This action might not be possible to undo. Are you sure you want to continue?
A project Report submitted in partial fulfillment of the requirements For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
RELIGARE SECURITIES LTD.
SUBMITTED TO: Mr. Ashish Mehrotra (Branch Manager)
SUBMITTED BY: Nency M.B.A. 3rd Semester
Doon Valley Institute of Engineering & Technology
(Affiliated to Kurukshetra University)
TO WHOMSOEVER IT MAY CONCERN
This is to certify that the project report titled Working of depository system´ carried out by Ms.Nency, has been accomplished under my guidance & supervision as a duly registered MBA student of the Doon Valley College of engineering and technology, Karnal. This project is being submitted by her in the partial fulfillment of the requirements for the award of the Master of Business Administration from Doon Valley College of engineering and technology. His project work represents his original work and is worthy of consideration for the award of the degree of Master of Business Administration.
(Name & Signature of the Faculty Advisor) Title: Working of depository system Date: ______________________________
It is my pleasure to thank to various respected persons who directly or indirectly guide, help, motivate and provide knowledge to me time to time for the development of this project. I would like to express my sincere gratitude to Mr. Ashish Mehrotra (Branch Manager) & Mr. Naveen Kumar ( Relationship Manager) who directly guide to me time to time about how to make this project more effective. I am also very thankful to respected Ms. Monika Sharma (H.O.D. MBA) for giving me this to topic to do deep study and guidance regarding training and project report. Lastly, I also want to thank to all the employees of Religare (Karnal Branch), friends and almighty god for their direct and indirect support to me for the accomplishment of this project.
INDEX S. PARTICULARS CERTIFICATE DECLARATION PREFACE INTRODUCTION • • • • • • • PAGE NO. 4. 1. 2. 3. 05 06 07 08 09 13 14 19 21 22 35 Depository Deposiory system Leagal framework of DS Functions of DS Benefits of DS Safety feature in the DS Difference b/wBank and Depository 4 .NO.
NATIONAL SECURITIRS DEPOSITORY SYSTEM • • • • About NSDL Management of NSDL Fee structure of NSDL Technology and connectivity in NSDL 48 • Common software use in NSDL 50 6.• Some important process in DS 36 42-50 43 45 47 5. CENTRAL SECURITIRS DEPOSITORY SYSTEM • • • 51-55 52 53 54 56-58 About CDSL Shareholders of CDSL Board of directors and management 7 RESEARCH METHODOLOGY • Objectives of the study 5 .
DATA ANALYSIS AND INTERPRETATION OBSERVATIONS SUGGESTIONS LIMITATIONS CONCLUSION BIBLIOGRAPHY 6 . 10. 13.• Types of research • Methods of data collection • Tools of analysis 57 58 58 58 59-65 66 68 69 70 71 Research design 8. 9. 12. 11.
The Company is a member of the National Stock Exchange (NSE) and OTCEI. The growing list of financial institutions with whom RSL is empanelled as approved Broker is a reflection of the high levels of services maintained by the Company. (RFSL). Ex-CMD of Ranbaxy Laboratories Ltd. a Company promoted by the late Dr. 7 .INTRODUCTION TO COMPANY RELIGARE SECURITIES Ltd. (RSL) is a wholly owned subsidiary of RELIGARE Financial Services Ltd. Parvinder Singh. is to cater to services in Capital Market Operations to Institutional Investors. The primary focus of Religare Securities Ltd.
Punjab National Bank. IDBI Principal. Besides the reach of RELIGARE.As on date the Company is empanelled with UTI. Prudential ICICI. Pioneer ITI. SBI. UTI Offshore. Depository Participant Service. SUN F&C. RELIGARE was founded with the vision of providing integrated financial care driven by the relationship of trust. the clients of the company greatly benefit by its strong research capability. IFCI. The bouquet of services offered by RELIGARE includes Broking (Stocks and Commodities). Punjab & Sind Bank. PNB-MF. BOI-MF. and Advisory on Mutual Fund Investments and Portfolio Management Services. Oriental Insurance. ING Baring and J M Mutual Fund. RELIGARE is a pioneer in the concept of partnership to reach multiple locations in order to effectively service its large base of individual clients. 8 . IDBI. GIC. which encompasses fundamentals as well as technical knowledge. ICICI Can bank MF.
A SEBI approved Portfolio Manager. 9 . Member of National Stock Exchange of India and Bombay Stock Exchange of India. The ARN No. is 33764. of the Religare Securities Ltd. 2. The ARN No.RELIGARE SECURITIES LIMITED 1. 3. Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). RSL provides platform to all segments of the investor to leverage the immense opportunity offered by equity investing in India either on their own or through managed funds in Portfolio Management. is required by to be available with the broker who deals on behalf of investors or sell the mutual funds of the different companies present in the market. 4.
portfolio management services.RELIGARE GROUP RELIGARE in recent years has expanded its reach in health care and financial services wherein it has multiple specialty hospital and labs which provide health care services and multiple financial services such as secondary market equity services. 10 . depository services etc.
RELIGARE Comdex Limited and RELIGARE Fin vest Limited which provide services in Equity.RELIGARE financial services group comprises of Religare Securities Limited. Commodity and Financial Services business & Religare Insurance Advisory Ltd. SERVICES RELIGARE SECURITIES LIMITED Equity Broking Online Investment Portal Portfolio Management Services Depository Services RELIGARE COMMODITIES LIMITED Commodity Broking 11 .
arts-i RELIGARE REALTY LIMITED In house Real Estate Management Company RELIGARE HICHENS HARRISON Corporate Broking Institutional Broking RELIGARE VENTURE CAPITAL LIMITED 12 .RELIGARE CAPITAL MARKETS LIMITED Investment Banking Proposed Institutional Broking RELIGARE INSURANCE BROKING LIMITED Life Insurance General Insurance Reinsurance RELIGARE ARTS INITIATIVE LIMITED Business of Art Gallery launched .
Shivinder Mohan Singh 13 . Vinay Kumar Kaul Mr. Sunil Godhwani Mr. Malvinder Mohan Singh Mr. Private Equity and Investment Manager RELIGARE ASSET MANAGEMENT Derivatives Sales Corporate finance DIRECTORS OF RELIGARE SECURITIES LIMITED Chairman: Managing Director: Director: Director: Director: Mr. Harpal Singh Mr.
MISSION To be India's first Multinational providing complete financial services solution across the globe. VISION Providing integrated financial care driven by the relationship of trust and confidence. 14 .
30%) (NEGOTIABLE) COMPETITITORS OF RELIGARE There are several financial security companies playing their roles in Indian equity market. ICICI Direct.BROKERAGE INTERADAY: 3 paisa (.com Share Khan (SSKI) Kotak Securities.com India Bulls HDFC Securities 5paisa. But faces competitions from these few companies.com Motilal Oswal Karvy 15 .
U. Kurukshetra has done project on Working of depositary system and has successfully completed his project on my guideline.DOON VALLEY INSTITUTE OF ENGINEERING & TECHNOLOGY KARNAL under K. NENCY 16 .K.B.CERTIFICATE This to certify that NENCY .A 3rd Semester . It is only for academic purpose and is a bonfires work done by researcher .M.
DECLARATION I Nency do here by declare that the project work entitle on the Working of depositary system is the original work done by me. NENCY 17 . This project report for the presented degree as of a partial of fulfillment Business requirement Master administration.
The experience which I gained by doing this project was essential at this turning point of my carrier this project is being submitted which content detailed analysis of the research under taken by me. programme as it tries to bridge the gap between theory and practice. I achieved a better knowledge about this system.B. The successful completion of this project was a unique experience for me because by visiting many place and interacting various person.it skiilfully blends the theortical aspect with practical business situation.A.A. preparing as M.B. in a better manner for the future responsibilities and challenges that she is likely to face when she enters the business world to start her carrier or growth. The research provides an opportunity to the student to devote his/her skills knowledge and competencies required during the technical session. thus. The research is on the topic ‘Working of Depositary system´ This study is divided into different chapters: 18 .PREFACE Dissertion is a very important and significant part of the M.
The second chapter contains two types of Depositories and their working. The first chapter contains the introduction about Depository and Depopository system. The last chapter contains conclusions. The fourth chapter contains the analysis and interpretation. recommendations and limitations of the study. The third chapter contains Research Methodology. 19 .
bad deliveries etc. 1956 or 20 . In many cases transfer process takes much longer time then two month as stipulated in section 113 of companies Act. Under this system. The system of physical delivery of scrips poses many problems for the purchaser as well as the seller in the form of delayed settlements. the clearing and settlement of transaction take place only with the use of paper work. long settlement periods.INTRODUCT ION INTODUCTION One of the biggest problem faced by the indian capital market has been the manual and paper based settlement system. high level of failed trade. high cost of transaction.
