can
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have either of the two or oth. +he client may have a 0* account even without a trading account. +o invest in mutual funds or fixed income instruments, the client does not need to have any kind of account. INVESTMENT PHILOSOPHY O( ANAGRAM SECURITIES LTD' +he investment philosophy of Anagram focuses primarily on recommending purchases in financially sound companies at reasona le market prices. +hey also recommend sales of companies which are a ove the sales price targets or whose usiness prospects are poor. #or all these, Anagram Securities Ltd has a very good research team. Anagram recognizes that every individual is uniDue in terms of hisGher investment time horizon, investment o "ectives, personal financial situations, level of interest and inclination in the investment decision taking process and last ut not the least, hisGher risk taking a ility. (hilst it is hard to eat the level of a solute customization and hand holding that a Dualified personal financial planner would provide, it has attempted to individualize, as much as possi le, model portfolios that it elieves to reflect the individual1s uniDue investment profile. RESEARCH-!ASED ADVICE A team of highly skilled analysts and experienced investment professionals are constantly monitoring a population of potential investment in companies so as to uy and sell on the asis of analytically derived riskGreturn ratios. +he population of companies has een selected ased on many Duantitative and Dualitative enchmarks. +he effort is directed to prevent permanent loss of capital and to make a solute returns over time with a minimal amount of usiness risk. Anagram is confident that through this process, over a three'year period, the investment results will e superior to any market index. +he portfolio, however, may fluctuate in the short run, as the investment decisions will e guided y usiness prospects and not y short'term market movements. +hey feel that this process will e well suited to the needs of investors.
It sees its role as that of an unbiased information provider and advisor attempting to empower individuals to ta#e investment decisions and styles that suit them. Their selection of companies reflects this. $any of the companies that they have recommended for investment are providers of goods and services that touch the every day life of most of us. Their belief is that the comfort level of investing in such companies! therefore! would be very high.
ORGANI*ATIONAL STRUCTURE .hairman 7$r. San"ay Lal hai8
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.E) 7$r. 0arshan $ehta8
$anagement .ommittee
0irector 7$r. 0imple Shah8
0irector 7$r. A"ay Saraogi8
0irector 7$r. $ayank Shah8
0irector 7$r. Sharma8
South
(est 7only $um ai8
East
6orth, /u"arat
$aharastra 7except $um ai8
&%0
AccountsG #inance
.ompliance, Liasioning
%esearch
%egional 0ivisions 0epository *articipant Settlement Information +echnology #unctional 0ivisions
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DEMAT SYSTEM IN INDIA
THE ?ORLD O( ELECTRONIC TRANS(ER O( SECURITIES In this new era of change and transformation, where time zones have disappeared and distance does not matter any more, each and every aspect of our life is eing governed y knowledge'driven technology and communication. Even in a developing country like India, where nearly <<H of the population still lives elow the poverty line,
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we can o serve the transformation of the country from an agricultural and industrial economy, into knowledge and information' ased economy. India has had a vi rant capital market that is more than a century old, and the Indian shareholders are very much involved in it, which has largely contri uted to its economic growth and development. +wo of the ma"or share markets in India, 5SE and 6SE, are widely reflective of the pattern of growth of the Indian economy. (e can see that a large num ers of players are stepping into the share azaar with an expectation of reaping huge enefits @ some for long'term investment purposes and others for windfall profits. $ost of these new players are tech'savvy and constantly in shortage of time. In tAis ne. te+An-/-0y-d4i3en e4aB +an tAe sAa4e ma4,et 8e /e9t 8eAindC $odernization in the trading and settlement system has een witnessed in the capital market through automated trading mechanism of 0emat. +he advent of Electronic trading and settlement has rought in transparency in trading and has eliminated risks associated with 5ad 0elivery and handling huge load of paperwork. +he country has made a remarka le growth in the capital market y switching over to electronic trading. Indian investor community has undergone sea changes in the past few years. India now has a very large investor population and ever increasing volumes of trades. &owever, this continuous growth in activities has also increased pro lems associated with stock trading. $ost of these pro lems arise due to the intrinsic nature of paper ased trading and settlement, like theft or loss of share certificates. +his system reDuires handling of huge volumes of paper leading to increased costs and inefficiencies. %isk exposure of the investor also increases due to this trading in paper. In this chapter we intend to discuss in detail the asics of a depository system, the depository participants 70*8 and the dematerialization of shares.
0E*)SI+)%B SBS+E$ Bour money may e held in the form of liDuid cash at your home or may e deposited in a ank. +he ank holds your funds in the electronic form and su seDuently de its or credits the account, depending on your issuance of cheDues or deposit of cheDues. +he advantages of safety and convenience of dealing with a ank overweigh the
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reasons for holding liDuid cash in your home. Bour financial assets such as EDuity Shares may e compared to the a ove example. Bou may hold physical share certificates in your home and e exposed to the various risks of lack of safety, mutilation, loss etc. Alternatively, you may deposit your shares in an organization called a 0epository, which holds your shares in the electronic form. A 0epository is a securities I ank,I where dematerialized physical securities are held in custody, and from where they can e traded. +his facilitates faster, risk'free and low cost settlement. +hus, a 0epository is akin to a ank and performs activities similar in nature. COMPARISON O( DEPOSITORY ?ITH !AN> 0epository functions like a securities ank, where the dematerialized physical securities are traded and held in custody. +his facilitates faster, risk free and low cost settlement. 0epository is much like a ank and perform many activities that are similar to a ank. #ollowing ta le compares the two.
!an, &olds funds in accounts +ransfers funds etween accounts +ransfers without handling money Safekeeping of money
DeD-sit-4y &olds securities in account +ransfers securities etween accounts +ransfers without handling securities Safekeeping of securities
COMPARISON O( DEPOSITORY SYSTEM ?ITH PHYSICAL SHARE SYSTEM +he risk of loss, mutilation is common for physical certificates and completely removed in electronic shares. &andling of a large num er of physical certificates is ended in the 0epository mode. In the electronic segment, there are no ad delivers as in physical segment. +here is no stamp duty paya le in electronic shares compared to the duty of 4.:4H in the physical segment while transferring ownership.
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In loans against shares, anks usually charge a lower interest rate and margin money than in the physical share certificates. Settlements in the Stock Exchanges have commenced in the electronic segment and have proven to e far more efficient and convenient compared to physical shares. !ENE(ITS O( DEPOSITORY SYSTEM 1' E/iminati-n -9 !ad De/i3e4ies' In the 0epository environment, once holdings of an investor are dematerialized, the Duestion of ad delivery does not arise. &ence after dematerialization, 0epository G 0epository *articipants cannot hold the 0ematerialized Securities I Ender ) "ection I. As per claims of 6S0L, in the physical environment, a out ;4H of delivered stock constitutes ad deliveries. )f these, a out 2H is ultimately a sor ed y the system as ad delivery cost. %ectification of o "ection always involves extensive follow up y the investor. +his means that in the physical environment, every fifth person taking delivery of stock gets securities, the genuineness to which there is a dou t whereas he parts with genuine funds. "' E/iminati-n -9 a// Ris,s -9 PAysi+a/ Ce4ti9i+ates' *hysical .ertificates are usually exposed to security risks due to theft of Stocks. +he uyers of the Securities are also exposed to mutilation and G or loss of certificates during movements through and from the registrars. +his reDuires the investor to incur additional urden for o taining 0uplicate .ertificates including cost of advertisements, etc. +his pro lem does not arise in the 0epository Environment. $'SDe+ia/ +-n+essi-n 94-m G-3t' -9 India 9-4 StamD D2ty. Section <4 of the 0epositories Act, 233?, has made special provision, which exempt the +ransfer of EDuity Instruments J Enits of $utual #unds in the 0epository from incidence of Stamp 0uty. In case of *hysical mode of +ransfer of EDuity instruments J Enits of $utual #unds, the uyers had to shell out for Stamp 0uty K 4.:H of the purchase cost. 7' Immediate T4ans9e4 and Re0ist4ati-n -9 Se+24ities' In the 0epository environment, investors 7.lients8 ecome Legal )wner of the Securities once the Securities are credited to the investors account with the 0epository *articipants on pay out, here in after the investors ecomes the 5eneficial )wner of the 0epository.
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+he 0epository System has relived the 5uyer of the Securities from the exercise of sending the Securities to the Issuer for getting the securities transferred to his own name as 0epository itself is the registered owner of 0ematerialized Stocks is empowered to effect transfer of )wnership. In the *hysical mode of +ransfers usually takes around three to four months and is rarely completed within the statutory framework of two months. +he delay in the process might expose the investor to opportunity cost due to delay in transfer. +he +ransferee is further exposed to risk of loss of Securities in transit. %'SA-4te4 sett/ement Cy+/e' +he 0epository affects transfers through 5ook Entry, and usually follows rolling settlement cycle of +L<. In the +L< settlement, all trades are settled on the <rd working day from the trade day. +his ena les faster turnover of stock and prompt liDuidity to the investor. :' Pay-in and Pay--2t -9 Se+24ities E (2nds -n tAe same day 9-4 Demat t4ades' As mentioned a ove, in the 0emat Segments the settlement of trades 7 oth securities and funds8 is on the <rd working day from the trade day. +his ena les the .lient G 5uyer who makes the payments on the <rd working day, to receive the securities in his Accounts with hisGher 0.*. on the same day in the evening and a Seller G .lient who delivers the securities on the <rd working day to receive the funds on the same evening. ;' (aste4 Dis824sement -9 N-n CasA C-4D-4ate !ene9its /i,e Ri0AtsB !-n2sB et+' +he 5eneficial )wner who opts for 0emat .redit of Securities for 5onus G %ights, these non'cash .orporate entitlements are credited to .lientMs AGc with 0.*. electronically. +his ensures faster dis ursement of entitlements and reduces the risk of loss of certificates in transit. <' Red2+ti-n in Rate -9 inte4est -n L-ans G4anted' Some market friendly 5anks G #inancial institutions provide loans at confessional rates against pledge of dematerialized securities. +he pledge of dematerialized stock provides the institution with greater control and opportunity for recovery in case of default y the loanee. +he 0ematerialized Stocks further ena le the institution hassle free transaction, while getting securities registered in their 75ank G Institutions8 name at the time of ook closure. =' Red2+ti-n in !4-,e4a0e 8y many 84-,e4s 9-4 T4adin0 in Demate4ia/iFe Se+24ities
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Some rokers provide concession in 5rokerage for 0ematerialized Stocks, as dealing in dematerialized securities reduces 5rokers ack office work of handling paper and other incidental risk. 24. Red2+ti-n in Aand/in0 -9 A20e 3-/2mes -9 DaDe4' +his is due to the electronic form of the securities. +he dematerialization of +his is due to the electronic form of the securities. +he dematerialization of securities would drastically ring a reduction in the paperwork. E/iminati-n -9 D4-8/ems 4e/ated t- +Aan0e -9 add4ess -9 in3est-4B t4ansmissi-nB et+'
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In case of change of address or transmission of demat shares, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their 0* with all relevant documents and the reDuired changes are effected in the data ase of all the companies, where the investor is a registered holder of securities. 1"' Pe4i-di+ stat2s 4eD-4ts' +he investors receive the Statement of &olding and +ransaction Statement regularly. +his ena les them to have a etter control over their operations.
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DEPOSITORY 0epository means a company formed and registered under the .ompanies Act, 23:? and which has een granted a certificate of registration under su 'section 72A8 of section 2; of the Securities J Exchange 5oard of India Act, 233;. A 0epository is an )rganization which holds Securities in 0ematerialized #orm i.e. y way of Electronic %ecords and which ena les Securities +ransactions to e processed y 5ook Entry, at the reDuest of the shareholder. +his eliminates the physical form of holding. A 0epository can e compared to a ank, which holds securities, such as shares, de entures, onds, /overnment Securities, units etc., of investors in an electronic form. 5esides holding securities, it also provides services related to transactions in securities. A 0epository interacts with the investors through its agents called 0epository *articipants 70*s8. If an investor wants to avail the services offered y the 0epository, heGshe has to open an account with a 0*. +his is similar to opening an account with any ranch of a ank, in order to utilize the ankMs services. +he 0epository is o ligated to maintain the .lient &oldings, ena le 0emat and %emat of eligi le securities, dis ursement of corporate enefits, effect settlement of securities traded !ENE(ITS O( DEPOSITORY TO THE INVESTORS $ain concerns of the Investors, after receiving deliveries of securities is to get the securities registered in his G her own name. &owever, in most of the times, investors are exposed to %isk related to .apital $arket and due to various reasons Investors are not a le to register his G her ownership. (e can roadly classify the InvestorMs %isks as elowC 0efault y Seller of Securities relating to +ransfer 0eeds. 0efault y Seller of Securities relating to Share .ertificates. 0efault y *urchaser of Securities to present the Securities along with duly completed +ransfer 0eed within stipulated time period. 0efault y Issuer, %egistrar to %egister +ransfer %eDuest. 0efault y Issuer, %egistrar to deliver the duly +ransferred Share .ertificates to the +ransferee. +he a ove list shows that except for one reason, uyer of the Securities is always at %isk of losing the ownership of the share purchased, due to sellerMs default. +o provide
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much needed protection G relief to the 5uyer Investors, /ovt. of India had decided to introduce the 0epository System in India. DEMATERIALI*ATION - THE CORE ACTIVITY O( DEPOSITORY +he 0ematerialization is ack one of the 0epository .+he term depository is explained as I a depository is an )rganization which holds Securities in 0ematerialized #orm i.e. y way of Electronic %ecords J which ena les Securities +ransactions to e processed y 5ook Entry I. +he Section 3 728 of 0epositories Act, 233? state, I all securities held y a depository shall e dematerialized and shall e in a fungi le form I, which implies that without dematerialization the depository cannot function. At present, there are two 0epositories in India, 6ational Securities 0epository Limited 76S0L8 and .entral 0epository Services 7.0SL8.
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NATIONAL SECURITIES DEPOSITORY LTD' NSDL& 6ational Securities 0epositories Ltd. 76S0L8 was set up as the first depository in the country having various depository participants registered with it. 6S0L was inaugurated on >th 6ovem er 233?. It was set up with an initial capital of %s.2;= crore, promoted y Industrial 0evelopment 5ank of India 7I05I8, Enit +rust of India 7E+I8, 6ational Stock Exchange of India Ltd. 76SEIL8 and the State 5ank of India 7S5I8. +he actual trading in dematerialized securities started at 6ational Stock Exchange on ;?th 0ecem er 233?. Although India had a vi rant capital market, which is more than a century old, the paper' ased settlement of trades caused su stantial pro lems like ad delivery and delayed transfer of title till recently. +he enactment of 0epositories Act in August 233? paved the way for esta lishment of 6S0L, the first depository in India. +his depository promoted y institutions of national stature responsi le for economic development of the country has since esta lished a national infrastructure of international standard that handles most of the trading and settlement in dematerialized form in Indian capital market. Esing innovative and flexi le technology systems, 6S0L works to support the investors and rokers in the capital market of the country. 6S0L aims at ensuring the safety and soundness of Indian marketplaces y developing settlement solutions that increase efficiency, minimize risk and reduce costs. 6S0L plays a Duiet ut central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in ank accounts. +ransfer of ownership of securities is done through simple account transfers. +his method does away with all the risks and hassles normally associated with paperwork. .onseDuently, the cost of transacting in a depository environment is considera ly lower as compared to transacting in certificates. !ASIC SERVICES Ender the provisions of the 0epositories Act, 6S0L provides various services to investors and other participants in the capital market like, clearing mem ers, stock exchanges, anks and issuers of securities. +hese include asic facilities like account maintenance, dematerialization, rematerialisation, settlement of trades through market transfers, off market transfers J inter'depository transfers, distri ution of non'cash corporate actions and nominationGtransmission. +he 0epository System, which links the issuers, depository participants 70*s8, 6S0L and clearing corporationG clearing house of stock exchanges, facilitates holding of securities in dematerialized form and effects
