IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

A PROJECT REPORT On Implementation of ‘IT’ in simplifying Demat Process

Submitted in partial fulfillment of the requirements of the M.B.A Degree Course of Bangalore University

By VIKAS MAHESHWARI Registration. No: 05XQCM6112 2005 – 2007 Under the Guidance and Supervision of Prof. B. SRINIVASAN

M.P.BIRLA INSTITUTE OF MANAGEMENT Associate Bharathiya Vidya Bhavan #43, Race Course Road BANGALORE-560001
M. P. BIRLA INSTITUTE OF MANAGEMENT

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REG. NO. – 05XQCM6112

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

DECLARATION

I hereby declare that this report on IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT PROCESS is a record of independent work carried out by me towards partial fulfillment of requirements of the Master of Business Administration course of Bangalore University at M.P.Birla Institute of Management. The report has not been submitted in part or full towards any other degree or diploma.

Place: Date:

VIKAS MAHESHWARI Registration No.: 05XQCM6112

M. P. BIRLA INSTITUTE OF MANAGEMENT

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REG. NO. – 05XQCM6112

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

PRINCIPAL’S CERTIFICATE

This is to certify that the Project Report on IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT PROCESS, has been prepared by Mr. VIKAS MAHESHWARI bearing Regn. No. 05XQCM6112 under the guidance and supervision of Mr. B. Srinivasan, Professor, M P Birla Institute of Management, Bangalore.

Place:

Dr. N S Mallavali

Date:
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(Principal)

M. P. BIRLA INSTITUTE OF MANAGEMENT

REG. NO. – 05XQCM6112

To the best of my knowledge this report has not formed the basis for the award of any other degree or diploma. NO. Place: Mr. P. SRINIVASAN Date: (Professor) M. during the academic year 2005-07 in partial requirement for the award of MBA degree by Bangalore University. BIRLA INSTITUTE OF MANAGEMENT 4 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS PROJECT GUIDE’S CERTIFICATE This is to certify that the Project Report on IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT PROCESS has been prepared by Mr. It is a bonafide work and has been carried out under my guidance and supervision. B. – 05XQCM6112 . VIKAS MAHESHWARI bearing Regn No. 05XQCM6112.

BIRLA INSTITUTE OF MANAGEMENT 5 REG. S. M. I express my deep sense of gratitude to Prof.Srinivasan. B. Associate Bharatiya Vidya Bhavan. inspiring supervision.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS ACKNOWLEDGEMENTS I extend a heartfelt thank you to the respondents of my questionnaire for having taken time of their busy schedule to provide me with valuable inputs. MPBIM for providing the facilities. Bangalore. for his most valuable guidance. – 05XQCM6112 . Malavalli. P. periodical monitoring and sparing his precious time in my project. Principal. Vikas Maheshwari M. I am indebted to my family and friends who encouraged me always in my study. NO. P. Birla Institute of Management (MPBIM). I am grateful to Dr. N.

P. – 05XQCM6112 . NO. BIRLA INSTITUTE OF MANAGEMENT 6 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table of contents Particulars Executive Summary Overview Typical procedure for opening a Demat Account Problem Overview Review Literature Need for simplifying Demat Process Loopholes in Demat Account Process Various Accounts and their functions Working of the Accounts Possible measures to simplify Demat process 5 Step Process Advantages of Online Application Process Proposals by Income Tax Department Research Design Data Analysis and Interpretation Conclusion Page No 1 3 8 11 13 18 20 23 26 28 30 34 35 37 39 59 M.

P. BIRLA INSTITUTE OF MANAGEMENT 7 REG. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Bibliography Annexure Sample Questionnaire Sample Demat Application Form 61 62 M. NO.

– 05XQCM6112 . NO. P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS EXECUTIVE SUMMARY M. BIRLA INSTITUTE OF MANAGEMENT 8 REG.

NO. In order to invest in the equity market one needs to have demat account. With the increase in working population. M.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS INTRODUCTION With the number of investors increasing in India day by day the equity market is growing phenomenally. people are opening demat account and this number is not going to decrease. More and more people are investing in the equity market as it is a good option to get high returns. A demat account is held by a person so that he can keep track of his investments and to make sure that there is no illegal trading of shares in his account. A person can open his demat account with any stock broking firm and that firm facilitates the person to trade in the market by taking care of his investments and works as a broker between the person and the company. BIRLA INSTITUTE OF MANAGEMENT 9 REG. The project has been undertaken to find a simple way of filling up the application form with the aid of IT implementation. P. – 05XQCM6112 . In this world of technology the process of filling application form for demats account is still not very user friendly. but not increase. It is very time consuming and tedious.

P. NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS OVERVIEW M. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 10 REG.