Besides. 1956. mismatch of signatures on transfer deeds with specimen record of the issuer or other procedural reasons. facilitate scrip less trading and electronic book entry of the transfer of securities. The system is also known as ‘scrip less trading system’. Thus. facilities automatic and transparent trading in scrips. as a consequence of implementation of reforms measures. theft. more stock exchanges and increased market intermediaries. It is a system whereby the transfer and settlement of scrips take place not through the traditional method of transfer deeds and physical delivery of scrips but through the modern system of effecting transfer of ownership of securities by means of book entry on the ledgers or the depositary without the physical movement of scrips. to eliminate paperwork. shorten settlement periods.section 22 A of the securities Contracts (Regulations) Act. a large number of transactions end up as bad deliveries due to faulty compliance of paper work. forgery. thus . the Indian capital market has shown rapid growth in the recent past with foreign investors. The old manual system of settlement and transfer has almost failed to handle the growing volume of paper that has loaded the market. shortens the settlement period and ultimately contributes to the liquidity of investment in securities. Moreover. it was found necessary to replace the old system of transfer and settlement with the new and modern system of depositories. eliminates paper work. However. The new system. multination of certificates and other irregularities have also become rampant. and to improve liquidity in the stock market. Accordingly the government of India enacted the depositories Act in 1996 for the orderly growth and development of the Indian capital market. There are essentially four players in the depository system: The Depositary participant 21 .
it had become difficult for the investors to hold share certificates and debt instruments in bulk. But now. The Beneficial owner/investor The issuer The depository A depositary is a firm wherein the securities of an investor are held in electonic form in the same way a bank holds money. With increase in the number of transactions in the stock market. It functions as a custodian of securities of its clients. It carries out the transactions of securities by means of book entry. The name of the depositary appears in the records. (CDSL) NSDL was formed and registered under the companies act 1956 during December 1995 and commenced operations during november1996. NSDL was promoted by Industrial Development Bank of India (IDBI)-the largest development bank in India. 22 . depositary institutions handle this job. State Bank of India and HDFC Bank. Bank of India. (NSDL) Central depositary services (india) Ltd. The depositary acts as a defecto owner of the securities lodged with it forn the limited purpose of transfer of ownership. Mumbai In association with Bank of Baroda. Number of Depositories in India National securities depositary Ltd. The depositary based settelment system is also called book entry transfer settelment.CSDL was promoted by stock exchange. Some of the prominent banks in the country also have a stake in NSDL. At present there are two depositories in india. without any physical movement of securities. Central Depository services (India) limited which commenced operations during February 1999. Unit trust of India (UTI)-the largest mutual fund in India and National stock exchange (NSE)-the largest stock exchange in India.
The depository model in India is a competitive multi depository system in India the system of dematerialization is followed. delayed transfers etc.DEPOSITORY SYSTEM WHAT IS DEPOSITORY Electronic revolution has brought about a number of changes in the functioning of Indian capital market. The century old Indian market has been vibrant all along but its paper. wherein the securities will be 24 .. The most revolutionary change that was brought in the entire history of the Indian market is the introduction of depository.based settlement of trades caused problems like bad delivery. until the enhancement of depository act in 1996.
due to the time that elapsed before trades were settled. in the sense that only authorized persons or institutions can gain access to the data it contains. A depository is a file or set of files in which data is stored for the purpose of safekeeping or identity authentication. An ideal Depository is secure.A depository is an organization where the securities of an investor are held in electronic form and carries out the securities transaction by book entry. There had to be a physical delivery of securities -a process fraught with delays and resultant risks. with the change of ownership being evidenced by an endorsement on the security certificate. In general information storage applications. magnetic disks. However. and similar media. a depository contains data about people's physical characteristics such as iris prints and finger images. 25 . In a biometric security system. WHAT IS DEPOSTORY SYSTEM The erstwhile settlement system on Indian stock exchanges was also inefficient and increased risk.cancelled as against the system of immobilization in which the securities are kept in custody. The second aspect of the settlement relates to transfer of shares in favour of the purchaser by the company. a depository are a physical site where data is kept in the form of hard copies. magnetic tapes. The transfer was by physical movement of papers. A good example is the safe deposit vault in a financial institution. no matter how secure they claim to be. compact disks (CDs). experience has shown that many depositories. The system of transfer of ownership was grossly inefficient as every transfer involves physical movement of paper securities to the issuer for registration. can be compromised by a determined hacker or thief.
In any stock exchange. restricted liquidity and made investor grievance redressal time consuming and. In addition. and (c) providing for maintenance of ownership records in a book entry form. accuracy and security. subject to certain exceptions. To obviate these problems. All this added to costs and delays in settlement. the issuer has the right to refuse the transfer of a security. at times. and a significant proportion of transactions would end up as bad delivery due to faulty compliance of paper work. forgery. 1996 was passed. Two depositories. (b) dematerialising the securities in the depository mode. It provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed.. This account settlement period. restricting the company's right to use discretion in effecting the transfer of securities. Theft. viz. mutilation of certificates and other irregularities were rampant. the Act envisages transfer ownership of securities electronically by book entry without making the securities move from person to person. trades or transactions have to be settled by either squaring up the carrying forward positions or settling by payment of net cash or net delivery of securities. In order to streamline both the stages of settlement process.In many cases the process of transfer would take much longer than the two months stipulated in the Companies Act. NSDL and CDSL. intractable. the Depositories Act. The Act has made the securities of all public limited companies freely transferable. have come up to provide instantaneous electronic transfer of securities. and the transfer deed and other procedural requirements under the Companies Act have been dispensed with. if it is 26 . It does so by (a) making securities of public limited companies freely transferable.
screenbased trading and trading through the Internet . The Depositories Act passed by Parliament received the President's assent on August 10. Bye. Securities and Exchange Board of India (Depositories & Participants) Regulations. LegalFramework of depositary system The operations of the depositories are primarily governed by the Depositories Act. 1996. and Business Rules framed in accordance with the Regulations and Bye-Laws. It increases the chances of speculation resulting in volatility. It was notified in a Gazette on August 12 of the same year. which hurts the small investors. 1996.Laws approved by SEBI. The Act enables the setting up of multiple depositories in the 27 . With the application of IT in the securities market .it has been possible to reduce this settlement period. 1996.long leads to several price distortions and allows for market manipulation.
Only a company registered under the Companies Act. 28 . issuers and beneficial owners are spelt out clearly in the Depositories Act 1996. The DP will then make the depository services available to the investor.The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). At present. On receipt of this information. The rights and obligations of depositories.country. 1956 and sponsored by the specified category of institutions can set up a depository in India. depository participants. Any investor who would like to avail the services of a depository has to enter into an agreement with any DP of his choice. two depositories are registered with SEBI . who provides various services of the depository to investors. Before commencing operations. every investor subscribing to securities offered by an issuer has an option to receive the same in physical form or dematerialised form. the issuer intimates the depository the details of allotment of security. The DP has to enter into an agreement with the depository to this effect. As per the Act : Section 4: DP is an agent of the Depository: A DP is an agent of the depository. section 8: Option to hold securities in demat form : In the depository system. depositories should obtain a certificate of registration and a certificate of commencement of business from SEBI. If an investor opts for receiving the securities in dematerialised form. Section 7: Free Transferability: The securities held by an investor in the depository are freely transferable from one beneficial owner to another. This was to see that there is competition in the service and there is more than one depository in operation.
2. Section 10: Registered Owner and Beneficial Owner : The depository is deemed to be the registered owner for the purpose of effecting transfer of ownership of security on behalf of a beneficial owner. A bank included in the Second Schedule to the Reserve Bank of India Act. An institution engaged in providing financial services where not less than 75% of the equity is held jointly or severally by these institutions. 3. any loss caused due to negligence of the depository or its participant. 1934. But as a registered owner. Eligibility Criteria for a Depository.The depository enters the name of the allottee as the beneficial owner of that security in its record. 6. 1956. A foreign bank operating in India with the approval of the Reserve Bank of India. A custodian of securities approved by Government of India. A public financial Institution as defined in section 4A of the Companies Act. Section 9: Securities held in a depository are fungible : All securities held by the depository are in dematerialised and fungible form. Section 14: Option to opt out of depository : A beneficial owner may opt out of a depository in respect of any security by requisite intimation to the depository. it does not have any voting rights or any other rights in respect of those securities. 4. and 29 . A recognised stock exchange. The beneficial owner is entitled to all rights and benefits as well as subject to all liabilities in respect of his securities held in the depository. Section 16: Depository to indemnify losses : A depository shall indemnify a beneficial owner. 5. Any of the following may promote a depository: 1.