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transfers y means of account transfers. +his system, which facilitates scripless trading, offers various direct and indirect enefits to the market participants. SPECIAL SERVICES 0epository is a facility for holding securities, which ena les securities transactions to e processed y ook entry. In addition to the core services of electronic custody and trade settlement services, 6S0L provides special services like pledge, hypothecation of securities, automatic delivery of securities to clearing corporations, distri ution of cash and non'cash corporate enefits, stock lending, distri ution of securities to allottees in case of pu lic issues, Internet' ased services for clearing mem ers MS*EE0M J Internet ased services for account holders MS*EE0%e&. 6S0L has taken the initiative for providing the facility of ena ling rokers to deliver contract notes to custodian G fund managers electronically through its S+EA0B facility. S+EA0B 7Securities +rading ' information Easy Access and 0eliverB8 was launched y 6S0L on 6ovem er <4, ;44;. S+EA0B is a means of transmitting digitally signed trade information with encryption across market participants electronically and efficiently, through Internet. JOINING NSDL 6S0L carries out its activities through service providers like 0epository *articipants 70*s8, Issuing companies and their %egistrars and Share +ransfer Agents, .learing corporationsG .learing &ouses of Stock Exchanges. +hese entities are called usiness partners in 6S0L terminology. +hese entities need to get integrated into 6S0L depository system to e a le to provide various services to the investors and .learing $em ers. +he investor can o tain depository services through a depository participant of 6S0L. Nust as one opens a ank account in order to avail of the services of a ank, an investor opens a depository account with a depository participant in order to avail of depository facilities. A clearing mem er can open a special account in the depository system for the purpose of settling trades done on stock exchanges. +he clearing account ena les the clearing mem er to receive securities from its clients for delivery to the .learing &ouseG.learing .orporation as pay'in, and to distri ute the payout to its clients received from the .learing'&ouse. Issuer can make dematerialization services availa le to their shareholders y signing an agreement to that effect with 6S0L. After the agreement is entered into, an electronic link is esta lished etween 6S0L, Issuer or its % J + Agent.IN&E&E&>E&E& +he clearing corporationsGhouses of stock exchanges also have to e electronically linked
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!ASIC SERVICES
to the depository in order to electronically receive securities delivered y clearing mem ers towards pay'in and to give out securities to clearing mem ers towards pay'out. !YE LA?S O( NSDL 5ye LawC ?.= *rovides for %ights J ) ligations of *articipants J .lients. ?.=.2. *rovides that no *articipant shall conduct usiness as a *articipant with its .lients unless it has entered into an agreement with its .lients. ?.=.;. Every *articipant shall enter into an Agreement referred to a ove with each of its .lients as per Annexure I 5 I of these 5ye Laws. Anne124e G ! G -9 NSDL !ye La. +he Annexure I 5 I at clause 6o.2 has enumerated, client o ligations towards the *articipant. .lause 6o.2C Stipulates that I +he .lient shall pay the charges to the 0epository *articipant for the purpose of opening J maintaining his account, for carrying out the instruction of the .lient J for rendering such other services as may e agreed to etween the 0epository *articipant J the client as set out in Schedule I A I. Schedule I A OC +his Schedule has listed elow mentioned charges for inclusion in this schedule, such asC 2. ;. <. =. :. Account $aintaining .harges. .ustody .harges. +ransaction .harges. %ematerialisation .harges. )ther .harges.
6S0L J SE5I had conveniently ignored the act of 0*1s to include without authority the charges of 0ematerialization in Schedule I A O of the agreement. .lause 6o.;C Inter alia it stipulates that I +he .lient shall have the %ight to get the Securities which have een admitted on the 0epository, 0ematerialized in the form J manner laid down under the 5ye Laws J 5usiness %ules I. Accordingly this .lause had empowered the investors the right of 0ematerialization in the form J manner laid down under the 5yelaws J 5usiness %ule. &ence if the depository participant is providing services of 0ematerialization, they are under o ligation to provide the same to the investors for which no charges can e levied. 5ye Law 3.;C 0eals with 0ematerializationC 5ye Law 3.;.;C Says that I A .lient may convert his physical holding of securities into 0ematerialized form y making an Application to the *articipant in a 0ematerialization
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%eDuest #orm in the form prescri ed under the 5usiness %ules along with the relevant Securities .ertificates I. Accordingly client is reDuired to su mit his securities to 0epository *articipant only for 0ematerialization. SECURITY 6S0L claims to have undertaken sufficient security measures. +hese measures areC
A 0* can e operational only after registration y Se i, which is ased on the recommendation from 6S0L and Se i1s own independent evaluation. Se i has prescri ed criteria for ecoming a 0* in the regulations. 0*s are allowed to affect any de it and credit to an account only on the asis of valid instruction from the client. Every day, there is a system driven mandatory reconciliation etween the 0* and 6S0L. +here are periodic inspections into the activities of oth 0* and %J+ agent y 6S0L. +his also includes records ased on which the de itG credit are affected. +he data interchange etween 6S0L and its usiness partners is protected y standard protection measures such as encryption. +his is a SE5I reDuirement. +here are no direct communication links etween two usiness partners and all communications etween two usiness partners are routed through 6S0L All investors have a right to receive their statement of accounts periodically from the 0*. Every month 6S0L forwards statement of accounts to a random sample of investors as a counter check. In the depository, the depository holds the investor holdings on trust. +herefore, if the 0* goes ankrupt the creditors of the 0* will have no access to the holdings in the name of the clients of the 0*. +hese investors can then either dematerialize their holdings or transfer them to a different account held with another 0*. Investor grievanceC All grievances of the investors are to e resolved y the concerned 0*. If they fail to do so the investor has the right to approach 6S0L. Insurance .overC 6S0L has taken a comprehensive insurance policy to protect the interest of the investors in cases of failure of the 0* to resolve a genuine loss. +he details of the policy is as underC Epper limit per claimC %s;44mn
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6um er of claims allowedC unlimited $inimum value of the claimC %s2:4, 444 +o cover claims valued less than %s2:4, 444 6S0L has an investor protection fund in place.
5esides all these safety measures efforts have een done to make this electronic system foolproof. COMPUTER AND COMMUNICATION IN(RASTRUCTURE O( NSDL +he systems are accepted y 6S0L only after a rigorous testing procedure. $achine level ack upC +he I5$ mainframe situated at I+rade (orldI 76S0L office in $um ai8 in which the data is processed has adeDuate redundancy uilt into its configuration. +here is a stand y central processing unit 7.*E8 to which processing can e switched over to in case of main system .*E failure. +he disk has %AI0 implementation, which ensures that a single point failure will not lead to loss in data. System has spare disk configuration where data is automatically copied from the main disk upon encountering the first failure 7due to %AI0 implementation ' first failure does not result in loss of data8. All network components like router, communication controllers etc, have on'line redundancy and thus a failure does not result in loss of transaction. 0isaster ack up siteC In addition, a disaster ack up site eDuipped with a computer identical to the mainframe computer J computing resources has een set up at a remote location a out 2A: km away from $um ai. +his site has een tested for operations from the site. 5ack'up in case of power failureC .ontinuity in power supply to the main systems is assured y providing for! dual uninterrupted power supply 7E*S8 for I5$'$ainframe and related components wherein the two E*Ss are connected in tandem. In case of failure of primary E*S, the secondary E*S takes over instantaneously and thus, there is no interruption in operation, and ack'up diesel generator set. If an investor looses his statement of holdings, he may inform his 0* and o tain a duplicate statement of holdings. +he loss of statement of holding will not affect his actual holdings. If a 0* goes ankrupt, there is no need for an investor to e unduly concerned as enough provisions are there for the investor to transfer his account from the defunct 0* to another 0* or get the securities rematerialized. +here cannot e any lien on the account holders1 assets y creditors elonging to the 0* or 6S0L and therefore the account holders1 assets are a solutely safe. +here is no credit risk in case of a defunct 6S0L or its 0*s.
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0epository account details are confidential. +here are strict systems and procedures esta lished to protect the confidentiality of investor information at the depository to ensure that these are availa le to only authorized persons. Even a 0* other than your own, cannot have access to your account.
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CENTRAL DEPOSITORY SERVICES LTD' CDSL& +he second depository, .entral 0epository Services 7India8, was promoted y the Stock Exchange, $um ai 75SE8 "ointly with leading anks such as State 5ank of India, 5ank of India, 5ank of 5aroda, &0#. 5ank, Standard .hartered 5ank, Enion 5ank of India and .enturion 5ank. .0SL got the certificate of commencement on >th #e ruary 2333 and commenced limited operations at 5om ay Stock Exchange, of opening accounts and processing 0emat reDuest from ;;nd $arch 2333. +he initial capital of the company is %s.24=.:4 crores. All leading stock exchanges like the 6ational Stock Exchange, .alcutta Stock Exchange, 0elhi Stock Exchange, the Stock Exchange of Ahmeda ad, etc have esta lished connectivity with .0SL. .0SL was set up with the o "ective of providing convenient, dependa le and secure depository services at afforda le cost to all market participants. Some of the important milestones of .0SL system areC .0SL received the certificate of commencement of usiness from SE5I in #e ruary 2333. &onora le Enion #inance $inister, Shri Bashwant Sinha flagged off the operations of .0SL on Nuly 2:, 2333. Settlement of trades in the 0emat mode through 5)I Shareholding Limited, the clearinghouse of 5SE, started in Nuly 2333. As at the end of Nuly ;44<, over =?44 issuers have admitted their securities 7eDuities, onds, de entures, commercial papers8, units of mutual funds, certificate of deposits etc. into the .0SL system. +he following are the ma"or enefits of having an account with .0SL. CONVENIENCEH ?ide DP Net.-4,H .0SL has over ;44 0*s spread around 22= citiesGtowns across the country, offering convenience for an investor to select a 0* ased on his location. On-/ine DP Se43i+esH +he ranches of a 0* can also e directly connected to .0SL there y providing on'line and efficient depository service to investors ?ide SDe+t42m -9 Se+24ities A3ai/a8/e 9-4 DematH $ore than =?44 companies have admitted their eDuity into .0SL. #urther, .0SL has also admitted an entire gamut of de t instruments viz. onds, de entures, commercial paper, government securities, certificate of deposits, etc. +hus an investor can hold almost all his securities in one account with .0SL.
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C-mDetiti3e (ees St42+t24eH .0SL has kept its tariffs very competitive to provide afforda le depository services to investors. .0SL also does not collect any custody fees or ISI6 fees from its 0*s. Inte4net A++essH A 0*, which registers itself with .0SL for Internet access, can in turn provide demat account holders with access to their account on the Internet. DEPENDA!ILITYH On-/ine In9-4mati-n t- Use4sH .0SLMs system is ased on centralized data ase architecture! 0*s can thus provide on'line depository services with to'the'minute status of the investorMs account. C-n3enient t- DPsH +he entire data ase of investors is stored centrally at .0SL. If there are any system'related issues at 0*s end, the investor is not affected, as the entire data is availa le at .0SL. C-ntin0en+y A44an0ementsH .0SL has made provisions for contingency terminals, which ena les a 0* to update transactions, in case of any system related pro lems at the 0*Ms office. Meetin0 Use4Is ReJ2i4ementsH .ontinuous updating of procedures and processes in tune with evolving market practices is another hallmark of .0SLMs services. A2dit and InsDe+ti-nH .0SL conducts regular audit of its 0*s to ensure compliance of stringent operational and regulatory reDuirements. D-4mant A++-2nt M-nit-4in0H .0SL has in place a mechanism for monitoring dormant accounts. He/Ddes,H 0*s and investors o tain clarifications and guidance from .0SLMs prompt and courteous help line facility. SECURITYH C-mD2te4 SystemsH .0SL has installed state'of'the'art computer system and data storage devices. All data is stored at .0SL and is auto mirrored separately and also transmitted to a 0isaster %ecovery site. 0ata is also acked up on digital linear tapes, which are stored in fireproof ca inets at the main and disaster recovery sites. UniJ2e !O A++-2nt N2m8e4H Each 5) in .0SL is allocated a uniDue account num er, which ensures that at the time of transfer of securities if the transferorMs account num er is wrongly entered, the transaction will not go through the .0SL system, unless corrected.
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Data Se+24ityH .0SL ensures the security and integrity of all data y encrypting all communications etween .0SL and its users. C/aims -n DPH If any 0* of .0SL goes into liDuidation, the creditors of the 0* will have no access to the holdings of the 5). Ins24an+e C-3e4H .0SL has o tained adeDuate insurance cover in the unlikely event of any loss to a 5) due to the negligence of .0SL or its 0*. TECHNOLOGY USED S-9t.a4eH +he software is developed and supported y .$. Ltd., who has also developed the 5)L+ system for 5SE. +he software is a modified version of the anking software'+.= developed y a su sidiary of .$. Ltd. 7in ESA8, which is currently eing used y several anks worldwide. +he software has een customized to suit the reDuirement of .0SL. Ha4d.a4eH &ewlett *ackard provides the hardware. &* 3444 7?= 5it8 Enterprise server system 7super computer technology with a ro ustness of enterprise class8, is the highest performing %IS.GE6IP server system availa le in the marketplace. +his system is connected to a near fault tolerant storage system from E$.; .orporation featuring multiple %AI0 levels and intelligent diagnostics 7automatic disk fault finding system8. +his is the worldMs est storage system and the first of its kind to e installed in India! imported from Enited States of America after due certification y the relevant ES Agency and installation at our site was also su "ect to inspection y the ES .onsulate. +he load handling capacity of Enix systems used is virtually limitless. Data8ase A4+Aite+t24eH A 0epository facilitates holding of securities in the electronic form and ena les securities transactions to e processed y ook entry y a 0epository *articipant 70*8, who as an agent of the depository, offers depository services to investors. According to SE5I guidelines, financial institutions, anks, custodians, stock rokers, etc. are eligi le to act as 0*s. +he investor who is known as eneficial owner 75)8 has to open a 0emat account through any 0* for dematerialization of his holdings and transferring securities. +he alances in the investors account recorded and maintained with .0SL can e o tained through the 0*. +he 0* is reDuired to provide the investor, at regular intervals, a statement of account, which gives the details of the securities holdings and transactions. +he depository system has effectively eliminated paper' ased certificates, which were prone to e fake, forged, counterfeit resulting in ad deliveries. .0SL offers an efficient and instantaneous transfer of securities.
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5y looking at the spread of their operations, one would find out that the 6S0L is way ahead of .0SL. +his is ecause of various reasons' the ma"or reason eing that 6S0L started much earlier in 233?, as compared to .0SL, which started operating from 2333. $any elieve that the over'all set'up of the infrastructure developed y 6S0L for 0*s is much superior to that of .0SL. #or example, it is a known fact that 6S0L has a much etter ack'up system than .0SL.
DEPOSITORY PARTICIPANTS