– 05XQCM6112 . As one buys and sells shares. So it is just like a bank account where actual money is replaced by shares. BIRLA INSTITUTE OF MANAGEMENT 11 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Introduction to Demat account What is a demat account? Demat refers to a dematerialized account. the DP will provide the demat account holder with periodic statements of holdings and transactions. Just as one opens a bank account to save money. M. One has to approach the Depository Participants – DP’s (they are like bank branches). one need not possess any physical certificates showing the ownership of these shares. If there is a portfolio of shares: 40 of Infosys. NO. Just like a bank passbook or statement. one needs to open a demat account to buy or sell stocks. They are all held electronically in the demat account. make cheque payments etc. 25 of Wipro. they are adjusted in the demat account. 45 of HLL and 100 of ACC. All these will show in the demat account. P. So. to open a demat account.

NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS BANK – DEPOSITORY: AN ANALOGY BANK DEPOSITORY Holds funds in an account Transfers funds between accounts on the instruction of the account holder Facilitates transfer without having to handle money Facilitates safekeeping of money Hold securities in an account Transfers securities between accounts on the instruction of the account holder Facilitates transfer of ownership without having to handle securities Facilitates securities safekeeping of M. P. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 12 REG.

Although the market regulator. BIRLA INSTITUTE OF MANAGEMENT 13 REG. has allowed trades of up to 500 shares to be settled in physical form. as are many brokers. Fill up the account opening form and sign an agreement with the DP. One need not have to take the same DP that the broker takes. M. the Securities and Exchange Board of India (SEBI). nobody wants physical shares any more. A broker is separate from a DP. P. others may not. NO. One may make his own choice. practically all trades have to be settled in dematerialized form. – 05XQCM6112 . Get documents in place The DP will guide his client through the formalities of opening an account. One may choose their very own DP. The DP will ask for some documents as proof of identity and address. A broker is a member of the stock exchange. But many brokers offer special incentives in the form of lower charges for opening demat accounts with their DPs. How can one apply for a demat account? Look for a DP with whom you want to open an account. Most banks are also DP participants. Some may accept a driver's license. A DP will just give an account to hold those shares. who buys and sells shares on his behalf and on behalf of his clients.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Is opening a demat account compulsory? These days. So a demat account is a must for trading and investing.

NO. A passport size photograph with the account holders signature across. also needs to be submitted. BIRLA INSTITUTE OF MANAGEMENT 14 REG. M. however the originals will be needed for verification. – 05XQCM6112 . P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Here is a broad list (all may not be required): PAN card Voter's ID Passport Ration card Driver's license Photo credit card Employee ID card Bank attestation IT returns Electricity/ Landline phone bill Only photocopies of the documents are asked.

– 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 15 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS TYPICAL PROCEDURE FOR OPENING A DEMAT ACCOUNT M. P. NO.

Step2: Next is the process of filling the application. SEBI is the governing body who protects the interests of investors in securities and promotes the development of the securities market through appropriate regulations. fill in details which are not required and many a times give details repeatedly which are not so mandatory. A PAN card is mandatory among all other documents to apply for a demat account and one also needs to provide address proof and bank statement to link their demat account with the bank account. SEBI check the form and the documents provided by the DP on behalf of the applicant and permits him to open a demat account. M. NO. P. The applicant also needs to give a cheque for the requisite amount in order to open a demat account. The DP verifies all the documents and further sends it to SEBI (Securities and Exchange Board of India). which needs to be filled and submitted along with the various documents required. Step3: After filling the form the applicant submits it to the DP. The process of filling the form is very cumbersome as one has to provide about 50 signatures. The DP provides him a form. Once it gives approval to the DP only then can the DP allot an account with it to the customer. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 16 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS A typical procedure for opening a demat account is as follows: Step1: An applicant goes to a DP and applies for a demat account.

BIRLA INSTITUTE OF MANAGEMENT 17 REG. NO. Also it gives a userid and password to the customer to facilitate him with the online trading. – 05XQCM6112 . The customer receives these documents by courier. And from hereon he can trade online. Step5: Once the customer receives all these documents. P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Step4: After getting approval from SEBI. he has to activate his account by going to DP. M. the DP allots the customer a unique account number in order to facilitate future transactions.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS PROBLEM OVERVIEW M. NO. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 18 REG. P.

– 05XQCM6112 . The rejection rate of demat application in DP’s is phenomenal as very rarely it happens that a customer fills the form and gets his id and password in single instance. The question then arises – What is the need to fill the demat form manually when everything is available online right from trading of shares to transfer of money and settling of accounts? Can’t the demat application process be made available online? M. The process of filling up a demat form is so cumbersome and redundant that a customer gets frustrated in filling up the form and many a times commits mistakes in filling up of the form. BIRLA INSTITUTE OF MANAGEMENT 19 REG. the process of applying for demat account is still following traditional methods.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS In the world of technology where everything is getting transferred into electronic form. Several times the form gets rejected and the customer has to provide the documents repeatedly. this is one process where even after tremendous implementation of internet in the form of trading online and settling transaction over the internet. P. NO.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS REVIEW OF LITERATURE M. BIRLA INSTITUTE OF MANAGEMENT 20 REG. – 05XQCM6112 . NO. P.