A depository company must have a minimum net worth of Rs. Participants of that depository. No foreign entity. On being satisfied with the eligibility parameters of a company to act as a depository. However. or as a sponsor and DP together. at any point of time. The promoters of a depository are also known as its sponsors. more than 5% of the equity capital. The sponsor(s) of the depository have to hold at least 51% of the equity capital of the depository company. 30 . SEBI may grant a certificate of registration subject to certain conditions.As per the provisions of the SEBI Act. can hold the balance of the equity capital. can function only if it obtains a certificate of commencement of business from SEBI. no single participant can hold. if any. Commencement of Business . 100 crore. Registration .7. a depository can deal in securities only after obtaining a certificate of registration from SEBI. The sponsors of the proposed depository should apply to SEBI for a certificate of registration in the prescribed form. A depository must apply for and obtain a certificate ofcommencement of business from SEBI within one year from the date of receiving the certificate of registration from SEBI.A depository that has obtained registration as stated above. individually or collectively either as a sponsor or as a DP. A foreign financial services institution approved by Government of India. can hold more than 20% of the equity capital of the depository.
The network. The physical or electronic access to the premises. The depository has a net worth of not less than Rs. and to the electronic data communication network connecting the DPs. through which continuous electronic means of communication are established between the depository. including the interface and method of transmission of Information between the depository. The depository has a detailed operational manual explaining all aspects of its functioning. 8. participants. issuers and issuers' agents. 2. 100 crore. 5. participants. The depository has established standard transmission and encryption formats for electronic communication of data between the depository. issuers and issuers' agents is controlled. The depository has established adequate procedures and facilities to ensure that its records are protected against loss or destruction and 31 . DPs and beneficial owners. issuers and issuers' agents. The automatic data processing systems of the depository have been protected against unauthorised access. It particularly examines whether : 1. destruction. 7. facilities. The Bye-Laws of the depository have been approved by SEBI. 4. alteration. issuers. 6. data storage sites and facilities including back-up sites.SEBI grants a certificate of commencement of business if it is satisfied that the depository has adequate systems and safeguards to prevent manipulation of records and transactions. 3. disclosure or dissemination of records and data. issuers' agents. automatic data processing systems. SEBI takes into account all matters relevant to the efficient and orderly functioning of the depository. monitored and recorded. is secure against unauthorised entry or access.
Depository. for the securities declared eligible for dematerialisation. negligence or default of the depository or its participants or of any employee of the depository or participant. 9. Where the issuer has appointed a registrar to the issue or share transfer. The State or Central Government is the issuer of government securities. NSDL is discharging the responsibility of R&T Agent for the securities issued by State and Central Governments. The depository has made adequate arrangements including insurance for indemnifying the beneficial owners for any loss that may be caused to such beneficial owners by the wrongful act. the depository enters into a tripartite agreement with the Issuer and Registrar & Transfer (R&T) Agent. the issuer enters into an agreement with the depository to enable the investors to dematerialise their securities. the regulations made under the Depositories Act. No such agreement is necessary where: i. ii. Bye. 10. Agreement between Depository and Issuers If either the issuer (a company which has issued securities) or the investor opts to hold his securities in a demat form.Laws approved by SEBI. as the case may be. 32 . or. At present.arrangements have been made for maintaining back-up facilities at a location different from that of the depository. The granting of certificate of commencement of business is in the interest of investors in securities market. Rights and Obligations of Depositories Depositories have the rights and obligations conferred upon them under the Depositories Act. is the issuer of securities.
It should conduct an annual inspection of these procedures and forward a copy of the inspection report to SEBI. other depositories and clearing organizations. and need to be approved by SEBI before becoming effective. 33 . Every depository is required to extend all such co-operation to the beneficial owners. to protect the interests of the beneficial owners against any risks. issuers. where the loss is caused due to the negligence of a DP. Every depository must have adequate mechanisms for reviewing. The Bye. Depository .A depository is required to make Bye-Laws governing its operations. destroyed or tampered with. procedures and safeguards. issuers and their R&T agents.Laws have to be in conformity with the Depositories Act and the regulations made there under. sufficient back up of records should be available at a different place. the depository shall have the right to recover it from such DPs. including insurance. systems. In the event of loss or destruction. monitoring and evaluating the depository's controls. The depository is also required to ensure that the integrity of the automatic data processing systems is maintained at all times and take all precautions necessary to ensure that the records are not lost. The depository should indemnify beneficial owners of securities for any loss caused to them due to the negligence of the DP. issuers' agents. prompt and accurate clearance and settlement of securities transactions and conduct of business. However.Every depository is required to maintain the following records and documents. Adequate measures should be taken. Bye-Laws .and the agreements made with the participants. as is necessary for the effective. custodians of securities.
7. 5. 8.A depository established under the Depositories Act can provide any service connected with recording of allotment of securities or transfer of ownership of securities in the record of a depository. Every depository in its Bye-Laws must state which securities are eligible for demat holding. entry and cancellation of pledge or hypothecation. A register and an index of beneficial owners. Any person willing to avail the services of the depository can do so by entering into an agreement with the depository through any of its participants. Details of securities declared to be eligible for dematerialisation in the depository. 3. 2. Records of securities dematerialised and rematerialised. A depository can provide depository services only through a DP. participants. issuers' agents and beneficial owners. the following securities are eligible for dematerialisation: 34 . Details of the holdings of the securities of beneficial owners as at the end of each day. 1. and sent to. 9. The names of the transferor. Records of instructions received from. 4. Such other records as may be specified by SEBI for carrying on the activities as a depository. issuers.These have to be preserved for a minimum period of five years. Generally. notice. 6. Services of Depository . and the dates of transfer of securities. Records of approval. A depository cannot directly open accounts and provide services to clients. Details of participants. transferee.
Account Transfer: The depository gives effects to all transfers resulting from the settlement of trades and other transactions between 35 . debentures. government securities. bonds. certificates of deposit. stocks. scrips. This is achieved through dematerialisation of securities. Investors are informed about these securities through Functions of Depository Dematerialisation: One of the primary functions of depository is to eliminate or minimise the movement of physical securities in the market. money market instruments. rights under collective investment schemes and venture capital funds. debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate. kisan vikas patra and unlisted securities. national saving certificates.(a) Shares. (b) Units of mutual funds. Dematerialisation is the process of converting securities held in physical form into holdings in book entry form. commercial paper. (c) Securities admitted to NSDL depository are notified to all DPs through circulars sent by email. securitised debt.
on the instructions of the beneficial owners. depository itself takes the responsibility of distribution of corporate benefits. these steps have to be repeated. it merely provides information to the issuer about the persons entitled to receive corporate benefits. In the first case. execution of a transfer instrument and payment of stamp duty. These securities are verified for authenticity and often need to be transferred in the name of lender. Corporate Actions: A depository may handle corporate actions in two ways. certain legal steps have to be taken like endorsement. borrowers are required to deliver pledged securities in physical form to the lender or its custodian. Under a depository system. Transfer and Registration: A transfer is the legal change of ownership of a security in the records of the issuer. Use of depository services for pledging/ hypothecating the securities makes the process very simple and cost effective.various beneficial owners by recording entries in the accounts of such beneficial owners. In a manual Environment. Pledge and Hypothecation: The securities held with NSDL may be used as collateral to secure loans and other credits by the clients. This has a time and money cost by way of transfer fees or stamp duty. The securities pledged/hypothecated are transferred to a segregated or collateral account through book entries in the records of the depository. In the other case. transfer of security occurs merely by passing book entries in the records of the depositories. The depository accelerates the transfer process by registering the ownership of shares in the name of the depository. For effecting a transfer. 36 . If the borrower wants to substitute the pledged securities.
