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viz. 1999. UTI and NSE. Need for Depository System The trading in physical segment is full of inefficiencies due to handling of large volumes of certificates and also involves various other problems like delays in transfer. postal losses.SEBI to be compulsorily traded in electronic form with effect from 4th January.DEPOSITORY SERVICES . which facilitates investor to hold securities in electronic form and to trade in these securities. a new system of trading. forgerly certificates. The first depository set up in India is National Securities Depository Limited (NSDL) and is promoted by IDBI. delay in settlement. 1/7/2011 3 . litigation etc. stolen certificates. court cases. loss in transit. mutilation of certificates. Depository system was introduced. To overcome these deficiencies.
a depository also transfers your securities without actually handling securities. 1/7/2011 4 . This is similar to opening an account with any branch of a bank in order to utilise the bank¶s services.DEPOSITORY . If an investor wants to utilise the services offered by a depository. a depository also provides services related to transactions in securities. DEPOSITORY A depository can be compared to a bank. the investor has to open an account with a DP. A depository interfaces with its investors through its agents called Depository Participants (DPs). in the same day as a bank transfers funds without actually handling cash. in the same manner as a bank holds your money. Besides holding securities. Further. A depository holds securities of investors in electronic form.CONCEPT Depository is an organization which holds your securities in electronic (also known as µbook entry¶) form.
2.BENEFITS OF DEPOSITORY SYSTEM 1. 7. 8. 11. No possibility of bad deliveries. After the settlement. 1/7/2011 5 . 5. No postal / courier charges. Script less trading helps allocate corporate benefits faster. 3. 6. mutilation etc. Eliminates the problem of odd lot shares. No need to affix share transfer stamp as it is a paperless trading. forgery. 9. Facility to lock your account if you are abroad. Elimination of all rise associated with physical certificates such as loss. 4. No danger of loss of share certificates since the shares are credited to your account. 10. Less brokerage charges. Facilitates pledging and hypothecation of your securities. pay in and pay out are on the same day for paperless trading which means you get your securities and cash immediately. theft.
the first depository in India. Some of the prominent banks in the country have taken a stake in NSDL.NSDL NSDL. established in August 1996 and promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialised form in the Indian capital market. Promoters / Shareholders NSDL is promoted by Industrial Development Bank of India (IDBI) the largest development bank of India. Unit Trust of India (UTI) the largest mutual fund in India and National Stock Exchange (NSE) .the largest stock exchange in India. Promoters ± Industrial Development Bank of India ± Unit Trust of India ± National Stock Exchange 1/7/2011 6 .
NSDL Other Shareholders ± ± ± ± ± ± ± ± ± State Bank of India Oriental Bank of Commerce Citibank NA Standard Chartered Bank HDFC Bank Limited The Hongkong and Shanghai Banking Corporation Limited Deutsche Bank Dena Bank Canara Bank 1/7/2011 7 .
3. Settlement of trades in electronic form. Open an account with one of the participants of NSDL (A participant is a market intermediary through whom NSDL interacts with the investors).SERVICES OFFERED BY NSDL The following services are offered by NSDL to the investors. Sign an Agreement with the participant. 2. 1. Depository Participants. 4. 1/7/2011 8 . Electronic credit of public offerings and non-cash corporate actions such as rights. Submit Dematerialisation Request form along with share certificate to the Issuer. STEPS INVOLVED IN JOINING DEPOSITORY SYSTEM There are 3 steps in which an investor can covert his physical certificate into electronic form. Dematerialisation and rematerialisation of securities. Holding the investors securities in electronic form. through its agents viz. bonus etc. 1. 3. 2.
Thereafter : a. c. Sign µParticipant-Client Agreement¶. Receive your account number which should be quoted in all your correspondence. 1/7/2011 9 . Your participant will provide you a statement of holdings and statement of transactions (like a bank pass book) every fortnight giving details of your holdings and transactions in your account. d. Fill up an Account Opening Form available with the participant. b.HOW DO YOU OPEN A DEPOSITORY ACCOUNT Choose a participant from amongst the participants (a list of participants is given in Annexure-A) offering depository services and registered with NSDL.
you have to a. Your account will be credited within 15 days. your existing shares can be dematerialised and converted into Electronic Form. you may do so by applying for rematerialistion.e.DEMATERIALISATION PROCESS Once the account is opened. If you wish to convert your electronic shares back to physical shares at a later stage. demat) shares of any company listed on NSDL which are registered in your name and convert your physical holdings into electronic form. (Please write µSurrendered for Dematerialisation¶ on the face of each certificate before you submit it for dematerialisation). d. c. For this purpose. Submit your share certificates along with the above form. Dematerialisation is a process by which you can deposit (i. Fill a Dematerialisation Request Form available with your participant. 1/7/2011 10 . b.