unsupervised transfer of ownership.com. M. to process. It has also highlighted several inefficiencies in the new system and thrown up an important new tax issue. Authored by: Devangshu Datta Title: Why is demat a pain? A virtual queue is an apparent oxymoron. So are the opportunities of thievery in the mail or forged share certificates. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 21 REG. Instead of several months. if not years. ownership is supposed to change hands instantly. No wonder when SEBI initiated the process of demat it was welcomed wholeheartedly by most investors. Some insecure company managements dislike rapid.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Purpose of the review A review of various literatures available would help in providing me with a better understanding of the various nuances involved in the process of opening a Demat Account. The odd unscrupulous investor who deliberately messed up his signature and gave bad delivery in order to obtain interest-free cash also dislikes demat. Demat ought to take care of many inefficiencies. P. NO. Source: Rediff. So demat solves various familiar problems that plague every stock market that operates with physical paper. One instantly beneficial effect was the easing of brokerage rates. But Indian systemic inefficiency has turned it into reality. which will take months. The tedious process of physically transferring ownership of shares is shortened. Another was a vast increase in institutional volumes. But the vast majority welcomed it. The dematerialization process for paperless trading of shares has created a virtual queue. The chance of a bad transfer because a signature doesn't match is reduced to zero. The twin problems of odd lots and jumbo lots both disappear since it is possible to trade either a single demat share or lakhs at a shot.

– 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 22 REG. For example. According to estimates. if Mr and Mrs Haridoss Paul hold some shares in the name of Mr & Mrs Haridoss Paul and a second batch in the name of Mrs & Mr Haridoss Paul.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS But then problems started surfacing. Some of it is absurd. the demand for demat services was severely under-estimated. Meanwhile. The simple fraud of stealing a share certificate out of the mail and selling it in the kerb is no longer possible with a demat account. all transfers (in the shares of designated companies) now involve a compulsory demat. There are further problems. Assuming this trend continues. The amount of paperwork involved in the demat process is also seriously painful. or more. P. The discount on physical paper is now around 15 percent. First of all. That is a large and unforeseen opportunity cost for any new system. somebody opening a demat account can expect to spend several months waiting for the paperwork to be completed. there is a wide differential between paper trade quotes and demat quotes.300 crore. At a minimum deposit of Rs 1. and given that there are more than 23 million individual investors. But while a physical sale is possible. NO. a physical trading route does exist for the individual investor who needs to raise cash in a hurry. they will need to open two demat joint accounts with their names reversed! There are other niggling little details. Others disregard the SEBI directives and insist that demat clients open low-interest or zero-interest accounts as a sort of extra fee. Since the buyer of physical securities must factor in a long waiting period. Brokers and banks are therefore quite reluctant to initiate the process for their clients. the amount already blocked in these low-interest or zero-interest accounts adds up to around Rs 900 crore. But M. The system has been overloaded and reached a breaking point. As a result. Some refuse outright. the eventual cost of demat would include sub-optimal returns on about Rs 2.000 per demat account and 9 million individual accounts. there are now 9 million pending individual applications for demat accounts.

However. NO. Trades and transfers are carried out on the basis of that piece of paper. however. And given the lack of a paper trail. P. Anybody who has the account number and knows the details can order a transfer of shares from one account to the other very easily. But it is something that gives the investor pause for serious thought. It's bound to occur sooner or later. This is liable to 33 per cent short-term CGT in the event of a sale. Another problem lies in the tax treatment of demat shares. – 05XQCM6112 . let alone prosecute and offer relief to victims. it will be difficult to establish the fraud. With dated physical transfer certificates. On average. Forgery is actually easier. This is levied at 10 per cent flat or an inflation-indexed at 22 per cent whichever is lower. presumably you would deliver the older set to minimise the payout. If you sold a physical lot. You could find yourself locked in a dispute and facing a demand for short-term capital gains tax.30 pm. One lot was bought several years ago and is hence. The second lot was. Suppose the investor has two lots of shares of the same company. it is fairly easy to calculate Capital Gains Tax (CGT) liability. Banking hours close at 2 pm while trading continues till 4. This is obviously of major significance. in case of a sale. PSU bank timings don't conveniently overlap trading times. the demat is supposed to be within 24 hours.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS the only proof of ownership for demat shares is a receipt. In theory. The receipt itself isn't too difficult to duplicate either. liable only to long-term capital gains tax. On occasion. the demat account may be temporarily credited with shares pending confirmation of a M. Frauds of this nature haven't started happening yet at least on a large enough scale to draw attention. there is an extremely grey area about which CGT rate should be levied. a transfer will take 48 hours or more. There are several more niggling problems. The Central Board of Direct Taxes hasn't worked out a clear procedure for distinguishing the earlier lot from the later lot. BIRLA INSTITUTE OF MANAGEMENT 23 REG. But in case of a demat. bought within the last fiscal.