Etc. the clearing system performs the functions of ascertaining the pay-in (sell) or pay-out (buy) of brokers who have traded on the stock exchange. To achieve this. Fake securities. Faster settlement cycles. No bad delivery. BENEFITS OF DEPOSITORY SYSYEM No risks associated with physical certificates such as loss of share certificate. Actual delivery of securities to the clearing system from the selling brokers and delivery of securities from the clearing system to the buying broker is done by the depository.Linkages with Clearing System: Whether it is a separate clearing corporation attached to a stock exchange or a clearing house (department) of a stock exchange. 37 . Low transaction cost for purchase and sale of securities compared to physical mode. depositories and the clearing system should be electronically linked.
in electronic form Wavier of stamp duty on transfer of securities Facilities offered by depository system Dematerialisation Rematerialisation Electronic settlement of trades in stock exchanges connected to depositories. Bonus. Regulation reconciliation between DP and the depositories. Nomination facility. Increase liquidity of securities Reduction of paper work Allotment of IPO. is mandatory. Rights shares etc. SEBI approval etc. DP cannot effect ant debit or credit in the demat account of the investor without the valid authorization of the investor. Services related to change of address. bonus issue. so that the debits from the dematerialization are not permitted. Freezing of De-mat accounts. nomination. Safety features in the depository system To ensure safety to the investors the following measures exist Strict norms for becoming depository participant. Electronic credit of securities allotted in public. Other services viz. mandate. rights. Periodic inspection by 38 .Net worth criteria. transmission.holding debt instruments in the same demat account. etc. Pledging/hypothecation of dematerialized securities.
Depositories of the office of the DP and Registrar. periodically from the DP.
investors have a right to receive their statements of accounts
In the depository system, the depository holds the investor
accounts on trust. Therefore if the DP goes bankrupt the creditors of the DP will have no access to the holdings in the name of the clients of the DP.
Compulsory internal audit of operations of DP by practicing
company secretary of the chartered accountant every quarter. Various procedures for backup and safe keeping of data at all the levels.
SEBI has made compulsory trading of shares of all the
companies listed in Stock Exchange in demat form w.e.f 2 January 2002. Hence, if the investor wants to trade in respect of the companies, which have established connectivity with NSDL & CDSL, he may have to open a beneficiary account.
A beneficiary account is an account opened by the investor or a broker with a DP of his choice, to hold shares in dematerialized form and undertake scrip less trading. Investor contacting the depository The investor must open a demat account with a Depository Participant. Opening a demat account with a DP is similar to opening an account with
bank. The selection of DP is to be done by the investor based on fee payable, proximity, service levels, etc. Documents required for opening demat account For demat account opening the following documents are required to be given Demat account opening form duly filled. Address proof. Photograph Identity proof
Other formalities in Demat account opening Once a demat account is opened, the investor must sign an agreement with the DP. The investor will be allotted an account no. known as client identity. The client identity number along with the DP identity number forms a unique combination. Both these numbers should be quoted in all the future dealing with Depositories /DP /RTA /Company. However in case of CDSL there is no DP identity and the 16-digit Client identity itself is a
unique number. The investor must collect forms like dematerialization request form (DRF), Delivery instruction slips etc.
Certain points to be considered while opening Demat account Demat account cannot be opened in the name of the partnership firms, as a partnership firm is not a legal entity. However, a demat account can be opened in the name of the partners. Demat account cannot be opened in the name of the HUF. It has to be opened in the name of the Karta of the HUF. In the case of a minor, the depository account should be opened in the name of the minor and the guardians name should be mentioned. The guardian will sign as signatory on behalf of the minor. Investor can open any number of DP accounts with any number of DPs. However, investor has to incur cost for each of such account.Investor must open different Demat accounts for shares held in different combination of names. Alternatively investor can submit the certificate for Demat along with transposition form. Minimum balance of securitiesn required to be maintained in Demat account There is no minimum balance required to be maintained in a Demat account and an investor can even maintain nil balance. Other steps the investor
The charges of DPs also vary. Stock exchanges connected to the Depositories for Demat trading At present the following 10 stock exchanges are connected to the Depositories National Stock Exchange The Stock Exchange Mumbai Calcutta Stock Exchange Delhi Stock Exchange Ludhiana Stock Exchange Banglore Stock Exchange Over the counter stock exchange of India Madras Stock Exchange Inter connected Stock Exchange Ahmedabad Stock Exchange Market trade and off market trade 42 . the DP is free to charge its clients for the services offered. Charges for Demat account opening and other depository trading The depository does not charge any fee directly from the investors. bank account. The depository charges only the DPs. However. etc.should take The investor should inform his DP of any change in his address. immediately upon change thereof. nomination.
When any corporate event such as right or bonus or dividend is announced for a particular security. Even in the case of bonus issue the 43 . bonus etc. interest.Trade done and settled through a stock exchange and clearing corporation is market trade. Corporate benefits Corporate benefit is a corporate event. there will be a provision for the investor to indicate the manner in which hewants the securities allotted to him.or non-cash corporate benefits like rights. Buying and selling of shares by the investor The investor can buy and sell shares only through a stockbroker and not through a DP. etc. Direct credit of shares in electronic form: In the public/Right issue application form of depository eligible companies. It can be cash corporate benefit like dividend. Non-cash benefits will be distributed through depository by crediting the entitled quantity of shares into shareholders demat account. The disbursements of cash benefits such as dividend/interests will be done by the RTA/Company directly to the shareholders. depository will give the details of all clients having electronic holdings in that security as of the record date to the RTA/Company will then calculate the corporate benefits due to all the shareholders. DP helps in delivering the shares against a sale transaction or receiving the shares for a purchase transaction. Trade done privately without the involvement of the Stock Broker of Stock Exchange is off market trade.
Transmission and Transposition Transfer 44 . It is. Number and DP ID No. right and other corporate benefits lying in his account to the investor. The investor must mention his client ID. Meaning of Transfer. so that the shares have higher liquidity. Advantage of getting allotment in electronic form: SEBI has announced that the shares of all the companies going in for public issue will have to be compulsorily settled in demat form by all investors. advantageous for an investor to prefer the allotment in demat form. In case of Discrepancies in corporate benefits the investor can approach his DP who in turn will contact the RTA/Company for clarifications regarding allotment of securities.investor is given an option for getting the shares allotted in physical or electric form. therefore. Clearing corporations and other intermediaries cannot have voting rights in respects of the shares held in pool account. Further the clearing member or cleaning corporation is also responsible for distribution of bonus. Clearing members.
For this purpose claimant must have a depository account. This is done in order to facilitate settlement of trades and to perform a daily. where the claimant will have to interact with each RTA/Company. Transposition In case of transportation-cum-dematerialization. supported by documents like death certificates. the investor can get the securities dematerialized in the same account if the names appearing on the certificate match with the names in which the demat account has been opened but are in a different order. an integrated system is set up for maintenance of investor accounts. Thus. The major advantage in transmission of dematerialized holdings is the transmission formalities for all securities held with the DP can be completed in one go. etc. after ensuring that the application is genuine.Depository is electronically linked to depository participants. the claimant will have to fill a transmission request form. unlike in the case of share certificate. The DP. issuer company or Registrar & transfer agent and the clearing corporation/ clear house of the stock exchange. reconciliation of all the account balances held with depository. by submitting the security certificate 45 . will transfer securities to the demat account of the claimant. Transmission In the case of transmission.
Pledging Pledging of dematerialized securities: Pledging dematerialized securities is easier and more advantageous as compared to pledging physical securities. Once this is done the securities are pledged. Change of securities offered in a pledge If the pledger (lender) agrees. the investor may change the securities offered in a pledge. the borrower can request for a closure of pledge by instructing his DP in a prescribed format. 46 . The pledger must initiate the pledge by submitting to his DP the details of the securities to be pledged in a standard format. The procedure as follows Both borrower (pledger) as well as the lender (pledgee) must have depository account.along with the transportation form and the Dematerialisation request form ´(DRF) to the DP. Procedure for the closure of pledge After the borrower has repaid the loan. All financial transactions between the pledger and the pledgee are handled outside the depository system. The pledge should confirm the request through his DP. The lender on receiving the repayment will instruct his DP confirmed the closure of the pledge.