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+he operations in the 0epository System involve the participation of a 0epository, 0epository *articipants, .ompanyG%egistrars and Investors. 6S0L provides its services to investors through its intermediary called depository participants 70*s8. A 0epository *articipant is the agent of the 0epository and is the medium through which the shares are held in the electronic form. +hey are also the representatives of the investor, providing the link etween the investor and the company through the 0epository. +hese agents are appointed y 6S0L with the approval of SE5I. According to SE5I regulations, amongst others, three categories of entities i.e. 5anks, #inancial Institutions and $em ers of Stock Exchanges Q rokersR registered with SE5I can ecome 0*s. All the 0*s are appointed su "ect to fulfillment of uniform reDuirements of SE5I 70epositories and *articipants8 %egulations, 233? and reDuirements of 6S0L. &owever, the type of services offered and the service standards may differ among various 0*s. #or example, a 0* ranch having direct connectivity with the main office having depository set'up may e in a position to execute instructions faster. Bou can select your 0* to open a 0emat account "ust like you select a ank for opening a savings account. Some of the important factors for selection of a 0* can eC 2..onvenience ' *roximity to your officeGresidence, usiness hours. ;..omfort ' %eputation of the 0*, past association with the organization, whether the 0* is in a position to give the specific service you may needS <..ost ' +he service charges levied y 0* and the service standards. +here are no restrictions on the num er of 0*s you can open accounts with. Nust as you can have savings or current accounts with more than one ank, you can open accounts with more than one 0*. 6S0L reDuirements for the 0*sC +he *articipant shall have the discretion to charge any fees to its .lients. #urther, the *articipant may charge different types of fees to its various .lients. +he 0epository on 0ematerialization %eDuests shall charge no #ee. &owever, in case of %ematerialisation, a flat fee of %s. 24 per .ertificate will e charged. $oreover, an issuer may pay a one'time custody fee to 6S0L and conseDuent upon such payment, 6S0L shall not levy any custody fee on the *articipants. +his necessarily concludes that the 0epository *articipants are neither empowered to collect the 0emat charges nor morally recover excess .ustody .harges from the .lients. +he charges prescri ed y the 6S0L for the 0*s are as followsC
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2. ;. <. =. :.
Account )pening .harges. .ustody .harges. +ransaction .harges. %ematerialisation .harges. )ther .harges.
(e will now examine different types of charges collected y 0epository *articipants against actual provision in this regardC 1' A++-2nt ODenin0 CAa40es' .lause 6o.2 stipulates that the client shall pay the charges to the 0epository *articipant for the purpose of opening J maintaining his account. 7a8 Account Maintaining Charges. +his clearly means that charges paid y the clients for )pening of Accounts also covers Account $aintaining .harges as well. 0epository *articipants can collect either Accounts )pening .harges or Account $aintain .harges. 5ut in no case .lient should e made lia le to pay oth the .harges that to Account $aintenance .harges on *eriodically. b! Annual Membership Charges" (ithout clearly specifying the difference etween Accounts $aintenance .harges, the same charge is recovered under the different nomenclature as Annual $em ership .harges.0epository Environment had actually provided 0epository *articipants with free hand to .harge same .harge time J again under different nomenclature as per their own will. "' C2st-dy CAa40esH 6o periodicity for collecting these charges is fixed y the 6S0L. &ence some 0epository *articipants are collecting .ustody .harges at Tuarterly Interval J some are collecting at Bearly Interval. .ollection at Tuarterly Interval has an effect of compounding nature. Again at 6S0L I scale of .ustody .harges varies from one 0epository *articipant to another 0epository *articipant I. As per our contention the .ustody .harges are recovered twice from the 5eneficial Account &older. #irst, through issuer where in the 5eneficial Account &older is a Share'&older J when this issuer pays to the 0epository )ne +ime .ustody .harges. Secondly, in spite of paying one time custody charges, the 5eneficial Account holder are again made to pay custody charges to the 0epository *articipants as a .lient. +he a solute minimum custody charge is another ploy to recover much more than the applica le rate.
$' T4ansa+ti-n CAa40es'
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+he 0* levies these charges for effecting .redit or 0e it to the .lients Accounts. A8 6on'Scheduled .harges of 0ematerialization. +he Schedule I A I at Annexure I 5 I has not prescri ed this sort of .harges, which referred as .harges of 0ematerialization. +he 6S0L usiness rule has prescri ed fee for dematerialization J rematerialisation as underC +he 0epository on 0ematerialization reDuests shall charge no fee. &owever, in case of %ematerialisation, a fee at the rate of 4.24H of the value of the securities reDuested for rematerialisation or %s.24G' per certificate, whichever is higher will e charged. 7' Remate4ia/isati-n CAa40es' +his charges ecomes paya le at the time of 5eneficial )wner )pting to withdraw from the 0epository Environment J reDuires his Securities in *hysical $ode. %' OtAe4 CAa40es +hese .harges are actually designed to carter need of 0epository *articipants , for providing extra facilities i.e. more than J out side statutory o ligation to the .lient. Some anks which are also 0epository *articipants are asking the Account &older to keep #ixed 0eposit linked with 0epository Account , efore opening of accounts in depository. +his clearly shows that in reality , with the protection of 5usiness %ule C :.< , each J every charges out side the prescri ed set of charges at Annexure I 5 I ' Schedule I A I is classified under this head. Ese Link #or .omplete Annexure I 5 I with Schedule I A I as prescri ed y 6S0L. )nly solidarity of 5eneficial )wner will provide the "ustice from I )ther .harges I .
DEMATERIALI*ATION
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0emat is a commonly used a reviation of 0ematerialization, which is a process where y securities like shares, de entures are converted from the ImaterialI 7paper documents8 into electronic data and stored in the computers of an electronic 0epository. Securities registered in your name are surrendered to depository participant 70*8 and these are sent to the respective companies who will cancel them after I0ematerializationI and credit your depository account with the 0*. +he securities on 0ematerialization appear as alances in your depository account. +hese alances are transfera le like physical shares. If at a later date, you wish to have these I0ematI securities converted ack into paper certificates, the 0epository helps you to do this y a process called %ematerialization. 5y dematerialization of shares the cum ersome process of paper work is eliminated. It offers scope for paperless trading through state'of'the'art technology, where y share transactions and transfers are processed electronically without involving any share certificate or transfer deed after the share certificates have een converted from physical form to electronic form. 0ematerialization of shares is optional and an investor can still hold shares in physical form. &owever, heGshe has to 0emat the shares if heGshe wishes to sell the same through the Stock Exchanges. Similarly, if an investor purchases shares, heGshe will get delivery of the shares in 0emat form. PROCESS O( DEMATERIALI*ATION *rescri ed 0emat %eDuest #orm 70%#8 needs to e filled in y the client who wishes to convert the physical shares into 0emat form. .lient should verify whether the scrip, he wishes to 0emat, is listed on 6S0L or not. )nly those scrips that are listed can e given for dematerialization. +he list of tentative scrips listed on 6S0L is made availa le to the ranch. +he same can e downloaded from 6S0LMs Internet site also, viz. www.nsdl.com. +he client should also deface the share certificates with the ru er stamp stating MSE%%E60E%E0 #)% 0E$A+E%IALISA+I)6M. +he said stamp is made availa le to the ranch to facilitate the client to use the same. Also the said shares should e punched with minimum two holes on G near the name of the .ompany. Separate 0%# needs to e filled in per account per scrip. +he said 0%#, received y the ranch from the client, should e verified for mandatory reDuirements in the 0%# and also should verify the *hysical shares. +he details mentioned on 0%# needs to tally with the physical shares and that the said shares are properly defaced with the reDuired stamp and holes. +he complete form with share certificates should e send to &o for further processing. 6ormal process of completion of the 0emat is ;4 to <4 days.
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As per 6S0L 5ye Law, .lient in relation to a *articipant means a 5eneficial )wner who has opened an account with the participant J has entered into the agreement in accordance with the provision of .hapter ? of 6S0L 5ye Laws.
MANDATORY REKUIREMENTS #irstly the client has to open an account with a 0epository *articipant and get a uniDue .lient I0 num er. +hereafter, he has to fill the 0ematerialization %eDuest #orm 70%#8 provided y the 0* and surrender the shares in physical form to the 0*. +he 0epository participant on receipt of the a ove documents will send an electronic reDuest to the companies through the 0epository for confirmation of demat. Each reDuest will ear a uniDue transaction num er. +he 0* will surrender the 0%# and the a ove'mentioned documents with a covering letter reDuesting the company to confirm 0emat. +he company will confirm 0emat to the 0epository after necessary verification. +his depository will confirm the 0ematerialization to 0*, which is holding the account. +hen 0* will credit the account with the shares so dematerialized. +he 0* will hold the shares in the dematerialized form thereafter on ehalf of the client. +he client will e eneficial owner of these dematerialized shares.
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SETTLEMENTSH THE NE? ORDER
Seller1s Shares SE.E%I+IES *AB'I6 0epository 5roker
5uyer1s #unds #E60S *AB'I6
5roker
.learing 5ank
.learing .orp. SE.E%I+IES *AB')E+ 0epository .learing 5ank #E60S *AB' )E+
5roker
5roker
5uyer gets Shares
Seller gets $oney
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COMPARITIVE STUDY
O( DPS IN AHMEDA!AD
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ANALYSIS O( THE STUDY ON DPs
1& NSDL VES CDSL In the early 2334s, the government decided to strengthen the financial infrastructure in our country and one of the steps in this direction was the dematerialization of securities. And as a result of this we have two depositories, namely, 6ational Securities 0epository Ltd. 76S0L8 and .entral 0epository Services Ltd. 7.0SL8 in our country. +he enactment of the 0epositories Act in August 233? paved the way for esta lishment of 6S0L, the first depository in India. +his depository, promoted y institutions of national stature, responsi le for the economic development of the country, has since esta lished a national infrastructure that handles most of the trading and settlement in the dematerialized form in the Indian capital market. 5y looking at the spread of their operations, one would find out that the 6S0L is way ahead of .0SL. +his is ecause of various reasons' the ma"or reason eing that 6S0L started much earlier in 233?, as compared to .0SL, which started operating from 2333. 6SE, eing one of the promoters of 6S0L, made it mandatory for security holders to dematerialize their securities phase' y'phase. $any elieve that the over'all set'up of the infrastructure developed y 6S0L for 0*s is much superior to that of .0SL. #or example, it is a known fact that 6S0L has a much etter ack'up system than .0SL. So, as of now, in India 6S0L has more 0*s under its um rella than .0SL. In our study of various 0*s of Ahmeda ad, we have found out that almost all the 0*s are registered with 6S0L, however some of the 0*s like &0#., %atnakar Securities, Shah Investors and Stock &olding .orporation of India are also registered with .0SL. "& !AN>S VES !RO>ERS +he Indian capital market moved along with international standards as it can e seen in the case of dematerialization. It was realized y the roker community that it would take more than stock roking services for them to survive in this new era of the vi rant capital market. +herefore, the large roking houses of the country started offering 0emat services, thus providing a one'stop'shop for their clients. +hey now provide their clients with roking services, 0emat facilities, financial consultancy, asset management services and so on. So dematerialization has helped them to retain their existing clientele and expand it at the same time y attracting new clients. )n the other hand, the ma"or financial institutions of the country were also attracted y the opportunity, as they could also provide demat services using their existing network of ranches.
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In our study, we found out that in Ahmeda ad all the large and old rokerage firms provide 0emat services to their clients. And the competition doesn1t end here as many anks like E+I, &0#., ,..5 and 6utan 6agarik also provide the demat services. +hus, we can now conclude that the all is in the customers1 court as it is up to the customer to decide whether he should e loyal to his anker or roker. +he 5anks and the 5roking houses are different in providing their services as a 0*. It is difficult to compare them since their mode of operation is different. +herefore, the services and the charges for the same are also different. Some of the anks provide 0* services only to those clients who have an account in their ank'in other words a client who wants to open a 0emat account with a ank must e an account holder of the ank. +his was o served y us in the case of 6utan 6agrik 5ank which reDuires its clients to e an accountholder of the ank in order to avail of the demat services. $& INITIATORS AND (OLLO?ERS 6S0L is India1s first depository which started in the year 233?, and soon after that, there were some early irds in Ahmeda ad to. In our sample of 2< 0*s in Ahmeda ad including anks, Shah Investors is the oldest 0* to e incorporated in the year 233=. Among the anks E+I seems to e the initiator, which started providing 0* services since 233? followed y Investmentor Securities in 233:. +he most recent players in this field include 6utan 6agrik Sahakari 5ank Ltd. and A.$L, which started its operation from ;442. +oday there are more then ;4 0*s in Ahmeda ad. As Indian capital market is in its growing phase, it seems that there is a good scope for new players to enter this competitive market. 7& NC(M L MANDATORY Earlier the Indian market makers were not conversant with 0emat system. 5ut with the emerging capital markets and the transformation of the paper' ased settlement to electronic form, the incorporation of 0*s would reDuire technical know'how of the process. As per the norms of 6S0L it is mandatory for each and every 0* including all the ranches to have at least one 6SE .ertificate for #inancial $anagement 76.#$8 Dualified employee. ,alupur .ommercial .o'operative 5ank ranks the highest among the 0*s surveyed with 2> out of ;4 employees eing 6.#$ Dualified. %atnakar has 24 6.#$ certified employees. (e found out in our study that this 6.#$ certified employees to total employees ratio is increasing y the day. Since 6.#$ exam is taken in English language, many of the 0* employees find it difficult to clear the exams in spite of having the technical knowledge.
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%& M!RO>ER N DP) MA>ES SENSE (e found out in our study that many large roking houses in Ahmeda ad provide many services apart from roking. In Ahmeda ad many rokers provide services like asset management, demat, financial advice etc. #urther in our study we realized that these houses provide additional services apart from their core service of roking in order to retain their clients. In Ahmeda ad roker firms like Shah Investors, *ravin %atilal share J stock roker Ltd. and Investmentor Securities Ltd. provide com ination of services apart from roking services. So clients would now get one'stop'shop in terms of such firms. As we have suggested through out the discussion that it makes sense to provide service undling. In future the emergence of such firms providing multiple services would increase ecause of increasing competition and we can conclude that it is an art of survival. As far as anks are concerned &0#. provides roking and asset management apart from anking services and E+I provides financial advice. :& MINDIVIDUALS) RULE THE ROOST /enerally 0*s have different kinds of clients such as individual clients, &E# firms, 6%Is, corporates, clearing mem ers etc. In Ahmeda ad, we found that almost all the 0*s surveyed had such a com ination. And it turned out that individual clients formed the ma"or chunk of the pie. +he individual clients form more than 3:H of the clientele across all the 0*s. 5ut it would e unwise to draw any conclusions from this. 5ecause usiness generated y other clients like corporates, clearing mem ers etc is much more than that of individual clients. In our study we found out that Shah Investors has the highest num er of clients which stands at nearly =:444, next comes ,..5 7<:4448, %atnakar Securities 72:4448, Invetmentor 72<=:48 etc. +hough Shah Investor has the highest num er of individual clients, the highest num er of corporate clients is with ,handwala Securities. ,handwala Securities also has the highest num er of clearing mem ers 7=8 as clients. ;& VOLUME MATTERS Another o vious difference found out was the volume of instructions per day for different 0*s. )ne can easily correlate it with the num er of clients with the 0*s. +hese instructions are of three kinds namely 0elivery instructions, Account opening instructions and 0emat reDuests. (e found out that A.$L gets the highest num er of instructions for delivery followed y Stock &olding .orporation of India Ltd. In Account )pening category 6utan 6agarik gets the highest num er of instructions, which stands, at ?4 instructions per day. +he next in line is Invetmentor, *ravin %atilal securities and A.$L. #or the last