Banks and stock exchanges will have to coordinate working hours and the use of temporary entries. NO. The NSDL and CSDL will have to speed up their registration procedures and devise a more foolproof system of receipt and transfer. – 05XQCM6112 . An unwary investor who sells without ensuring that he has actually received a confirmed transfer is open to everything starting from severe embarrassment and ending with charges of fraud. SEBI and RBI have to come up with a way of streamlining the demat process and regularising the status of deposits accepted. The CBDT will have to come up with clear tax guidelines. BIRLA INSTITUTE OF MANAGEMENT 24 REG. M. So the excuse of political instability cannot be trotted out for delays. etc. None of these problems are insurmountable. P. but industry could not estimate the demand of Demat accounts. None of these are processes. if any.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS transfer. Paper work involved in the Demat is very painful and hence a pressing need to simplify the process. But it will require a coordinated effort from various agencies to sort them out. change of ownership. Demat has already been in progress for a year. Opinion: Dematerialization process has definitely removed much inefficiency such as physical transfer of shares. How much longer will it take to clear up the virtual queue? Your guess is as good as mine. which needed to be ratified or mandated by Parliament. There are some nine million applications pending for the Demat account.

– 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS NEED FOR SIMPLIFYING DEMAT PROCESS M. P. NO. BIRLA INSTITUTE OF MANAGEMENT 25 REG.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

The latent need to simplifying demat process is due to various reasons

1. Awareness among people to invest People today are investing more and more in equity market. With the rising income and expenditures scenario in India people are looking at other options to earn quick money and for that equity market is one of the best options where one can get high returns in short period of time, not forgetting the risk involved in it. 2. PAN Card - a mandatory document. Since SEBI has made it mandatory to give PAN card details with every demat account, people are applying for PAN card in large number. According to the tax department, every month 5 lakh PAN cards are issued in India. Keeping in mind the working population of India, this number is very small. Also, the number of people adding up to this population is phenomenal as more and more jobs are coming to India. 3. Increasing use of Internet for trading purpose. With the increasing use of Internet, people are avoiding the traditional methods of trading i.e. going to the broker and asking him to trade on his behalf. Now a person can sit at home and trade according to his convenience. He does not have to rely on the broker and wait for his approval for buying or selling of shares. This has facilitated more and more people to start trading and hence more and more people are taking interest in it.

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IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

LOOPHOLES IN DEMAT ACCOUNT PROCESS

M. P. BIRLA INSTITUTE OF MANAGEMENT

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IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

1.

Form for Demat Account

Today when the organizations such as Banks and Airlines are stressing to reduce the unnecessary paperwork in order to cut costs, the form for opening the demat account still follows a traditional approach - that of a booklet containing some 50 to 55 pages. A customer maybe put off at the first instance as soon as he sees the booklet. It is difficult to understand its complicacies. The process of filling up the form is very cumbersome and redundant. One has to provide about 50 to 55 signatures in the form. A customer also has to provide all the details repeatedly. For example; customer has to write his name in the form about 10 to 15 times. There is no real need to do so, when the form is only for a single applicant.

2.

The Verification process

Verification of documents is done in 2 stages. First the DP verifies the documents provided and then sends the same to SEBI. SEBI in turn verifies the documents. If they find any mistakes or inconsistencies in the documents they reject the form and the customer has to fill in the form again right from the beginning. This results in phenomenal wastage of paper which results in not only higher costs but also wastage of time for all parties concerned. The rejection rate of demat forms is very high. It rarely happens that form is approved by SEBI at the first instance.

3. Allotting DP id and passwords to the customer Once the form gets approved, the customer gets his DP id, username and password. After that the customer has nothing to do with SEBI. He has to conduct all his future transactions and conversations with his DP.

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At the initial stage of logging in to the account. Right from trading of shares to transfer of money to settling of account is done electronically. BIRLA INSTITUTE OF MANAGEMENT 29 REG. P. – 05XQCM6112 . Changing Passwords every fifteen days One important rule given by SEBI to all its DP and their customers is that they have to change the password of their online demat account every 15 days. 4.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS There is no paper work after that. M. The password is given at two stages. NO. This is to make sure that nobody misuses the demat account. And then when the customer has to conduct transactions.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS VARIOUS ACCOUNTS AND THEIR FUNCTIONS M. P. NO. BIRLA INSTITUTE OF MANAGEMENT 30 REG. – 05XQCM6112 .

All he has to do is give an application to the SEBI and they will change the DP id without changing the demat account number. P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Demat A/C Trading A/C Saving A/C Demat A/C This is an account where all the shares are kept in electronic form. A demat account is a universal account which is given to a customer once and after that the customer can keep this account with any DP. Trading A/C M. NO. If a person wants to change his DP client he can do so without opening a new demat account. BIRLA INSTITUTE OF MANAGEMENT 31 REG. – 05XQCM6112 . Demat account is kept with the respective DP who keeps the record of shares in a customer account.

The account is kept with a bank and the demat account holder can transfer money from bank account to trading account and vice-a-versa. Also whatever charges are there for deduction in terms of brokerage. Generally it takes a day’s time or two to transfer the money within the accounts.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Trading account is where a person keeps the money in electronic form and does the trading of shares. It keeps the money used for trading purpose and facilitates the customer to use this money when he is trading online. service charge. P. M. BIRLA INSTITUTE OF MANAGEMENT 32 REG. or dividends paid. Savings A/C Savings account is where the person keeps his money in the physical form. The DP does not deduct any amount for transferring money. NO. Trading account is kept with the DP. – 05XQCM6112 . are charged to the trading account only.