Nomination can be made only by individuals holding beneficiary accounts on their own behalf either singly or jointly. address and the photograph of the guardian must be given. all joint holders must sign. the securities will be transmitted to the surviving holder(s) only in the event of death of all the joint holders.Separate nomination cannot be made for each security. Nomination Shares held in physical as well as electronic form can be nominated. holder of power of attorney cannot nominate. the guardian will sign on behalf of the nominee and in addition to the name and photograph of the nominee. 47 . Nominee and two witnesses must sign this form and the name. trust. address and photograph of the nominee must be submitted. Only an individual can be a nominee. On individuals. the securities will be transmitted to the nominee. Karta or Hindu undivided Family. body corporate. A nominee shall not be a society. A minor can be a nominee. karta of Hindu undivided Family or a power of attorney holder. Nomination is permitted for accounts with joint holder.partnership firm. partnership firm. In such a case. but in case of death of any of the joint holder. body corporate . The account holder. The investor must fill in and submit to his DP the nomination form. address and photograph of the nominee must be submitted. The nomination can be changed anytime by the account holder by filling up the revised nomination form and submitting it to the DP. trust. Nominee and two witnesses must sign this form and the name. In case of joint holders. The account holder. society. A minor cannot nominate either directly or through its guardian. the name. Nomination can be made Demat account wise and not security wise.
he marks Surrendered for Dematerialization´ on the face of the certificates. an investor will have to first open a demat account with a DP and the a request for the dematerialization of certificates by filling up a dematerialization request form (DRF). Any new instrument can be issued directly in dematerialized form without recourse to printing of either letter of allotment or certificates. primary Dealers and satellite dealers are directed to convert their outstanding investment in commercial papers in script form. debentures. The procedure of dematerialization of debt instrument is same as that carried out for equity shares. certificates of deposit. In its midterm review of the monetary and credit policy RBI has mentioned that banks and financial institutions shall make investment in debentures and bonds only in demat form. Demat of debt instrument Debt instrument can also be held in demat form. As per RBI Monetary and credit policy ± banks. In order to dematerialized his/her certificates. 48 . commercial papers. The investor has to ensure that before the certificates are handed over to the DP for demat. into Demat form. Bonds and debentures can also kept in demat form. Instruments like bond. etc. Securities will be directly credit into the demat accounts of the investor by the depositories on receipt of allotment details from RTA/Company. The investor need not open separate demat account for demat of debt instrument. irrespective whether these instruments are listed/unlisted/privately placed or even issued to a single holder can be dematerialized. which is available with DP and submitting the same along with the physical certificates. Financial Institutions. The above entities have also been directed to make fresh investment in commercial paper only in demat form. Commercial paper can also be kept in demat form.
Based on that the investor will know his security balances. This is in additional security feature of the investors. Receiving Transaction statement by investor :The DP will send a transaction statement once in a quarter if there is no transaction during the quarter. no debits will be permitted from the account. In an account. till the time it is defreeze. Standing instruction to DP 49 .• Account opening • Demat/Remat • Account Maintenance • Custody • Transaction. If there are any transactions DP will send the statements within fifteen days of the transaction. Knowing of securities balance in demat account The investor is provided with a transaction statement by his DP at regular intervals. etc. Freezing of demat account The depository system provides the facility to freeze the demat account for any debits or for both debits and credits. which is free zed of debits´.
to prevent its misuse. he can do so by submitting the change in writing to the DP. including the 9-digit code number of the bank and branch appearing on the MICR cheque issued by the bank have to be given to the DP at the time of account opening. the investor cannot give standing instruction for any debits in his account. Access of investor accounts by all DPs A DP cannot access the investors account of any other DP. 2. Details of bank account of the client. with the same participant or with a different participant.. 50 . Furnishing of bank account particulars in DP.The investor can give one time standing instruction to his DP to receive all the credits coming to his depository account automatically. Procedure of closure of demat account An investor can close a demat account by giving an application in prescribed form. In case there is any balance in the demat account sought to be closed. Rematerialisation of all securities standing to the credit of the demat account at the time of making the application for the closure. the following steps are necessary1. Companies use this information for printing them on dividend/interest warrants etc.The DP can access only those investors accounts serviced by them. Transferring the balance to the credit of another demat account . However. In case the client wishes to change this bank account details.
the company whose shares are sought to be dematerialized. DP will check whether security is available for Demat. Dematerialization Dematerialization is the process of conversion of shares or other securities held in physical form into electronic form. Investor must deface the sharecertificate by stamping surrendered for dematerialization´ and DP will punch two holes on the name of the company and will draw two parallel lines across the face of the certificate. 5. 51 . Investor must submit request form and share certificate to DP. DP dispatches the physical certificates along with the DRF to the RTA/ Company. 3. 2. DP enters the Demat request in their system to be sent to the depository. Whom to approach The investor must approach his DP for Dematerialization The shares that an investor can dematerialize The investor can demat the shares of any company that has established connectivity with NSDL or CDSL Steps involved in dematerialization 1. 4. Once the RTA/Company finds that shares are in order.e. Depository records the details of the system and forwards the request to Registrar and transfer agent or issuer i. RTA Company on receiving the physical documents verifies request and check them.
the depository allots an ISIN. Depository credits the dematerialized securities to the beneficiary account of the investor and intimates the DP electronically. The DP issues a statement of transaction to the client. This number is unique for each security of the company that is admitted in the depository. Mentioning of the ISIN in the DRF The ISIN should be mentioned in the DRF. Distinguishing between partly paid-up share and fully paid up shares in the depository 52 .dematerialization of the concerned securities is electronically confirmed to the depository 6.This to certain extent ensures that the security mentioned in the DRF is the one which the investor intends to dematerialize. • Company identification number for demat purposes Once the company is admitted in the depository system. Signing of the demat request form in case of joint holders • All joint holders should sign the DRF.
The company issues call notices to the beneficial holders of partly paid up securities in the electronic form. Steps involved for Rematerialisation The investor must fill up a remat form (RRF) and give it to the DP. Electronic settlement of the Trades Procedure for selling dematerialization securities in the stock exchanges is similar to the procedure for selling physical securities Instead of delivering physical securities to the broker.Parties paid up shares and fully paid up shares are identified by separate ISINs (International security identification number). The details of such beneficial holders will be provided to the RTA/company will automatically convert the partly paid up shares to fully paid shares. The DP will forward the request depository after verifying that the shareholder has necessary balances. Depository in turn will intimate the RTA/Company will print the certificate and dispatch the same to the investor. Rematerialisation Rematerialisation is conversion of electronic holdings into physical certificate form. These are also traded separately at the stock exchanges. Procedure for selling securities is given below: 53 . the investor must instruct his/her DP to debit his/her demat account with the number of securities sold by him/her and credit brokers clearing account.
If the securities remain in the clearing account of the broker. The investor should ensure that the broker transfer the securities purchased to his account. Investor gives instruction to DP to debit his account and credit the brokers (clearing account pool) account before the pay-in-day. Investor purchases securities in any of the stock exchanges connected to depository through a broker. • Broker receives payment from investors. • Broker gives instruction to DP to debit clearing account and credit clients account. • Broker receives credit of securities in clearing account on the payout day. Investors broker transfers the securities to clearing corporation. the investor has to collect benefits from the broker. Therefore. • Broker arranges payment to clearing corporation. The transaction relating to purchase of securities are summarized below. • Investor receives shares in his account. The broker receives payment from the stock exchange (Clearing Corporation). 54 . The investor receives payment from the broker for the sale in the same manner payment is received for a sale in the physical mode. Procedure for purchase of dematerialized shares The procedure or buying dematerialized securities in stock exchanges is similar to the procedure for buying physical securities. before the book closure. Investor may give a one time standing instruction to receive credits into his /her account or may give separate instruction each time in he prescribed format. the company may give corporate benefits to the broker.Investor sells securities in any of the stock exchange linked to depository through a broker.
Some important Processes in depositary system Dematerialization Rematerialization Initial public offers Trading & settlements On Market transactions Off market transactions Inter Depository transactions 55 .
available ‡ Investor should be registered holder for the securities in the books of the company.Dematerialization Process Physical Securities Electronic Form. Pre-requisites: ‡ ‡ Demat ISIN for Account the with securities any DP of with the the Depository. Rematerialization 56 . Depository.
Rematerialization process Initial public offers 57 . It is typically tightly integrated with register allocation. using the concept of available expressions.Rematerialization or remat is a compiler optimization which saves time by recomputing a value instead of loading it from memory. Cooper. and so can no longer be used to rematerialize that value. It was conceived by Preston Briggs. Usally the expression must also have no effects. for example a maximum complexity on the expression used to rematerialize the value. it would do no good to rematerialize a value using a complex computation that takes more time than a load. where it is used as an alternative to spilling registers to memory. and Linda Torczon in 1992. Other criteria must also be fulfilled. Keith D. Sometimes the variables used to compute a value are modified. The expression is then said to no longer be available.Rematerialization works by keeping track of the expression used to compute each variable.