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category of 0emat reDuest, *ravin %atilal gets the highest num er of instructions 7<:48 next comes Stock &olding .orporation of India 7;448 and Shah Investors 72448. )ne can pro a ly make out from this information a out the extent of active clientele with the 0*. (e can infer that *ravin %atilal and A.$L have more active clientele than others. 5ut it is difficult to conclude the difference it makes to their ottom' line. <& DISCRIMINATION L AN ORDER O( THE DAYO Isn1t itS As we discussed earlier 0*s have different kinds of clients. Some of the clients form a ma"or chunk of revenue, some clients generate ma"or chunk of volume with respect to su ' roker, .orporates etc. So 0*s use different strategies to retain such clients. 0*s sometimes offer discounted charges to such clients, which ring more usiness. +his differentiation of clients can e done on various asis such as volume, value, as per category of clients etc. (e found out that almost all the 0*s in Ahmeda ad have such differentiation, though they have their own criteria for differentiating. +here is also a possi ility of argainingGnegotiation etween clients and 0*s. (e o served that most of the 0*s discriminate etween the su ' rokers and clients. 0iscrimination is also done when the volume of transaction varies a lot. Sometimes discrimination is reasona le, at least in usinessU =& PAYMENT SYSTEM *ayment systems followed y different 0*s is an important factor for comparing them ecause it determines the level of convenience for the clients. It can also e used as a tool y the 0*s to attract their clients. As far as the payment system is concerned we have o served that almost all the roking houses under our study providing 0* services have an advance payment, upfront payment and post transaction payment system. Some of them also offer two or all of the three options. $ost of the anks follow such a system where payment would e de ited directly from their ank account. In Ahmeda ad, many 0*s prefer post transaction payment such as Anagram Stock roking Ltd., %atnakar Securities, E+I, Investmentor and Stock &olding .orporation of India whereas /oldmine prefers upfront payment. ,handwala, A.$L and *ravin %atilal Share and Stock rokers Ltd. follows advance payment and post payment system. 1#& MON DEMAND) IS IN DEMANDH As we discussed earlier communication etween clients and 0*s can e done through various modes and it comes into the picture when 0*s want to send Statement of &olding 7So& hereafter8 and +ransaction statement 7+S hereafter8. As per 6S0L
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guidelines it is mandatory for the 0*s to send the So& and +S on Duarterly asis. A common pattern o served in ma"ority of the 0*s is that they send these statements on a monthly asis if any transaction takes place otherwise they are sent Duarterly. ,handwala and /oldmine send the So& monthly even if no transaction has taken place. Each time a client enters into a transaction, heGshe needs to know the alance in the account. #or this purpose some clients may reDuire the So& and +S more freDuently. +herefore the 0*s have started providing So& and +s on demand, for which additional charges may e imposed. Anagram Stock roking Ltd., Shah Investors and Stock &olding .orporation of India provide these statements on demand for free which the clients have to go and collect. It may also e e'mailed to the clients as E+I does. In the long run it would e futile to charge the clients for on demand statements, as competition would necessitate the use of technology, which would reduce the cost in any case. 11& !ETTER SA(E THAN SORRY Since the system of 0ematerialization has come into existence it has ecome much easier for the clients to enter into transactions. All one needs to do is to su mit the instruction slips duly filled to their respective 0*. In doing so if the 0* finds any error or inaccuracy with regards to the amount, signature or the details regarding the shares, the 0* may re"ect the same. Some 0*s may not charge for the re"ected instructions. Among those 0*s that charge their clients for re"ected instructions are Infinite #inancial Services Ltd., *ravin %atilal, Investmentor Securities, 6utan 6agrik, /oldmine, E+I and Shah Investors. $oreover these 0*s also impose a service tax of approx. >H on these charges. +herefore small mistakes could cost the client dearly. 1"& MODE O( COMMUNICATION In this new era of competition, 0*s have introduced many innovative things to retain and add to their clientele. And that reflects in their modes of communication to the clients for sending +ransaction Statement and Statement of &olding. (e o served that 0*s used many new modes of communication apart from communication modes like post and courier. 6ew modes of communications include telephone, e'mail, fax, we site and telephone 7automatic8 where clients can get information ;=VA. In Ahmeda ad, all the 0*s use postGcourier. 5ut, the difference is apparent in offering more convenience to clients through different modes. Shah investors uses e'mail, telephone 7automatic8 and fax. &0#. and %atnakar securities have their own we site which they update regularly for clients. .lients can access +S and So& through it. E'mail and +elephone 7automatic8 are also ecoming increasingly common for 0*s to serve their clients. 1$& MSLIPS) (OR CLIENTSO As 0emat services ecame more and more popular, and 0*s spread their services across all the sections of the clients, the 0*s were driven y competition and thus started
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giving more services and convenience to their clients. So as a result of this matters of little importance started getting more and more importance to differentiate one 0* from the other. +his was visi le even in the deadlines for su mission of instruction slips. 6ow' a'days, the 0*s have ecame more and more flexi le towards their clients. (e found out that some 0*s set the deadlines in such a way that it would e more convenient to clients. Even some 0*s go out of their way to accept the instruction slips of clients, even after the deadlines. ,handwala Securities is the most client friendly in this regard which accepts instruction slips up to ?.44 p.m. +his setting of deadlines y 0*s is largely dependent on the efficiency of 0*s, as all the 0*s have to su mit these instructions to the depository. So it depends on how much of loadGpressure the 0*s are willing to take for their clients. 17& !RIC> MN CLIC> +he emergence of Information +echnology has created a wide communication network with the widespread use of Internet and a large num er of upcoming dotcom companies. +he traditional organization is transforming itself into a 6et'Savvy organization. +hus more and more people are ecoming 6et'Savvy and have started transacting with virtual rokers. $any we sites like icicidirect.com, sharekhan.com etc. provides facility of online trading. As far as the 0*s are concerned, most of them have their own we sites, which helps one to get detailed information a out their organization. 6S0L has come up with new net'ena led services such as S*EE0'e and I0eAS. Some of the 0*s have started to su scri e to these in order to enhance their services for the net' savvy clients. In future most of the 0*s will provide these services, as more and more people will demand for the same. 1%& !-e SPEED-e S*EE0'e is a net' ased service, which helps you to enter your 0* transactions through the Internet. Bou need not physically su mit the slips to the 0* ut you can do the same at your convenience from your home or office with the help of Internet. )n the asis of our study of 0*s, we o served that *ravin %atilal, &0#., ,handwala and E+I have su scri ed to S*EE0'e services and provide the same to the clients. As of now very few clients have availed of this service. +his may e due to their lack of willingness to use the Internet, ut the future scenario is likely to change with the gradual acceptance of Internet.
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1:& MIDeAS CAN CHANGE YOUR LI(E) $ore and more people are ecoming net'savvy with the emergence of Information Systems and +echnology. *eople have started transacting with virtual rokers. $any we sites like icicidirect.com, sharekhan.com etc. provides this facility of online trading. +hus it is ecoming increasingly necessary to know the alance online. So this so'called Wnet'savvy community1 found their answer in terms of I0eAS. +hrough I0eAS the 0* provides a net' ased access to the So& and +S for those customers who reDuire knowing their alance on a more freDuent asis than. In Ahmeda ad also many 0*s have now su scri ed to I0eAS services. Some of them eing &0#., ,handwala, Shah Investors, /oldmine, ,..5, and A.$L, though the client ase for this service is not very large. In our sample, A.$L has highest num er of clients 7more than ;448 followed y ,handwala 72448 and ,..5 7A48. 1;& ITS ALL A!OUT MONEYB HONEYO An interesting aspect of comparing the 0*s is the charge structure as it affects the choice of the clients for choosing a particular 0*. (e o served that the whole charge structure could e divided in two parts' fixed and varia le. All the 0*s have set different charges and in some case nothing is charged for some of the services. +his is an area where the 0*s can attract the attention of the clients y charging differently as compared to competitors. #ixed component of charge structure includes AGc opening charges and annual maintenance charges. -aria le charges include purchase and sell charges ased on num er of transactions, 0emat and %emat charges ased on the num er of certificates etc. Shah Investors is one of the 0* that has high AGc opening charges 7%s.234G' including stamp paper charges8 followed y %atnakar 7%s.2A:G'8, A.$L 7%s.2:4G'8 and Infinite 7%s. 2:4G'8. Annual maintenance charge of Stock &olding .orporation of India is the highest at %s.<:4G'. $ost of the other 0*s charge %s. <44 per year. A.$L charges the least at %s.2:4G' per year.
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CLIENTS) PERSPECTIVE
ANALYSIS O( A CLIENTS) PERSPECTIVE
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After understanding and analyzing the different aspects of various 0*s, we were given a task to analyze the clients1 perspective towards 0*s. #or that we chose a sample of <4 clients of Anagram Securities Ltd. +hese clients are very important for Anagram Securities Ltd. , as most of them are rokers of Anagram and some are ig investors. (e chose the Duestionnaire method for this task. +his second stage of our study has ecome eDually important for us as it gives us the other side of the picture. 1& !RO>ER L DP P CONVENIENCE As we discussed earlier also, it makes sense for prime rokerage firms to provide dematerialization service as well. It works as a supporting service and a one'stop shop for clients. (e o served in our study that ma"or clients like rokers, su ' rokers prefer their principal which also provides demat service. It is ecause it would ecome easy for them to settle any pro lems regarding pay'in. +hus it would save their time and would provide them with more flexi ility in their work. "& LOCATION (hen clients decide a out the 0*, there are many issues on their mind. +hey also consider many implicit costs. #or example many clients would prefer a 0* which is nearer to their homeGoffice ecause it would give them convenience. (e found out in our study that many individual clients consider this issue important while choosing a 0*. It doesn1t make much difference to ig rokers and su ' rokers as they have far greater volumes and so they give more importance to the charges, relationships and so on. $& CHARGES All the clients, whether an individual, a su ' roker or a main roker, would consider charges closely while choosing a 0*. +his is the most important factor which influences the clients1 choice of 0*. +here are two types of charges in demat, namely, fixed and varia le. +he ma"or fixed charge is annual maintenance charge and the ma"or varia le charge is the transaction 7 uyGsell8 charge. Active clients would look at varia le charges closely while selecting a 0*. )n the other hand, those clients who are not so active would look at annual maintenance charge closely. 7& CUSTOMER SERVICE .ustomer service is one of the most important issues for clients. It includes a variety of things, starting from the sending of the statement of holding and the transaction statement on time, to providing the latest internet' ased S*EE0'e and I0eAS facilities. +he clients look for that 0* which matches their need of services. .ertain clients reDuire the Statements more freDuently than other clients and may find it cum ersome to visit the 0* everyday for the same. 6ow'a'days, the num er of internet'friendly clients is increasing
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due to the Information revolution. At present there may not e many clients willing to use the Internet, ut this num er is only set to rise in future, and this could provide a wide scope of improvement. %& RELIA!ILITY It is very important for 0*s to provide satisfactory level of services with consistency. +his means that the Duality of service should not keep changing from time to time. +he client should e a le to estimate the timings and functioning of the services with a fair level of accuracy. 5y providing services with consistency creates relia ility. )ne important aspect here is that the client should e assured that their transactions are all valid and safe as far as the services of the 0* are concerned. :& GOOD?ILL $any clients also consider goodwill of the 0*s, ecause ultimately they are putting their securities with the 0*s and therefore taking risk. So the clients would prefer well' esta lished 0*s. (e o served that clients have positive perceptions regarding Anagram1s goodwill, the key reason ehind this is the goodwill of Lal hai /roup in the industry. It takes time, money and loads of efforts in uilding a good reputation for a company. +he clients should e convinced of the credi ility and the relia ility of the organization. Anagram passes this test with flying colors as almost 34H of the clients are happy and satisfied with it. ;& (AMILIARITY ?ITH THE ORGANI*ATION #amiliarity with the organization is also one of the key issues for clients. (e found out that some of Anagram1s clients have very good relationship with the staff mem ers. .lients ecome aware of the culture, people, procedures etc of the organization over a period of time. So this also influences the clients1 decision. #amiliarity with the organization gives certain level of comfort to the clients. (e can say that a good relationship will lead to good usiness. In any organization, maintaining relationships is of utmost importance. As some of the clients have een dealing with Anagram since its inception, it is like a second home to them. +his is a very positive sign for Anagram. Such satisfied clients spread through word of mouth the goodwill of Anagram, thus attracting more clients.
<& TIMINGS (OR INSTRUCTION SLIP SU!MISSION
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+imings for su mission of instruction slip is not the critical issue, still for many clients it is not a non'issue either. /enerally clients would prefer some flexi ility on the part of 0*s to accept the instruction slips. $ost 0*s are Duite flexi le in this regard and have no pro lems in ad"usting to the reDuirements of the clients. Anagram too is pretty much flexi le in this regard.
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DEMAT SYSTEM PRO!LEMS P SCOPE
PRO!LEMS AND SCOPE O( DEMAT
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Like they say, WEvery coin has two sides1. 0espite all the efficiencies rought'in y the demat system, there are certain draw acks to which your attention needs to e drawn. +he Indian systemic inefficiency has actually turned the virtual Dueue into a reality. +he dematerialization process for paperless trading of shares has created a virtual Dueue, which will take months, if not years, to process. It highlights several inefficiencies in the new system and has thrown up an important new tax issue. 0emat ought to take care of many inefficiencies. +he tedious process of physically transferring ownership of shares is shortened. Instead of several months, ownership is supposed to change hands instantly. +he chance of a ad transfer ecause a signature doesnMt match is reduced to zero. So are the opportunities of thievery in the mail or forged share certificates. +he twin pro lems of odd lots and "um o lots oth disappear since it is possi le to trade either a single demat share or lakhs at a shot. So demat solves various familiar pro lems that plague every stock market that operates with physical paper. 6o wonder when SE5I initiated the process of demat it was welcomed wholeheartedly y most investors. Some insecure company managements dislike rapid, unsupervised transfer of ownership. +he odd unscrupulous investor who deli erately messed up his signature and gave ad delivery in order to o tain interest'free cash also dislikes demat. 5ut the vast ma"ority welcomed it. )ne instantly eneficial effect was the easing of rokerage rates. Another was a vast increase in institutional volumes. (hen you uy physical shares from the stock market, you could never e certain of the validity of the title of shares. +here were many reasons' the sellersM signature did not match, or the certificates were fake, forged or stolen, and so on. 0emat shares are supposed to o viate these pro lems. 5uying shares in the demat form always guarantees you a good title as soon as the settlement is over. +he iggest attraction of trading in demat shares is that the shares you uy come with a clean title and immediately after the settlement on the relevant stock exchange. 5ut then problems started surfacing. #irst of all, the demand for demat services was severely under'estimated. According to estimates, there are now 3 million pending individual applications for demat accounts. +he system has een overloaded and reached a reaking point. As a result, some ody opening a demat account can expect to spend several months waiting for the paperwork to e completed. $eanwhile, a physical trading route does exist for the individual investor who needs to raise cash in a hurry. 5ut while a physical sale is possi le, all transfers 7in the shares of designated companies8 now involve a compulsory demat. Since the uyer of physical securities must factor in a long waiting period, there is a wide differential etween paper trade Duotes and demat Duotes. +he discount on physical paper is now around 2: percent, or more.