P. NO. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS WORKING OF THE ACCOUNTS M. BIRLA INSTITUTE OF MANAGEMENT 33 REG.

Trading account is kept with the DP so the DP takes charge for facilitating the customer in terms of brokerage. M. the customer can start online trading. BIRLA INSTITUTE OF MANAGEMENT 34 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS The three accounts work in synchronization with each other: The customer transfers money from his bank’s savings account to the trading account. This brokerage gets deducted from the customer’s account while settling of accounts takes place. P. If a customer wants to transfer the shares to any other DP he can do that by requesting the DP to transfer the shares to other DP. He can buy or sell shares and the money gets debited or credited to his account. When a customer buys the shares of a certain company these shares are kept in the demat account in the electronic form. These shares are non transferable and customer cannot trade these shares without the help of a DP or any broker. NO. Once money is credited to the trading account. The procedure takes 2 days and the money gets transferred. – 05XQCM6112 .

NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS POSSIBLE MEASURES TO SIMPLIFY THE DEMAT PROCESS M. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 35 REG. P.

failing which their account will be terminated. PAN Card 2. BIRLA INSTITUTE OF MANAGEMENT 36 REG. Address Proof 3. the demat form should be as simple as opening an account in a bank.e. Keeping in mind that the customer base includes people from working class to businessman to common man who don’t want to miss the chance to try his hand in equity market. Address Proof is taken by the DP for future correspondence and for sending transaction details and statements. Those who are already having a Demat account have to give the PAN card details. P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Looking at the process of filling up a demat application form. The most important documents required for opening a Demat Account are: 1. it is very much required to simplify the whole process to make it more user friendly. A customer has to give his PAN card details if he is opening a Demat account. A customer can apply for the form by going to a DP and ask him for the Demat Account. The process is not so simple so DP’s have to help the customer in filling up the form. Bank A/c Proof PAN card has been made mandatory by the government of India for all the demat account holders because it keeps track of all the transactions and profit made by the customers. M. and to ensure authenticity of the applicant. The main aim of this research is to remove the paper work and convert the process of filling up the demat form into electronic form i. NO. online application and filling up of demat form so that customer does not have to wait so long for the demat account. – 05XQCM6112 .

BIRLA INSTITUTE OF MANAGEMENT 37 REG. P. NO. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS 5 STEP PROCESS M.

other fields can take the entry from that field. NO. The PAN details can now be confirmed i. goes to him and applies for the same. M. P. The various fields in the application which are repeatedly asked can be reduced in the electronic form as once a field is filled. Step3: PAN card details can be checked from the PAN card website of India. hence reducing the work. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 38 REG. Also it gives correct details of his Father’s name and his date of birth which are required in the demat form. DP asks for the required documents and the customer provides them. DP can pay a certain amount to the Government of India for allowing them access to the customer database which they can include in the account opening fees. customer credibility is proved that he is a resident of India who pays taxes on time and it also gives his permanent address details which may differ from his present address but are credible. Step2: The whole form can be generated electronically by the DP’s and an expert provided by the DP can fill the form on behalf of the customer.e.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS The whole process can be improvised and converted into a simple 5 step process: Step1: The customer who desires to open a Demat account selects the DP.

Also while trading shares the physical signatures are not required so there is no need to cross check the different signatures. Customer can provide the details and the DP can enter the address immediately. if a customer does not wish to receive the statements in the physical form he can always intimate the DP about the same. The DP can take a proper signature of the customer and they can scan these signatures and keep it in their database. All the transaction details and statements are available online in the trading account. NO. The documents sent to the customer are not so important so there is no need for the DP to go and verify the address of the customer. This is a convenient way of keeping customer’s signature. It is required to send the statements. – 05XQCM6112 . the cheque will bounce. All the banks are following the same procedure to check or match a customer’s signature. BIRLA INSTITUTE OF MANAGEMENT 39 REG. Signatures A very important field of the form is signatures of the customers. The customer can always refer to the online version. M. The credibility of the bank details can be proved by the cheque submitted in the bank. So there is no need for the DP to verify it. transaction receipts and other important documents which are generated during the trading process. If there is no cash in the account. Step5: Bank details are the next and last document required by the DP to verify customer’s credibility.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Step4: Address proof is the second important document required for the opening of demat account. Also. P. Customer can give bank statements along with the cheque of requisite amount for opening of demat account.