In an IPO. which helps it determine what type of security to issue (common or preferred). younger companies seeking capital to expand.Also referred to as a "public offering". IPOs can be a risky investment. which helps it determine what type of security to issue (common or preferred). For the individual investor. it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. They are often issued by smaller. but can also be done by large privately owned companies looking to become publicly traded. An IPO can be a risky investment. but can also be done by large privately-owned companies looking to become publicly traded. best offering price and time to bring it to market. Also. IPOs are often issued by smaller." is when a company (called the issuer) issues common stock or shares to the public for the first time. the issuer obtains the assistance of an underwriting firm. Also. younger companies seeking the capital to expand. most IPOs are of companies going through a transitory growth period. most IPOs are of companies going through a transitory 58 . In an IPO the issuer may obtain the assistance of an underwriting firm.An initial public stock offering (IPO) referred to simply as an "offering" or "flotation. The first sale of stock by a private company to the public. it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. and they are therefore subject to additional uncertainty regarding their future value. the best offering price and the time to bring it to market. For the individual investor.
growth period. which are subject to additional uncertainty regarding their future values. Initial public offers process 59 .
Trading & settlements 60 .
61 . Off Market Transactions Transaction done on person to person basis without going through stock exchange mechanism. For settling On Market Transactions.Transfer of securities in/ out of the Demat A/c can arise in the following instances: For execution of Off Market Transactions. Neither buyers A/c nor sellers A/c is with clearing house/clearing corporation. For Inter depository transactions. • • Both A/cs are with same Depository though with different DPs. Pre-requisites: • Transfer of securities from one BO A/c to another BO A/c.
Off market transaction process On Market Transaction 62 .
Trades done by investors through stock exchange mechanism and settled using same stock exchange mechanism. 1996 requires depositories to be inter connected. Securities available for dematerialization on both depositories. These instructions are exchanged online for each day between the depositories. Seller as well as buyer account is with CH/CC Inter Depository Transactions. SEBI (Depository and participants) Regulations. Debit/ credit instructions have to given on inter-depository delivery or receipts forms to the DPs of seller and the buyer. 63 .
National Securities Depository Limited 64 .
Market Participants and Investor Database (MAPIN) and Tax Information Network (TIN). The first volumegives an overview of the Indian capital market and NSDL depository system. The second volume deals with admission procedure for different business partners of NSDL. practices.In a span of about nine years.Depository Operations Module". The procedures explained in the handbook are based on the Depositories Act. This handbook is meant to help the candidates in their preparation for the certification programme. Warehouse Receipts. dematerialisation. their obligations. The last volume deals with special services offered by NSDL like Pledge. The programme is aimed at certifying whether an individual has adequate knowledge of depository operations. to be able to service investors. This certification is conducted using NCFM infrastructure created by NSE and is called "NSDL . Stock Lending and Borrowings. investors have switched over to electronic [demat] settlement and National Securities Depository Limited (NSDL) stands at the centre of this change. In order to provide quality service to the users of depository. Corporate Actions. NSDL launched a certification programme in depository operations in May 1999. Depository Participants are required to appoint at least one person who has qualified in the certification programme at each of their service centres. The third volume helps in acquiring a working level understanding of certain basic services offered by NSDL like account opening. National Savings Certificates / Kisan Vikas Patra (NSC/KVP) in demat form. systems and procedures to be followed by them and benefits and safety of depository system. Securities and Exchange Board of India (Depositories & 65 . and transfer of securities and related operations. This handbook has been divided into four volumes for readers' convenience.
80 crore since NSDL has bought back its 66 . It was incorporated on December 12. A thorough understanding of this handbook will form a good base for qualifying the certification test.the largest Indian mutual fund and the National Stock Exchange (NSE) . National Securities Depository Limited National Securities Depository Limited is the first depository to be set-up in India. The paid up capital has been reduced to Rs. Unit Trust of India (UTI) . The book contains illustrations. Readers may like to visit NSDL website www. sponsored the setting up of NSDL and subscribed to the initial capital.the largest development bank in India. flow charts and checklists for better understanding of various concepts and procedures.co. 105 crore. A feedback form is given at the end of the fourth volume.nsdl. 1995.the largest stock exchange in India. 1956. The Industrial Development Bank of India (IDBI) . 1996. A sample test paper is given at the end of the fourth volume to help the candidates appearing for NCFM test form an assessment of their preparedness.Participants) Regulations and Byelaws & Business Rules of NSDL. NSDL had a paidup equity capital of Rs. Ownership NSDL is a public limited company incorporated under the Companies Act. NSDL commenced operations on November 8.in for updates and to know the new procedures introduced or changes brought about in the existing procedures. which will be of great help in enhancing the value of this Handbook in its subsequent editions. Readers may give their feedback.
Standard Chartered Bank 8. HDFC Bank Limited 9. 1. Deutsche Bank A. 100 crore. The Hongkong and Shanghai Banking Corporation Limited 10. 25 crore in the year 2000. its net worth is above the Rs. 7. as required by SEBI regulations. Administrator of the Specified Undertaking of the Unit Trust of India DRF 3.shares of the face value of Rs. The day-today operations are conducted by the Chairman & 67 . Dena Bank 12. 11.G. Oriental Bank of Commerce 6. Canara Bank Management of NSDL NSDL is a public limited company managed by a professional Board of Directors. Industrial Development Bank of India 2. The following organizations are shareholders of NSDL as on March 31. State Bank of India 5. Citibank N. National Stock Exchange 4.A. 2005. However.
Executive Committee 5. 8. Arbitration 68 . Safeguards to protect interest of clients and participants. The eligibility criteria and period of nomination. Securities 9. Appeals 13. Short title and commencement 2. Board of Directors 4. are governed by the ByeLaws of NSDL in this regard. 1996 and approved by Securities and Exchange Board of India. The ByeLaws contain fourteen chapters and pertain to the areas listed below : Amendments to NSDL Bye-Laws require the approval of the Board of Directors of NSDL and SEBI. 1. accounts and audit 11.Managing Director (CMD). the Board appoints an Executive Committee (EC) of not more than 15 members. etc. Business Rules 6. Disciplinary action 12. Accounts/transactions by book entry 10. Reconciliation. To assist the CMD in his functions. Conciliation 14. Participants 7. Definitions 3. Bye-Laws of NSDL Bye-Laws of National Securities Depository Limited have been framed under powers conferred under section 26 of the Depositories Act.
_ Stock Lending and Borrowing. _ Pledging/hypothecation of dematerialised securities. _ Receipt of non-cash corporate benefits like bonus rights. _ Effects settlement of securities traded on the exchanges. NSDL performs the following functions through depository participants: (dematerialization and rematerialisation).Business Rules of NSDL Amendments to NSDL Business Rules require the approval of NSDL Executive Committee and filing of the same with SEBI at least a day before the effective date for the amendments. _ carries out settlement of trades not done on the stock exchange (off-market trades). etc. _ Transfer of securities. Functions. _ Maintains investor holdings in the electronic form. Services Offered by NSDL NSDL offers a host of services to the investors through its network of DPs: _ Maintenance of beneficiary holdings through DPs _ Dematerialisation _ Off-market Trades _ Settlement in dematerialised securities _ Receipt of allotment in the dematerialised form 69 . in electronic form. _ Electronic credit in public offerings of companies or corporate actions.
systems maintenance and compliance with the Bye-Laws. Issuers and R&T agents. These charges are fixed. NSDL also carries out periodic visits to the offices of its constituents R&T agents. the investors for their services._ Distribution of corporate benefits _ Rematerialisation _ Pledging and hypothecation facilities _ Freezing/locking of investor's account _ Stock lending and borrowing facilities Fee Structure of NSDL NSDL charges the DPs and not the investors directly. Accounting and Internal Audit NSDL obtains audited financial reports from all its DPs once every year. Business Rules and SEBI Regulations.e. If a DP is aggrieved by the action of the DAC. The DPs in turn. declare a security as ineligible on the NSDL system. are free to charge their clients.. there is a twotier fee structure. internal audit reports every quarter. i. Inspection. Internal audit has to be conducted by a chartered accountant or a company secretary in practice. DPs and clearing corporations to review the operating procedures. This has to be done within 70 . The DAC is empowered to suspend or expel a DP. DPs are required to submit to NSDL. Additionally. The Board of Directors appoints a Disciplinary Action Committee (DAC) to deal with any matter relating to DPs clients. it has the right to appeal to the EC against the action of the DAC. Thus. freeze a DP account and conduct inspection or call for records and issue notices.