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+he amount of paperwork involved in the demat process is also seriously painful. Some of it is a surd. #or example, if $r and $rs &aridoss *aul hold some shares in the name of $r J $rs &aridoss *aul and a second atch in the name of $rs J $r &aridoss *aul, they will need to open two demat "oint accounts with their names reversedU +here are other niggling little details. 5rokers and anks are therefore Duite reluctant to initiate the process for their clients. Some refuse outright. )thers disregard the SE5I directives and insist that demat clients open low'interest or zero'interest accounts as a sort of extra fee. At a minimum deposit of %s 2,444 per demat account and 3 million individual accounts, the amount already locked in these low'interest or zero'interest accounts adds up to around %s.344 crore. Assuming this trend continues, and given that there are more than ;< million individual investors, the eventual cost of demat would include su 'optimal returns on a out %s ;,<44 crore. +hat is a large and unforeseen opportunity cost for any new system. +here are further pro lems. +he simple fraud of stealing a share certificate out of the mail and selling it in the ker is no longer possi le with a demat account. 5ut the only proof of ownership for demat shares is a receipt. +rades and transfers are carried out on the asis of that piece of paper. Any ody who has the account num er and knows the details can order a transfer of shares from one account to the other very easily. #orgery is actually easier. +he receipt itself isnMt too difficult to duplicate either. #rauds of this nature havenMt started happening yet at least on a large enough scale to draw attention. 5ut it is something that gives the investor pause for serious thought. ItMs ound to occur sooner or later. And given the lack of a paper trail, it will e difficult to esta lish the fraud, let alone prosecute and offer relief to victims. Another pro lem lies in the tax treatment of demat shares. (ith dated physical transfer certificates, it is fairly easy to calculate .apital /ains +ax 7./+8 lia ility. 0emat shares are fungible and don1t have distinctive num ers. It is not easy to track the sale or trade of shares after they are dematerialized. Suppose the investor has two lots of shares of the same company. )ne lot was ought several years ago and is hence, lia le only to long'term capital gains tax, in case of a sale. +his is levied at 24 per cent flat or an inflation'indexed at ;; per cent whichever is lower. +he second lot was, however, ought within the last fiscal. +his is lia le to << per cent short'term ./+ in the event of a sale. All this has of course changed, with the $udget %&&'(%&&) announced on >th of Nuly y the #inance $inister, Shri *. .hidam aram. +here will e no more long'term capital gains tax, and a flat rate of 24H short'term capital gains tax. If you sold a physical lot, presuma ly you would deliver the older set to minimize the payout. 5ut in case of a demat, there is an extremely grey area a out which ./+ rate should e levied. +he .entral 5oard of 0irect +axes hasnMt worked out a clear procedure for distinguishing the earlier lot from the later lot. Bou could find yourself locked in a
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dispute and facing a demand for short'term capital gains tax. +his is o viously of ma"or significance. +here are several more niggling pro lems. In theory, the demat is supposed to e within ;= hours. &owever, *SE ank timings donMt conveniently overlap trading times. 5anking hours close at ; pm while trading continues till =.<4 pm. )n average, a transfer will take => hours or more. )n occasion, the demat account may e temporarily credited with shares pending confirmation of a transfer. An unwary investor who sells without ensuring that he has actually received a confirmed transfer is open to everything starting from severe em arrassment and ending with charges of fraud. 6one of these pro lems are insurmounta le. 5ut it will reDuire a coordinated effort from various agencies to sort them out. SE5I and %5I have to come up with a way of streamlining the demat process and regularizing the status of deposits accepted, if any. +he 6S0L and .S0L will have to speed up their registration procedures and devise a more foolproof system of receipt and transfer. 5anks and stock exchanges will have to coordinate working hours and the use of temporary entries. +he .50+ will have to come up with clear tax guidelines. 6one of these are processes, which needed to e ratified or mandated y *arliament. So the excuse of political insta ility cannot e trotted out for delays. 0emat has already een in progress for a year. %ule 244 of market regulator SE5I determines whether the shares delivered in a settlement, are good or not. Ender rule 244, the shares that have een transferred any num er of times can still e withdrawn y the company, if a transfer is found to e invalid for any reason. Suppose A sells physical shares to 5 and 5 gets them dematerialized. Later 5 sells the shares in the stock exchange and . uys them. $eanwhile A discovers that his share certificates were stolen and fraudulently sold y someone else. &e gets a court order restraining the company from further transferring the shares and attaching them 7currently in possession of .8. +his is known as Mstop transferM. So . who has ought dematerialized shares is now struck with the shares. &e cannot sell these shares since they would e frozen in his account In demat shares, pre'demat pro lems a out the validity of a share do not effect the interest of the uyers after dematerialization. Shares go through a verification process at the registrarsM efore they are dematerialized. +herefore the responsi ility lies with the registrar. +he registrar must find a remedy if the original transfer of shares, efore their dematerialization comers under dou t. 5ut there is a catch. +he company and its registrars are not responsi le if the reasons for original transfer eing invalid were not availa le at the time of dematerialization. $atters have to e dealt with on a case to case asis. (hich means that even demat uyer may find that
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his shares have een frozen in his demat account. +his kind of case has to e contested in court y the parties involved. +his issue is not directly addressed in +he 0epositories Act, 233?. SE5I1s regulations on depositories and depository participants also do not mention the issue. $atters get more complex if an investor has traded further in shares of the same company in his demat account. Investors do not like receiving physical share certificate ecause the process of getting the shares converted into dematerialised form takes anywhere etween four to six weeks. $any investors look to sell immediately on listing especially a stock that is up ?4 per cent on listing. )f course, if ;: per cent of all investors are arred from trading ecause they hold physical shares it automatically reduces the floating stock and potentially creates a perfect situation for stock prices to remain artificially high.
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SUGGESTIONS P
RECOMMENDATION
5ased on the our first study done on the various depository participants in Ahmeda ad and on clients perspective, we came to know a out Anagram1s status vis'F'vis other 0*s.
%%
(e focused on key areas too for comparison. (e have made following suggestions which will help Anagram to rethink a out different aspects. 1& CHARGES 6S0L charges its 0*s for the various services and the 0*s in turn charge their clients on the asis of their own standards, thus differentiating themselves from their competitors. 5ased on our o servations we can say that the annual maintenance charge of A.$L is the least, which stands at %s. 2:4G'. +hey also charge the least for uy and sell transaction, which charges nothing for purchase transactions and %s. 2< for sell transaction. +hus, those clients who consider the charges to e a ma"or factor might go for A.$L. (e have ranked the 0*s that we studied on the asis of their A$. 7+he 0* charging the least gets the first rank and so on8 Ran, 2 ; < = : Name -9 DP A.$L 6utan 6agrik, *ravin %atilal ,..5 /oldmine Securities ,handwala, Shah Investors, Investmentor, Infinite Securitiies. AMC %s.2:4G' %s.;44G' %s.;;:G' %s.;:4G' %s.<44G'
(e suggest that Anagram Securities remain with more or less with the same charges or at the most discriminate among some of the clients while charging for the same services. It should charge less to more active clients to retain them. "& SERVICES
%:
In today1s world service to the customers forms the ma"or aspect of differentiation and every organization strives to offer its customers maximum services in order to increase their satisfaction. In our study we o served that many rokersG0*s offer many other services like financial advice, asset management etc. It would give the clients the one'stop solutions for all the financial worries. So we recommend Anagram to also provide financial consulting to the clients. +hese other services include financial advice, asset management, $# schemes etc. It would e very helpful in the long term to retain the clients. $& MODE O( COMMUNICATION -arious 0*s provide +ransaction Statements and Statement of &oldings through different modes. +he asic o "ective ehind this is to give options to the clients which will take care of their convenience and flexi ility in the operations. Some 0*s provide these statements through courier, e'mail, phone7&I8, phone7A8, we site etc. &ereunder we have listed some of the 0*s1 name and their offerings to the clients. Se4ia/ Name -9 DP N-' 2 ; < = : Shah Investors %atnakar Securities /oldmine Stocks *ravin %atilal E+I C-24ie4 Emai/ ' ' PA-ne PA-ne ?e8site (a1 HI& ' ' ' A& ' ' ' ' ' ' ' ' ' '
6ow it is ecoming increasingly important for Anagram to come up with various options of providing +S and So& to the clients. .urrently Anagram provides it through courier only ut in our opinion they should provide options to the clients. It should also consider providing +S and So& on demand. It might charge reasona le amount for the same, which as per our calculations comes in the range of %s.<G' to %s.:G'. +his, we think, would e competitive enough. 7& SPEED-e P IDeAS
%;
(e o served in our study that many 0*s have started providing I0eAS and S*EE0'e services. +his makes these 0*s more competitive in terms of attracting those clients who are internet savvy. (e felt after reasona le o servation that it would e Duite necessary for Anagram Securities to survive and compete in the long'run. So here, we strongly recommend them to provide S*EE0'e and I0eAS services. +his is the area where they can differentiate their services from others. )ne ma"or thing which supports this argument is the increasing trend of doing online transactions. So it is Duite o vious that the future in this area looks good. +he data of some of the competitors which have already started providing these services in Ahmeda ad is given elow. &0#. and ,handwala Securities provide oth the services. Se4ia/ Name -9 DP SPEED- IDeAS N-' e 2 ,handwal Int. #in Services *vt Ltd ; %atnakar Securities *vt Ltd < /oldmine Stocks *vt Ltd = A.$L : *ravin %atilal Share J Stock rokers Ltd. ? &0#.
%& DELIVERY IS THE >EY Eltimately how you provide the services matters the most. Services should e fast, relia le and with fair degree of consistency. In our survey we asked the clients to rate the different parameters which they consider relevant while choosing their 0*. (e have included in our survey different aspects like locationG proximity, charges, customer service, security level, relia ility, goodwill etc. in our survey we got that customer service is the most important aspect for clients. ;: out of <4 clients have rated it very high while choosing the 0*. Se4ia/ (a+t-4 N-' 2 LocationG*roximity ; < = : +imings for Instruction Slip Su mission .harges .ustomer Service Security System Ve4y Hi0A Medi2m L-. Ve4y Hi0A L-. 2= ? ? = ' 2: ;4 ;: 2= > : = 3 A < 2 A ' ; ' ' ' ' ' '
%<
? A > 3
%elia ility /oodwill )thers1 %eference #amiliarity with +he )rganization
2> 2: ? 2?
24 2= : 24
; 2 24 =
' ' A '
' ' ; '
In our study we found that most of the clients of Anagram Securities are fairly satisfied with the demat services of it. 5ut the pro lem is when it comes to settlement of their dues as ma"ority of them are su ' rokers. So the actual pro lem is not the demat services ut the its more a out on roker' su roker relationship. So at the end we recommend to Anagram to continue providing high level of customer services. And should take care of some minor things which we found out in during the study like sending +S and So& on time. Apart form the a ove recommendations, some of the clients have given suggestions for the scope of improvement in services for Anagram as a whole. +hey are as followsC Anagram should focus on the retention of the existing clients y improving the services rather than trying to increase the num er of clients. +his would ensure client satisfaction and also increase its goodwill. +he we site of Anagram should provide the latest information and it should make sure that authentic information with respect to their research is availa le. +he ma"or focus of Anagram has een on eDuity so far and it has done Duite well. Similarly it should try to concentrate on $utual #unds which is an emerging area in the financial market. +hey should set up a committee that concentrates on the clients and their activities and accordingly makes suggestions to the clients as per their risk' taking a ility and other reDuirements.
%=
ANNE@URE
:#
ANNE@URE LA KUESTIONNAIRE ON SERVICES PROVIDED !Y DEPOSITORY PARTICIPANTS
N-teH 728 (e kindly reDuest you to provide the following information to the est of your knowledge. 7;8 +he information collected through the following Duestionnaire will e kept confidential and will e used for study purposes only. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X
728 6ame of the 0*C XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;8 Bear of IncorporationCXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7<8 Ender which 0epository are you registeredS 6S0L .0SL 5oth
7=8 (hich of the following services do you provide apart from depository servicesS 5roking
:1
Asset $anagement #inancial Advice 5anking )thers 7specify8C XXXXXXXXXXXX 7:8 (here is the &ead )ffice locatedS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7?8 6um er of 5ranches which provide 0* servicesC XXXXXXXXXXXXXXXXXXXXXXXXXX 7A8 6um er of Employees for 0* operationsC XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7>8 &ow many of them are 6.#$ DualifiedS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 738 &ow many clients do you haveS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7248 *lease give us an approx. reak'up of the following categories of clients as per the num er of accounts. .learing $em ersC IndividualsC &E#C 6%IC .orporatesC )thersC XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX
7228 At your 0*, what is the volume of instructions per day in terms of 7i8 delivery instructionsSXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 account openingS XXXXXXXXXXXXXXXXXXXXXXXXXXXX 7iii8 demat reDuestSXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 72;8 0o you charge different categories of clients differentlyS Bes 6o
If, yes, on what asis do you differentiate your clientsS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XX
:"
7*lease attach the charge sheet for the same.8 72<8 0o you offer free transactionsS Bes 6o
If yes, to whomS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
72=8 (hat is the freDuency of sending the Statement -9 H-/din0 to the clientsS 0aily (eekly #ortnightly $onthly
7i8 +o which kind of clients do you send the Statement -9 H-/din0 0ailyGweeklyGfortnightlyS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 72:8 0o you provide the clients with the Statement -9 H-/din0 on demandS Bes 6o If yes, 7i8 +o whomS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 0o you charge them for the serviceS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X 7iii8 If so, what are the charges for the sameS
:$
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X 72?8 (hat mode of communication do you use for sending the Statement -9 H-/din0S *ostG.ourier E'mail #ax +elephone ' &uman Interface +elephone ' Automatic (e site )thers specifyC XXXXXXXXXXX
72A8 (hat is the freDuency of sending the T4ansa+ti-n Statement to the clientsS 0aily (eekly #ortnightly $onthly 7i8
+o which kind of clients do you send dailyGweeklyGfortnightly T4ansa+ti-n StatementC QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ
72>8 0o you provide the clients T4ansa+ti-n Statement on demandS Bes 6o
If yes, 7i8 0o you charge them for the serviceS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX' XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 (hat are the charges for the sameS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X
:7
7238 (hat mode of communication do you use for sending the T4ansa+ti-n StatementS *ostG.ourier E'mail #ax +elephone ' &uman Interface +elephone @ Automatic (e site )thers specifyC XXXXXXXXXXX
7;48 (hat payment system do you follow for delivery instructionsGdemat chargesS Advance *ayment .ollected *ost +ransaction *ayment 75ills dispatched and collected8 0irect de it from 5ank aGc )thers specify XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;28 0o you charge for failedGre"ected instructionsS Bes 6o
If yes, how muchS XXXXXXXXXXXXXXXXXXXXXX 7;;8 (hat are the timings for the su mission of the instruction slipsS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;<8 0o you accept instructions after the deadlinesS Bes 6o
If Bes, 7i8 In which casesS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 0o you charge for the sameS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7iii8If yes, how muchS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
:%
7;=8 (hat is the deadline for the ranches of your 0* to su mit the instructions to the &)S XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;:8 If the deadline is not met, what actions are takenS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;?8 (hat is the mode of communication etween the ranch and &) for instruction slips and client reDuestsS *ostG.ourier E'mail #ax )thers *lease specify XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
7;A8 &ave you su scri ed to S*EE0'eS Bes 6o
If yes, 7i8 &ow many clients su scri e to these servicesS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 &ow do you charge for the sameS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;>8 &ave you su scri ed to I0eASS Bes 6o
::
If yes, 7i8 &ow many clients su scri e to these servicesS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7ii8 &ow do you charge for the sameS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;38 (hat are the special services that your 0* provides to differentiate itself from other 0*sS
QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ QQQQ
ANNE@URE L ! KUESTIONNAIRE (OR CLIENTS) (EED!AC>

QQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQQ Q N-teH 728 *lease complete the following Duestionnaire to the est of your knowledge. 7;8 +he information collected will e kept confidential and will e used for study purpose only.
:;
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X
728 6ameC ' XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7;8 AddressC ' XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
7<8 *hone 6oC ' 7%8 XXXXXXXXXXXXXXX 7)8 XXXXXXXXXXXXXXX 7=8 .lient I.0C ' XXXXXXXXXXXXXXXXXX
7:8 6ame of the AccountC XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7?8 Age /roupC ' 5elow ;: ;?'<: <?':4 A ove :4 7A8 )ccupationC
Student 5usiness &ousewife +rader Landlord Agriculture Service 5roker *rofession Investor )thers 7specify8 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7>8 Income *er $onth 7in I%S8C ' 5elow ;:444
:<
;:444' :4444 :4444'244444 244444';44444 ;44444':44444 A ove :44444
738 0o you have any accounts in another 0*S Bes 6o
If yes, which 0*S XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 7248 (hile choosing a 0*, how would you rate the following factorsS 7+ick the appropriate8 SE%IA L 6). 2 ; < = : ? A > #A.+)% LocationG*roximity +imings for Instruction Slip Su mission .harges .ustomer Service Security System -E%B -E%B &I/& $E0IE$ L)( &I/& L)(
%elia ility /oodwill )thers1 %eference #amiliarity with the 3 )rganization 7228 (hy have you opened your account at AnagramS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
72;8 Are you satisfied with the services provided at AnagramS Bes 6o
:=
(hyS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 72<8 &ow do you rate the services at AnagramS Excellent -ery /ood /ood #air *oor
72=8 (hat is the scope of improvement in the servicesS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
72:8 0o you get your +ransaction Statement on timeS Bes 6o 72?8 &ow often do you reDuire your +ransaction StatementS (eekly #ortnightly $onthly Tuarterly
72A8 0o you get your Statement of &olding on timeS Bes 6o
;#
72>8 &ow often do you reDuire your Statement of &oldingS (eekly #ortnightly $onthly Tuarterly
7238 &ow would you like to receive the +ransaction Statement and the Statement of &oldingS *ostG.ourier +elephone E'mail #ax -isit 0* personally
7;48 Are you aware of the SPEED-e servicesS 7SPEED-e is a net' ased service, which helps you to enter your 0* transactions through the Internet i.e. you need not physically su mit slips to the 0* ut you can enter it at your convenience at your homeGoffice8 Bes 6o
7;28 Are you interested in su scri ing to SPEED-e servicesS Bes 6o
If yes, which type do you preferS Pass.-4d !ased 7+he user has to use his user I.0 and password to access to the SPEED-e services. Bou can enter transactions for pay'in into < pre'notified roker pool accounts8 Sma4t Ca4d !ased 7It works like an A+$ card where only the person possessing the smart card and *I6 can su mit the instructions. )ff'market instructions can also e keyed in8 7;;8 +he 6S0L charges for SPEED-e are as followsC *assword 5asedC %s.<4G' per Duarter
;1
Smart .ard 5asedC
%s.2<4G' per Duarter
+he one'time charges for Smart .ard are as followsC If you go for the .ard reader with kitC %s.A444G' If you go for the .ard aloneC %s.2444G' (hich of the a ove would you e willing to go forS 6one *assword 5ased for your residenceGoffice *assword 5ased using computer system at Anagram
Smart .ard 5ased with reader and used at your residenceGoffice Smart .ard 5ased with card alone using computer system at Anagram
7;<8 Are you aware of the IDeAS ServicesS 7IDeAS is a net' ased access to Statement of &olding and +ransaction Statement8 Bes 6o
7;=8 +he 6S0L charges for IDeAS is %s.24 per DuarterS (ould you e willing to su scri eS Bes 6o
ANNE@URE - C
COMPARATIVE CHARGE STRUCTURE O( VARIOUS DPs - 1
*erial +o.
+ame of ,-
A.C /pening
Annual Maintenance $uy
0ransaction *ell
;"
2 ; <
Anagram %s.:4G' Stock roking Ltd &0#. ,handwala Int. #in Service *vt. Ltd. Shah Investors %atnakar Securities *vt Ltd E+I /oldmine Stocks *vt. Ltd. Investmentor Securities Ltd. ,alupur .ommercial .o'operative 5ank Stockholding .orporation of India 6utan 6agarik Sahakari 5ank Ltd. A.$L *ravin %atilal Share J Stock 5rokers Ltd. 6IL 6IL
%s.<44G' %s.;33G' %s.<44G'
6IL
%s.2>G' 7 4.4=HV or %s.;:G'8VV
6IL
%s.2>G'
%s.234G'
%s.<44G'
6IL
%s.2:G'
: ? A >
%s.2A:G' 6IL %s.?4G' %s.?4G'
%s.;44G' %s.;44G' %s.;:4G' %s.<44G'
%s.2:G' %s.2;G' 6IL 6IL
%s.2:G' %s. ;<G' %s.2:G' 74.4=HV or %s.;4G'8VV
%s.?4G'
%s.;;:G'
74.4;HV or %s.24G'8VV
74.4;HV or %s.2:G'8VV
24
%s.244G'
%s.<:4G'
%s.2:G'
74.4:HV or %s.2:G'8VV L depository charges 74.4;HV or %s.2:G'8VV %s.2<G' 74.4;HV or %s.;4G'8VV 74.4=HV or %s.2:G'8VV
22 2; 2< 2=
%s.A4G' %s.2:4G' 6IL
%s.;44G' %s.2:4G' %s.;44G' %s.<44G'
74.4;HV or %s.24G'8VV 6IL 6IL 74.4;HV or %s.2:8VV
Infinite #in %s.2:4G' Services *vt Ltd
COMPARATIVE CHARGE STRUCTURE O( VARIOUS DPs - "
*erial +o.
+ame of ,-
,emat
,emat -er Certificate
1emat
1emat -er Certifiate
;$
2 ; < = : ? A >
Anagram %s.<4G' Stock roking Ltd &0#. ,handwala Int. #in Service *vt. Ltd. Shah Investors %s.<:G' %s.;>G' %s.<4G'
%s.;G' %s.<G' %s.;G' %s.:G' %s.;.:4G' %s.;G' %s.<G'
%s.<4G' ' ' %s.:4G' 6IL %s.:4G' %s.:4G' %s.;4G'
%s.;4G' %s.24G' ' %s.24G' 6IL %s.;4G' %s.2<G' %s.;:G'
%atnakar %s.<4G' Securities *vt Ltd E+I %s.:4G'
/oldmine Stocks %s.<4G' *vt. Ltd. Investmentor Securities Ltd. ,alupur .ommercial .o'operative 5ank Stockholding .orporation of India 6utan 6agarik Sahakari 5ank Ltd. A.$L *ravin %atilal Share J Stock 5rokers Ltd. %s.;4G'
%s.;:G'
%s.<G'
'
74.42HV or %s.248VV
24
%s.;:G'
%s.<G'
%s.;:G'
%s.;:G'
22 2; 2< 2=
%s.;:G' %s.<4G' %s.;:G'
%s.<G' ' %s.;G' %s.;G'
%s.2:G' 6A %s.:4G' %s.;:G'
4.4<HV 6A %s.24G' %s.24G'
Infinite #in %s.;:G' Services *vt Ltd.
COMPARATIVE CHARGE STRUCTURE O( VARIOUS DPs - $