BIRLA INSTITUTE OF MANAGEMENT 40 REG. P. This facilitates the DP’s to provide the latest photo of a person to SEBI for identification purposes.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Photographs Photographs of a person can be taken instantly by digital cameras and can be transferred directly to the form field. As soon as all these formalities are done a customer can get his username and password and he can activate the demat account immediately with the DP. M. NO. Also he can get a demonstration on operating the account and trading of shares. This also checks the factor of authenticity as the applicant cannot forge any photograph and furnish incorrect information. – 05XQCM6112 .

verification. He does not have to wait for the DP to send him his username. The redundancies can be reduced by not repeating the fields. User friendly A customer will find the online demat application process more user friendly. courier. BIRLA INSTITUTE OF MANAGEMENT 41 REG. password and other details by courier. etc. 5. 4. Also the risk of courier being lost or misplaced is eliminated as every detail is available on the internet. would be more safe and convenient to fill than offline. Safe and convenient The process of online demat application. Reduction in paperwork Paper work is reduced drastically which firstly saves the stationery costs and secondly reduces the verification job for SEBI. Also changes or alterations if any can be made conveniently. 3. 6.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Advantages of Online Application Process 1. NO. M. One can have a look at all the options and choose the fields accordingly. redundancies and rejections. P. 2. – 05XQCM6112 . Cost Saving It also saves money as the whole process is electronically done and there are significant cost savings on stationery. Time saving It saves time of a customer as well as of DP by preventing duplication. Immediate account Customer can get his online demat account almost immediately.

BIRLA INSTITUTE OF MANAGEMENT 42 REG. NO. – 05XQCM6112 . P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS PROPOSAL BY INCOME TAX DEPARTMENT M.

M. But this will take time as changing 4. For this purpose. P.6 crore PANs have been issued. These two service providers operate about 2. The Department uses the PANs to identify its taxpayers. BIRLA INSTITUTE OF MANAGEMENT 43 REG. Currently.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS The Income-Tax Department proposes to use biometric features such as fingerprints and retina images in permanent account number (PAN) cards to ensure the uniqueness of such numbers and prevent the allotment of more than one PAN to a person.6 crore pan cards and is not an easy task and also the technology required for this work is not readily available in India. NSDL and UTI Technology Services manage the interface with PAN applicants. – 05XQCM6112 . Many places in India still lack the basic facilities so thinking about bringing such techniques in India is still a dream. NO. Such entities have been asked to submit a synopsis of their expertise in this area by. Till date. about 4. About five lakh new PANs are allotted every month. The Department is keen to have a biometric solution that would be cost-effective and one that does not lead to long queues of applicants at the front offices.000 front offices for PAN services across the country. the Department has sought inputs from organizations engaged in providing biometric solutions.

BIRLA INSTITUTE OF MANAGEMENT 44 REG. NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS RESEARCH DESIGN M. P. – 05XQCM6112 .

The applicant also has to provide various documents to prove his credibility and for identification purposes. The applicant has to fill an application booklet (forty to fifty pages) and sign in about forty to fifty fields in the application booklet.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS PROBLEM STATEMENT The process of filling the demat application form is very cumbersome and redundant. BIRLA INSTITUTE OF MANAGEMENT 45 REG. – 05XQCM6112 . RESEARCH OBJECTIVES To simplify the demat application process To make the application filling process more user friendly To make it available online so that customer don’t have to go personally to apply for demat account To make the process highly secure and authentic FEASIBILITY STUDY To find out the feasibility of the project To find out the acceptance of the project To get the customer’s feedback To implement it in the real life situation M. mismatch in even two signatures in the application booklet. The process is very time consuming and tedious.g. NO. On several occasions the application gets rejected e. P.

P. NO. BIRLA INSTITUTE OF MANAGEMENT 46 REG. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS DATA ANALYSIS AND INTERPRETATION M.

NO. were many such as. BIRLA INSTITUTE OF MANAGEMENT 47 REG. 40 of them were having their Demat Account in one or other company.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Findings from the Survey The survey was carried out with a sample size of 50 people by giving them the questionnaire and taking their inputs. who were given the questionnaire. M. and some of them were not investing in the equity market. The conclusion derived from the survey is as follows: Table1: Showing number of people having Demat Account Particulars Yes No Respondents 40 10 Percentage 80% 20% Interpretation Out of 50 people. – 05XQCM6112 . The reason when asked. most of them were not aware of the procedure of opening Demat Account. 10 of them were not having any Demat account. P.

NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Inference The scenario in India is changing now days. They are the one who are not investing in equity market. The data shows that many people know about the demat account and its process. Very few of them are not aware of the process. Graph1: Showing number of people having Demat Account Number of people having Demat Account No 20% Yes 80% M. People are investing more and more in equity market. BIRLA INSTITUTE OF MANAGEMENT 48 REG. – 05XQCM6112 . P.

18 out of 40 people think that process is very cumbersome and they had to take someone’s help to fill up the form. 10 out of 40 people think that the process is very difficult and they couldn’t understand it. 7 out of 40 people think that the process is not very simple but they can understand it well and fill the form. But majority of them find it very difficult. They somehow managed to fill the form. Inference Though 30% of the people think that the process is very simple and they did not find any difficulty in understanding and filling up of the form. BIRLA INSTITUTE OF MANAGEMENT 49 REG. The process is very cumbersome and some of them couldn’t understand it. P. M. NO. – 05XQCM6112 . of Respondents 5 7 18 10 Percentage 12% 18% 45% 25% Interpretation 5 out of 40 people think that the process is very simple and they don’t find any difficulty in opening the account.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table2: Showing level of ease of opening a Demat Account Particulars Very Simple Simple Cumbersome Very Cumbersome No.