entered in a computer system maintained by Depository Participants called DPM. companies (DPM-SHRs). Stock exchanges receive pay-in (receiving securities against sales made by brokers) or to payout (giving securities to brokers against their purchases) using a computer system connected to NSDL called DPM (CC). have to be settled under the Arbitration and Conciliation Act 1996. No two business partners' systems can communicate to each other without passing through the DM. are electronically conveyed to the central system of NSDL called DM. This system is used to electronically receive demat requests. DPM (SHR) may be installed by the company itself or through its R&T Agent. confirm such requests or to receive beneficial owner data (Benpos) from the depository. Any transaction conducted by any computer system in the NSDL depository system which is targetted to reach any other computer system first gets recorded in DM and then will reach the target.30 days of the action by DAC. 71 . and stock exchanges (DPM-CC) are connected to NSDL central system (DM) through V-SAT (very small aperture terminal) or leased lines. All the computer systems installed by DPs (DPM-DP). Settlement of Disputes All disputes. Companies who have agreed to offer demat facility to their shareholders use a computer system called DPM (SHR) to connect to the NSDL central system. irrespective of whether NSDL is a party to it or not. The EC has to hear the appeal within two months from the date of filing the appeal. The account details. Account holders (investors) open account with the DPs. These are collectively called Business Partner Systems. The EC has the power to stay the operation of the orders passed by the DAC. The information on all such actions has to be furnished to SEBI. differences and claims arising out of any dealings on the NSDL.
branch networks and any other specific features. Distributed Database Each of the computer systems connected to NSDL system has its owndatabase relating to its clients. 72 . the central system of NSDL has the records of all details of every transaction conducted in the depository system. communication and control and provide service to their clients. Thus. DPs may develop software of their own for co-ordination. However each of the databases is reconciled with the data at the central system everyday in order to ensure that the data in the distributed database tallies with the central database. Such exclusive software is called "back office software". the computer systems used by all the entities will have common software given by NSDL. Common Software NSDL develops software required by depository participants. DPM system given by NSDL gives "export and import" facility to take out the transaction details to be used by back office software and to feed in transaction details generated from the back office software. companies.Maintenance of Accounts at the Central System The NSDL central system known as DM maintains accounts of all account holders in the depository system. This helps in giving prompt and accurate service to the clients. Thus. However. depending on the business potential. All the transactions entered at any point in the computer system connected to it are first effected in the central system and subsequently at these computers. R&T Agents and clearing corporations for conducting depository operations.
Some business partners may connect using leasedlines provided by MTNL/ BSNL. Such other meansare PSTN lines. V-SATs used by NSE brokers can connect to NSDL. BPs must have the ability to connect through other means. 73 . R&T Agents and stock exchanges may be connected to NSDL central system through V-SAT network or leased line network. Thus. If primary connectivity fails for any reason. ISDN lines.Connectivity The computer system used by DPs. V-SAT uses satellites for communication purposes. V-SAT or leased line connections are called primary connectivity. companies. NSDL uses NSE's V-SAT network for the connectivity purposes. POP lines(normal telephone lines) through which they can dial in to the NSDL system and conduct their transactions.
financial 74 . who as an agent of the depository. offers depository services to investors.Central Depository Services (India) Limited Central Depositary Securities Limited A Depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository Participant (DP). According to SEBI guidelines.
The depository system has effectively eliminated paper-based certificates which were prone to be fake.institutions. Standard Chartered Bank. CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India. Bank of Baroda. counterfeit resulting in bad deliveries. are eligible to act as DPs. Some of the important milestones of CDSL system are: CDSL received the certificate of commencement of business from SEBI in February. Shri Yashwant Sinha flagged off the operations of CDSL on july 15. dependable and secure depository services at affordable cost to all market participants. forged. at regular intervals. a statement of account which gives the details of the securities holdings and transactions. Bank of India. banks. etc. The DP is required to provide the investor. The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. stockbrokers. CDSL was set up with the objective of providing convenient. 2) Settlement of trades in the demat mode through BOI Shareholding Limited. started in july 1999. 75 . CDSL offers an efficient and instantaneous transfer of securities.1999. the clearing house of BSE. The investor who is known as beneficial owner (BO) has to open a demat account through any DP for dematerialisation of his holdings and transferring securities. Union Bank of India and Centurion Bank. custodians. 1999 1) Honourable Union Finance Minister. HDFC Bank.
000. 2008 is as under. No. The list of shareholders with effect from 11th December.000.50 crores.57 76 . The Stock Exchange.104. Shareholders of CDSL CDSL was promoted by Bombay Stock Exchange Limited (BSE) in association with Bank of India. commercial papers).3) All leading stock exchanges like the National Stock Exchange. Ahmedabad.46 1. Name of shareholders Value of holding (in Rupees Lacs) % terms to total equity 1 2 3 Bombay Stock Exchange Limited Bank of India Bank of Baroda 3. units of mutual funds.00 36.00 1. debentures.57 9. Sr. certificate of deposits etc. State Bank of India and HDFC Bank.825.61 9. Bank of Baroda. BSE has been involved with this venture right from the inception and has contributed overwhelmingly to the fruition of the project. Delhi stock Exchange. Calcutta Stock Exchange. into the CDSL system. The initial capital of the company is Rs. over 5000 issuers have admitted their securities (equities. bonds. etc have established connectivity with CDSL. 4) As at the end of Dec 2007.
00 674.00 77 .00 200.00 750.08 -- TOTAL 10.46 200.000.500.18 6.00 1.00 100.450.96 12 Others 0.45 1.00 200.91 1.91 1.57 14.00 9.00 100.4 5 6 7 8 9 10 11 State Bank of India HDFC Bank Limited Standard Chartered Bank Canara Bank Union Bank of India Bank of Maharashtra The Jammu and Kashmir Bank Limited The Calcutta Stock Exchange Association Limited 1.91 0.36 7.
RESEARCH METHODOLOGY RESEARCH METHODOLOGY “While great devices are invented in the laboratory. great products are invented in the Research Departments” 78 .
OBJECTIVES OF THE STUDY To acquaint myself with the Depository system 79 . The word research methodology comes from the word advance learner µs dictionary meaning of research as a careful investigation or inquiry especially through research for new facts in my branch of knowledge for example some author have define research methodology as systemstized effort to gain new knowledge. In my case I am Choosing the problem “Working of depository system” To study the opinion of the customers about the different type of Depositories available in the market and to know why they are using that particular Depository.one can also define reseach methodology as a scientific and systematic search for required information on aspecific topic.Research Methodology refers to search of knowledge.
To know the major factors influencing their buying decisions. To find out the truth which is hidden and which has not been discovered as yet. 80 . To Know about Depositories – NSDL and CDSL To know more about the likings of the customers towards a particular Depository. Find out the satisfactory level of the investors regarding this system. To find out that factors or speculations those are responsible for creating a negative image of DS in the mind of investor. Getting the information about the awareness of depository system. TYPES OF RESEARCH ANALYTICAL RESEARCH: It has to used facts or information already available and analyze these to make a critical evaluation of material. To find out the suggestions of the dealers as well as customers.
magazines etc. various journals. TOOL OF ANALYSIS In the project work quantitative technique & percentage method has been used. Religare Securities Limited. METHODS OF DATA COLLECTION In the project work Primary and secondary (both) sources of data has been used: PRIMARY SOURCE: I have gathered information about our project from the interaction with the customers of our company i. I have collected from the various websites of reliance money.e. SECONDARY DATA: The secondary data. It help in marketing more accurate generalization 81 .SAMPLE SIZE:Considering the constraints it was decided to conduct the study based on sample size of 100 people in specific age groups. RESEARCH DESIGN Chapter Overview For the proper analysis of data simple quantitative technique such as percentage were used. The sampling method used was basically convenience sampling and most of the calls made were cold calls made on the generated database of recipients of other companies.
82 . Research Instrument For my survey.From the data available . Restatement of the Problem The problem is to be studied under the following research design in finding out the consumer perception of working of depositories in the area of Karnal. Description of the Research Design For the purpose of my survey I decided to follow the conclusive research design. Under this I selected the descriptive design.The data which was collected from a sample of population was assumed to be representing entire population was interested . I used personal Interview of the respondents by asking them a list of questions from the questionnaire prepared by me for collecting the desired information & have been fulfilling the questionnaires there & then according to information given by each person.