*erial +o. +ame of ,Custody -ledge.2ypothecation Creation 2 ; Anagram Stock roking Ltd &0#. %s.2.:4G' per Duarter %e.2G' per month %s.:4G' Closure %s.:4G' 3nvocation %s.;:G'
74.4;HV or %s.;:8VV
;7
< = : ? A > 3 24 22 2; 2< 2=
,handwala Int. #in Service *vt. Ltd. Shah Investors %atnakar Securities *vt Ltd E+I /oldmine Stocks *vt. Ltd. Investmentor Securities Ltd. ,alupur .ommercial .o'operative 5ank Stockholding .orporation of India 6utan 6agarik Sahakari 5ank Ltd. A.$L *ravin %atilal Share J Stock 5rokers Ltd. Infinite #in Services *vt. Ltd.
As per 6S0L 6IL %e.2G' per month %s.2.A:G' per Duarter %e.2G' per month ' %s. 4.A:G' per month %e.2G' per month %e.2G' per month %e.2G' per Duarter 6IL %e.2G' per Duarter
%s.:4G' %s.<4G' %s.:4G' 74.4;HV or %s.;:8VV 6A %s.<4G'
%s.;:G' %s.24G' ' %s.:4G' 6A %s.;4G'
%s.;:G' %s.24G' %s.;:G' %s.:4 6A '
74.4;HV or %s.:48VV 4.4;HL 6S0L charges 74.4;HV or %s.<:G'8VV %s.;:G' %s.:4G' %s.;:G' %s.:4G' %s.;:G' %s.:4G' %s.:4G'
74.4;HV or %s.;:8VV
N-teH 728 V means Won the value of the transaction1. 7;8 VV means Wwhichever is more1. 7<8 Service tax is applica le as per the norms. 7=8 Account opening charges include form fees and stamp charges.
ANNE@URE L D !REA>-UP O( CLIENTS O( VARIOUS DPs
*erial +o. +ame of ,-
0otal
3ndividuals
24#
+13
Corporates
Clearing members ;
/thers
Anagram Stock roking
24;A;
24444
2<4
2:
2;:
;%
Ltd ,handwala Int. #in Service *vt. Ltd. Shah Investors /oldmine Stocks *vt. Ltd. Investmentor Securities Ltd. ,alupur .ommercial .o'operative 5ank 6utan 6agarik Sahakari 5ank Ltd. A.$L %atnakar Securities *vt. Ltd
2;444
224??
<44
<4
=44
;44
< = :
=:444 3444 2<=:<
===3> >3;< 2<<<>
244 2: A2
<44 24 23
244 :4 ;=
; ; 2
4 4 4
<:444
<=?2:
;<4
2::
=?:4
=:;:
3=
;3
>
222>4
24444
2444
::
2;:
2:444
2=A44
<44 7rest all8
6)+EC S)$E )# +&E 0*s (E%E 6)+ (ILLI6/ +) 0IS.L)SE +&E 5%EA, E*.
GRAPHICAL PRESENTATION O( THE NUM!ER O( CLIENTS INDIVIDUALS ONLY&
;:
;;
!I!LIOGRAPHY
!I!LIOGRAPHY
5ooks Avadhani, -.A. Marketing of #inancial *ervices and Markets. $um aiC &imalaya *u lishing &ouse,2333. ?<3 pp.
;<
.ooper, 0onald %.! and Schindler, *amela S. $usiness 1esearch Methods. ?th edn. 6ew 0elhiC +ata $c /raw'&ill *u lishing .ompany Limited, ;44;. A4< pp. 0alton, Nohn $. 2ow the *tock Market 5orks. ;nd edn. 6ew 0elhiC *rentice &all of India Limited, 233A. <;: pp. Literature provided y 6S0L. *athak, 5harati -. 3ndian #inancial *ystem. 0elhiC *earson Education 7Singapore8 *te. Ltd., ;44<. :3; pp. *andian, *unithavathy. *ecurity analysis and -ortfolio Management. 6ew 0elhiC -ikas *u lishing &ouse Ltd., ;442. =?= pp. %ao, S. Sreenivas. 2andbook #or 5riters and 6ditors. Ahmeda adC Ahmeda ad $anagement Association, ;44;. 2<3 pp. Sharma, A.,. 3ndian *tock Market 1egulation7 -erformance and -erspective. 6ew 0elhiC 0eep and 0eep *u lications *vt. Ltd., ;442. 2:= pp. Internet 0ocuments www.nsdl.co.in www.moneypore.com www.indiainfoline.com www.cdslindia.com www. seindia.com
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- A REPORT ON -