– 05XQCM6112 . NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph2: Showing Level of Ease of opening a Demat Account Level of Ease of opening a Demat Account 20 15 10 5 0 Very Simple Series1 Series2 5 12% Simple 7 18% Cumbersome 18 45% Very Cumbersome 10 25% M. P. BIRLA INSTITUTE OF MANAGEMENT 50 REG.

Inference More or less all of the respondents feel that the application form is very lengthy and there is too much to read. M. Also the number of signatures which a customer has to do is too much which makes him crazy sometimes. BIRLA INSTITUTE OF MANAGEMENT 51 REG. Some of them feel that many fields are repetitive. P. There are many fields which repeat themselves again and again. Particulars Respondents Percentage Lengthy Application form 20 50% Too many signatures 22 55% Repetitive Field 15 38% Interpretation Half of the respondents feel that the application form is too lengthy More than half of the respondents feel that there are too many signatures field in the form which needs to be removed. Once given it should be considered same everywhere.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table3: Showing cumbersome aspects of the Demat Application form. – 05XQCM6112 . NO. The customer feels there is no need for the duplication of the information.

25 20 15 10 5 0 Lengthy Too many Repetitive Application signatures Field form Series1 Series2 M.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph3: Showing cumbersome aspects of the Demat Application form. NO. P. Graph Showing cumbersome aspects of the Application form. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 52 REG.

Very few of the respondents feel that the process need not to be changed and it should remain as it is. P. M. Inference Majority of the respondents feel that the process needs to be changed and improved. They feel that the whole process is very cumbersome and time taking. BIRLA INSTITUTE OF MANAGEMENT 53 REG. Seventeen percent of the respondents did not intend to change neither they were okay with the process.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table4: Showing needs to simplify the process. And some of them were there who feel that though the process is cumbersome but they don’t want to change it. NO. Particulars Respondents Percentage Yes 28 70% No 5 13% Can’t say 7 17% Interpretation Seventy percent of the respondents say that the process should be simplified Thirteen percent of the respondents say that the process need not to be simplified and they are okay with it. – 05XQCM6112 .

– 05XQCM6112 . P. Can’t say 18% No 13% Yes 69% M. BIRLA INSTITUTE OF MANAGEMENT 54 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph4: Showing needs to simplify the process. NO. Graph Showing needs to simplify the process.

Sixty three percent of the respondents say that the Demat account is very safe and no one can misuse it without their knowledge. Very few who think that it is not safe is because of the fact they are not very much aware of the internet and its facilities M. Inference Most of the respondents feel that the Demat Account is a safe account where nobody can misuse it without their knowledge. Very few of them don’t know whether it’s safe or not. P. The reason being they are not using it.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table5: Showing safety aspects of Demat Account Particulars Not So Safe Very Safe Can’t Say Respondents 10 25 5 Percentage 25% 63% 12% Interpretation Twenty five percent of the respondents say that the Demat account is not so safe. BIRLA INSTITUTE OF MANAGEMENT 55 REG. They feel that there is ample security given to protect their privacy. NO. – 05XQCM6112 . or they hardly trade or some other person trade on their behalf.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph5: Showing safety aspects of Demat Account Graph Showing safety aspects of Demat Account Not So Safe Very Safe Can’t Say M. P. NO. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 56 REG.

– 05XQCM6112 . It is having maximum number of customer base and is the leader in this industry.com still holds the first position in stock broking companies. Etc. BIRLA INSTITUTE OF MANAGEMENT 57 REG. Next come India Bulls where twenty five percent of the respondents were having their account. P. Geojit Securities. Inference ICICIdirect. India Bulls is second in the race and it has grown a lot in last few years.com India Bulls Motilal Oswal Others Respondents 18 10 5 7 Percentage 45% 25% 12% 18% Interpretation Majority of the respondents were having their Demat Account in ICICIdirect.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table6: Showing most preferred companies for opening Demat Account. Share Khan.com. Other players in industry like Share Khan and Motilal Oswal are also there who have captured a pretty good customer base. Few of them were having accounts in other companies like Motilal Oswal. NO. M. Particulars ICICIdirect.

ICICIdirect.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph6: Showing most preferred companies for opening Demat Account.com India Bulls Motilal Oswal Others M. BIRLA INSTITUTE OF MANAGEMENT 58 REG. – 05XQCM6112 . Graph Showing most preferred companies for opening Demat Account. P. NO.

P. Also time saving and fewer formalities are other factors which people expect from the companies. Some give preference to companies which are established from long time and where rejection rate of the form is very low.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table7: Showing reasons why people chose above companies. Few of them see time saving and fewer formalities in the process. – 05XQCM6112 . NO. M. They want the executives to be friendly and helping. Inference Most of the respondents prefer user friendliness as the most important factor. BIRLA INSTITUTE OF MANAGEMENT 59 REG. Others people give prefer companies where rejection rate is low and they don’t need to come again and again for the formalities. Particulars User Friendly Time Saving Less Formality Other Respondents 15 8 8 9 Percentage 38% 20% 20% 22% Interpretation Majority of the respondents give preference to the company which is more User Friendly.