2. The shares you have bought are transferred in your name the very next day of pay out without any risk of bad deliveries. 1/7/2011 11 . If you desire to sell shares in electronic form. you can also buy them directly in the Electronic Form. there is a separate buying and selling electronic shares is just like buying and selling shares in physical segment. you place an order with your broker under the Demat segment and instruct your participant by way of a Delivery Instruction (resembling a cheque) to debit your account with the number of shares sold by you. is required to be complied with. 1.HOW DO YOU TRADE IN ELECTRONIC SHARES Demat segment on the National Stock Exchange When you wish to purchase shares from the secondary market. you must inform your broker about your depository account number so that electronic shares bought by you are credited into your account and instruct your participant by way of Receipt Instruction to receive credit in your account. No formalities of filling transfer deed. affixing share transfer stamp etc. 4. Payment for the shares bought or sold in depository mode is made in the same manner as in the physical securities. 3. If you wish to buy shares in electronic form. For this purpose. The following procedure be adopted for trading in electronic segment.
15% on value 0.2 per certificate-Rs.15 per certificate-Rs.0.1.15% on value 0.1. Transfer fee (buy) 7.000 Nil .Rs. Account opening 2.500 .DEPOSITORY SERVICES .025% .10% .25 per certificate 0. (since your company has paid one time custody charges to NSDL.10 per certificate Rs. The following statement indicates the fee structure of the participant 1.0. custody charges will be NIL) 0. Account closing 3.000 (depending on value) 12 6.10.a. Off market transaction 9.05% .FEE STRUCTURE The charges for the services provided by the participant by the participant may vary from participant to participant. Dematerialisation 4.0. Rematerialisation 5.000 Rs.12% Rs.Rs.055% p. Custody charges Nil . Annual charges 1/7/2011 - . Transfer fee (sell) 8.Rs.
Mumbai has promoted Central Depository Services (India) Ltd. holding and handling of securities in electronic form. The depository is not just another custodian. which a custodian cannot. (NSDL) promoted by UTI. Is a depository just another custodian.WHO ARE THE DEPOSITORIES? Depositories are those who are licensed by the Securities and Exchange Board of India (SEBI) to undertake depository functions i. (CDS) which has drawn plans to set up the second depository in the country. The National Securities Depository Ltd. settling and transferring securities. 1/7/2011 13 . The depository can legally transfer beneficial ownership. the only difference being that the securities in a depository are held in electronic form ? No. The main objective of a depository is to reduce settlement risk by minimising the paperwork involved in trading.e. IDBI and NSE is the first depository of India. The Stock Exchange.
theft. 3. No bad deliveries. 2. Reduction in transaction cost. 1/7/2011 14 .BENEFITS OF A DEPOSITORY The benefits of participation in a depository are : 1. 4. But physical securities not allowed to be delivered in dematerialised segment. mutilation and forgery. 6. 7. Option to deliver dematerialised securities in the dematerialised or physical segment with effect from 6th April. No stamp duty on transfer of shares. Elimination of risk associated with physical certificates such as loss. Considerable reduction in the handling of large volumes of paper. making dematerialised stock held with investors more liquid than physical stock. 1998 on both NSE and BSE. 5. Immediate transfer of shares and registration of securities. increasing liquidity of stocks with investors.
BENEFITS OF A DEPOSITORY contd« 8. and 14.Lower margin on securities pledged with banks. 13. 11.Periodic status 1/7/2011 15 . 10.Reduction in rate of interest on loans granted against pledge of dematerialised securities by banks. Pay-in and pay-out of securities and funds on the same day for scripless trades. Faster settlement cycle. 12. 9.Faster disbursement of corporate benefits like rights and bonus.Reduction in brokerage by several brokers for trading in dematerialised securities.
electronic credit in public offerings of companies.FACILITIES OFFERED BY NSDL NSDL offers the following facilities : . .transfer of securities. converting physical certificates to electronic form. . 1/7/2011 16 . and . .dematerialisation i.receipt of non-cash corporate benefits such as bonus and rights in electronic form.e.pledging/hypothecation of dematerialised securities.settlement of trades done in the depository (dematerialised) segment of stock exchanges. . .rematerialisation which is the opposite of dematerialisation.