THE SUMMER TRAINING

ANAGRAM SECURITIES LIMITED

MIT VORA CHITRA GOTHI CHRISTINA D)SOU*A

N'R' INSTITUTE O( !USINESS MANAGEMENT&

Demat System in India

Demat System in India

Demat System in India

Demat System in India

SCOPE O( THE PROJECT

Demat System in India

Demat System in India

Demat System in India

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Demat System in India

E-!RO>ING AND ?E!-!ASED SERVICES

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ORGANI*ATIONAL STRUCTURE .hairman 7$r. San"ay Lal hai8

Demat System in India

.E) 7$r. 0arshan $ehta8

0irector 7$r. 0imple Shah8

0irector 7$r. A"ay Saraogi8

0irector 7$r. $ayank Shah8

0irector 7$r. Sharma8

(est 7only $um ai8

$aharastra 7except $um ai8

%egional 0ivisions 0epository *articipant Settlement Information +echnology #unctional 0ivisions

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Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

Demat System in India

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Demat System in India

Demat System in India

Demat System in India

Demat System in India

SETTLEMENTSH THE NE? ORDER

Seller1s Shares SE.E%I+IES *AB'I6 0epository 5roker

5uyer1s #unds #E60S *AB'I6

5uyer gets Shares

Seller gets $oney

Demat System in India

Demat System in India

ANALYSIS O( THE STUDY ON DPs

Demat System in India

Demat System in India