– 05XQCM6112 . P. Graph Showing reasons why people chose above companies. 16 14 12 10 8 6 4 2 0 User Friendly Time Saving Less Formality Other Series2 Series1 M. BIRLA INSTITUTE OF MANAGEMENT 60 REG. NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph7: Showing reasons why people chose above companies.

M. They feel that online application will save their time and money and will also make the process more simple and user friendly. NO. Safety was the concern about which they were worrying. Twelve percent of the respondents said they don’t want inline Demat Account.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table8: Showing respondents for online Demat Account. Eight percent of the respondents didn’t answer anything for this. Those who were not ready for this concept were having the concern that this will increase threat to the customers and will increase online crime. Inference Majority of the respondents welcome online Demat Account and they really liked the idea. P. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 61 REG. Particulars Yes No Can’t Say Respondents 32 5 3 Percentage 80% 12% 8% Interpretation Eighty percent of the respondents said that they welcome online Demat Account.

P. BIRLA INSTITUTE OF MANAGEMENT 62 REG. Graph Showing respondents for online Demat Account 35 30 25 20 15 10 5 0 Yes No Can’t Say Series2 Series1 M.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph8: Showing respondents for online Demat Account. NO. – 05XQCM6112 .

Some of them felt that the companies should keep more and more executives to help the customer in filling form. Most of them were very happy with the idea of online demat application and they felt they are very comfortable with it. – 05XQCM6112 . NO. The respondents gave various suggestions to improve the process of filling demat form. P. Most of the respondents felt that internet is getting popular amongst the masses and they are very comfortable with its use.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Suggestions for improving or simplifying the Demat Application process. M. BIRLA INSTITUTE OF MANAGEMENT 63 REG.

Inference Majority of the respondents said they are very much ready to change themselves according to the new process. Particulars Very Much Not So Much Not at all Respondents 30 7 3 Percentage 75% 18% 7% Interpretation Seventy five percent of the respondents said that they are very much flexible for this new process.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Table10: Showing Level of flexibility in opening Online Demat Account. – 05XQCM6112 . M. NO. P. Few of them who were not so ready with the idea or not at all ready with the idea said that they do not rely on the process and think that this process is not secure enough. BIRLA INSTITUTE OF MANAGEMENT 64 REG. Eighteen percent of them said that they are not very okay with the whole idea and few of them were not at all ready for this.

Graph Showing Level of flexibility in opening Online Demat Account Not at all Not So Much Very Much 0 10 20 30 40 M. BIRLA INSTITUTE OF MANAGEMENT 65 REG. NO. P.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Graph10: Showing Level of flexibility in opening Online Demat Account. – 05XQCM6112 .

BIRLA INSTITUTE OF MANAGEMENT 66 REG. P. NO. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS CONCLUSION M.

Also there is need to develop a process which is user friendly. NO. People will welcome the new and improved way of the Demat application form over the traditional way. M. People find it very cumbersome and difficult to fill up the form and they feel there is the need to change the process. BIRLA INSTITUTE OF MANAGEMENT 67 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Findings from the survey clearly states that there is latent need to change the Demat Application process. Also from the findings. we could find out that online application for opening the Demat account would be good alternate for the existing and new applicants. – 05XQCM6112 . simple and easy to understand. P.

in www.gov.wikipedia. BIRLA INSTITUTE OF MANAGEMENT 68 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS Bibliography: www. P.nsdl.google.co.in www. NO. – 05XQCM6112 .com www.cdslindia.com M.sebi.com www.

IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS ANNEXURE M. NO. P. – 05XQCM6112 . BIRLA INSTITUTE OF MANAGEMENT 69 REG.

NO. BIRLA INSTITUTE OF MANAGEMENT 70 REG. Do you have a demat account? Yes No _______ _______ If No. Is the process of opening a Demat Account: Simple Relatively Simple Cumbersome _______ _______ _______ Highly Cumbersome _______ 3. Why? _______ 2. Which aspects of the Demat Application are cumbersome? Lengthy Application Form Too many signatures Repetitive field _______ _______ _______ M. P. – 05XQCM6112 .IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS 1.

Is there a need to simplify the process of opening a Demat Account? Yes No _______ _______ Can’t say _______ 5. – 05XQCM6112 . What do you feel about the safety aspects of a Demat Account? Not so Safe Very safe Can’t say _______ _______ _______ 6. NO. P. Which company’s Demat Account process is most convenient? ICICI India Bulls Motilal Oswal Others _______ _______ _______ _______ M. BIRLA INSTITUTE OF MANAGEMENT 71 REG.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS 4.

– 05XQCM6112 . What are the reasons for the company which you stated above? User friendly Time Saving Less Formality Others _______ _______ _______ 8. Any suggestions for improving or simplifying the process? 9. Would online application for Demat account be a good alternate? Yes No _______ _______ Can’t say _______ M. P. BIRLA INSTITUTE OF MANAGEMENT 72 REG. NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS 7.

– 05XQCM6112 . How flexible are you in opening Demat Account online? Very Much Not so much Not at all _______ _______ _______ M. NO.IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS 10. P. BIRLA INSTITUTE OF MANAGEMENT 73 REG.

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