1 Knowledge about Depository system.DATA ANALYSIS AND INTERPRETATIO N Ques. 83 .
2) Knowledge and awareness about NSDL or CSDL.A) Yes B) No 97 03 120% 100% PERCENTAGE 80% 60% 40% 20% 0% YES KNOWLEDGE LEVEL NO 3% Series1 97% INFERENCE: This shows the awareness about the Depository system.100 people are surveyed which shows that 97% people are aware about the depository system and only 3% are not aware about this system. We can say that most of the people are aware about the Depository System. Ques. A) Yes 84 .
85 . 3) Satisfaction level with fee structure of depository system. Ques.B) No C) To Some extent A) Yes B) NO C) To some extent 24 30 46 46% 30% 24% Series1 50% PERCENTAGE 40% 30% 20% 10% 0% A) Yes B) NO C) To some extent KNOWLEDGE LEVEL OF CDSL&NSDL INFERENCE: The above diagram shows about the sufficient knowledge about the NSDL OR CDSL. 24% are completely aware about the NSDL or CDSL and 30% have no knowledge about the NSDL or CDSL and 46% people are little aware about the NSDL or CDSL.
A) Yes B) No C) To Some extent A) Yes B) No C) To some extends 34 54 12 60% PERCENTAGE 50% 40% 30% 20% 10% 0% A) Yes 34% 54% Series1 12% B) No C) To some extends SATISFACTION WITH FEE STRUCTURE INFERENCE: This diagram shows the satisfaction about the fee structure of the Depository System. Ques. 34% are fully satisfied with the fee structure of the Depository System and 54% are not satisfied with fee structure due to many reasons and 12% are in neutral position. A) Religare 86 . 4) Trading with particular depository company trading.
5) If your selected trading company increase there annual charges will you go with it? A) Yes 87 IC IC Id . This shows that the highest trading is done in Religare.com E) Other A) Sharekhan B) Indiabulls C) Religare D) ICICI direct.com E) Other 30% PERCENTAGE 25% 20% 15% 10% 5% 0% Sh ar ek ha n Re lig ar e In di ab ul ls ir e ct .B) Indiabulls C) Reliance D) ICICI direct.c om O th er 14 22 28 16 20 28% 22% 20% 16% Series1 14% INFERENCE: This shows that 14% people make trading in Sharekhan company and 22% in India Bulls and 28% in Religare and 16% in ICICI Drect. Ques.com and remaining 20% in other companies.
A) Provide maximum profit 34 88 .6) The most important factor for a trading company to enhance the loyalty and customers. And 38% people have opinion that they will accept this if the price they increased is reasonable. Ques.B) No C) If charges are reasonable A) Yes B) No C) If charges are reasonable 04 58 38 70% PERCENTAGE 60% 50% 40% 30% 20% 10% 0% Yes 4% 58% 38% Series1 No If charges are reasonable EFFECT OF INCREASE IN ANNUAL CHARGES INFERENCE: According to this diagram only 4% are satisfied if trading company increase the annual charges 58% is not satisfied with their increase in annual charges.
O BSERVATION 89 .B) Provide tips time to time C) No hidden charges D) Other factors 16 36 14 40% 35% 30% 25% 20% 15% 10% 5% 0% 34% 36% PERCENTAGE 16% 14% Series1 Provide maximum profit Provide tips time to time No hidden charges Other factors INFERENCE: According to this. 34% people believe that Providing maximum profit is the important factor which increase the loyalty of the company. 16% believe that Providing tips time to time is the most important factor for a trading company to enhance the loyalty and customers and 36% have opinion that there should be no hidden charges and 14% says that there are some more factors which enhance the loyalty and customers.
com comes and get 16votes.To study the above Doughnut. reliance get maximum votes 28 and 20 90 . The observation of this question explain that the sharekhan trading company is not popular in Karnal area because only 14 respondents are make trading with it. • Data of second question is shows that only 24 respondents have a sufficient knowledge about CSDL and NSDL it means most of respondent have a no or only little bit knowledge about these two terms data says that 30 respondents go with no and 46 go with to some extent. Graph and pie charts I observe that the most of the people of pathankot have knowledge about depository system but they have not a proper and basic knowledge about this vast concept only limited information is there. • After analysis of first one question it clear that only 03 (30%) respondents are not introduce with term depository system but majority is goes with yes option 97 (97%) . According to data analysis result represent below. • With observation of third question we find out that the most of the public of pathankot are not satisfy with present fee structure of depository system. After that ICICI direct.Data represents that 54 respondents are not satisfy whereas 34 are satisfy and 12 are satisfy only some extents.
16 go with time to time tips and only 14 respondents select other factors option. • Fifth one question is basically include in this questioner for knowing the loyalty of public. It means peoples are satisfy with its trading company and loyal about it. In this question its clear that Reliance is popular trading company in Karnal area. RECOMMENDATIONS & SUGGESTIONS 91 . Data shows that most of peoples (36) realized that hidden charges are very default factor in decreasing the number of customers and its loyalty. regarding its trading company. Whereas 34 respondents are says that Maximum profits are the main factor. • 34% Last question of my questioner is very essential for find the factor which are directly influence the amount and loyalty of the customer.respondents making trading with other companies. According to data 58 respondents are not switchover to other company while its present trading company increase its annual fee.
• • The e-broking service should be introduced. dematerialization etc. calls should be made when the account is opened. • • The processing of the demat account opening should be made fast. • • Awareness of functioning of this system should be spread to the public through advertisement.g. LIMITATIONs 92 . For e. net banking. bill pay. Clear picture of the deductions made by depository participant or the charges levied on the customers should be provided in black and white. • Bank should expand its network by opening its more branches and franchise and there should be easy accessibility of services rendered by a this system.• Regular statements of holdings should be made available at regular intervals. The bank should launch more welfare schemes from time to time. • Customers should be made aware about the services like phone banking. • Proper feedback should be taken into consideration. • The statement of holdings should be provided with the sale and purchase of the shares. telling about how to use their services to the customer to make these advanced services more popular. Aggressive efforts should be made by sales team to tap the potential customers and to increase the customer base.
• Less awreness about this system in public is very critical block in this study. CONCLUSION 93 .• Whole area is not covered in this project so only 100respondents are representative for complete area its not ideal data. • The lack of information sources for the analysis part is also a limitation of this study. • In this sytem vast financial terms are comes in this system but peoples are not introduce with it so peoples are only limited knoweldge about this system and not get sufficent profit from this system. • The study is limited to the different schemes available under the Demat account selected.
To conclude, it can be said that the research findings clearly reveal the goodwill and reputation of depository system among the customers. But there is a need to strengthen this depository system by spreading awareness about the services offered by NSDL, CDSL and its trading companies through advertisement and by expanding the more branches of this system all over the country and also by tapping the potential customers through innovative means. The securities depository system was introduce in India in 1996 with the creation of NSDL under the sponsor ship of IDBI, UTI and NSE. Subsequently in February 1999, second depository called CDSL was sponsored by Bombay Stock Exchange. The SEBI working group on framework for a Depository System had envisaged a competitive system of multiple depositories because in the Group’s opinion it was risky to have a single depository in the initial stages. The depositories act 1996 recognized the competitive principle by keeping the door open for multiple depositories.
www.reliamcemoney.com www.icicidirect.com www.religare.com www.indiabulls.com www.moneycontrol.com www.rediff.com
Referred books 1.Financial institutions and markets-L.M.Bhale 2. Investment management-V.K.Bhalla 3.Research methodology-Mohit gupta,Navdeep Aggarwal 4.Financial services- Shashi k. gupta, Nisha aggarwal
Ques. 1) Do you know about Depository system? A) Yes B) No Ques. 2) Have you sufficient knowledge and awareness about NSDL or CDSL? A) Yes B) No C) To Some extent Ques. 3) Are you satisfied with fee structure of depository system? A) Yes B) No C) To Some extent Ques. 4) By which depository company do you make trading? A) Religare B) Indiabull C) Reliance D) ICICI direct.com E) Other
Ques. 5) If your selected trading company increases their annual charges will you go with it? A) Yes B) No
6) According to you which one is the most important factor for a trading company to enhance the loyalty and customers? A) Provide maximum profit B) Provide tips time to time C) No hidden charges D) Other factors 97 .C) If charges are reasonable Ques.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.