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INTRODUCTION

In India, shares and securities are held electronically in a dematerialized account, instead of the
investor taking physical possession of certificates. A Dematerialized account is opened by the
investor while registering with an investment broker (or sub-broker). The Dematerialized
account number is quoted for all transactions to enable electronic settlements of trades to take
place. Every shareholder will have a Dematerialized account for the purpose of transacting
shares.

Access to the Dematerialized account requires an internet password and a transaction password.
Transfers or purchases of securities can then be initiated. Purchases and sales of securities on the
Dematerialized account are automatically made once transactions are confirmed and completed.

This account is popular in India . The market regulator, securities and exchange board of India
(SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it
became mandatory that any person holding a demat account should possess a permanent account
number (PAN), and the deadline for submission of PAN details to the depository lapsed on
January 2007.

Dematerialization is the process by which physical certificates of an investor are converted to an


equivalent number of securities in electronic form and credited in the investor's account with its
DP. In order to dematerialize certificates; an investor will have to first open an account with a DP
and then request for the dematerialization of certificates by filling up a dematerialization request
form [DRF], which is available with the DP and submitting the same along with the physical
certificates. The investor has to ensure that before the certificates are handed over to the DP for
demat, they are defaced by marking "Surrendered for Dematerialization" on the face of the
certificates.

In order to promote dematerialization of securities, NSE joined hands with leading financial
institutions to establish the national securities depository Ltd. (NSDL), the first depository in the
country, with the objective of enhancing the efficiency in settlement systems as also to reduce the
menace of fake/forged and stolen securities. This has ushered in an era of dematerialized trading
and settlement. SEBI has made dematerialized settlement mandatory in an ever increasing
number of securities in a phased manner, thus bringing about an increase in the proportion of
shares delivered in dematerialized form. There is an increasing preference to settle trades,
particularly in high value securities, in demat form. Such high level of demat settlement
reassures success of rolling settlement.
ADVANTAGES OF DEMAT
The bonus/right shares allotted to the investor will be immediately credited into his account.
There is no risk due to loss on account of fire, theft or mutilation. Transaction costs are usually
lower than that in the physical segment. A demats account also helps avoid problems typically
associated with physical share certificates. For example: delivery failures caused by signature
mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks
associated with forgery and due to damaged stock certificates. Demat account holders also avoid
stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds.
The biggest advantage of having demat account is that you don't have to pay for stamp since
these are electronically stored which reduces the transaction cost.

DISADVANTAGES OF DEMAT
Trading in securities may become uncontrolled in case of dematerialized securities.

It is incumbent upon the capital market regulator to keep a close watch on the trading in
dematerialized securities and see to it that trading does not act as a detriment to investors.

For dematerialized securities, the role of key market players such as stock-brokers needs
to be supervised as they have the capability of manipulating the market.
Multiple regulatory frameworks have to be conformed to, including the Depositories Act,
Regulations and the various Bye-Laws of various depositories.

Agreements are entered at various levels in the process of dematerialization. These may
cause worries to the investor desirous of simplicity.

There is no provision to close a demat account, which is having illiquid shares. The
investor cannot close the account and he and his successors have to go on paying the
charges to the participant, like annual folio charges etc..

After liquidating the holdings, many Indian investors don't close their dp account.They
are unaware that DPs charge even on dormant accounts

OBJECTIVE OF THE STUDY


The main objective of the study is to know about the potential of the market regarding people's
dealing in share market.

To know the role of Demat Account .

To know the procedure of opening DEMAT ACCOUNT.

The objective is to know that how many people in the city are aware of the UNICON
SECURITIES PVT. LTD.

To know where people have already opened their demat a/c and on what basis.

DEMAT BENEFITS
Demat account for shares and securities with Business purpose

The benefits of demat are enumerated as follows:

Easy and convenient way to hold securities


Immediate transfer of securities
No stamp duty on transfer of securities
Safer than paper-shares (earlier risks associated with physical certificates such as bad
delivery, fake securities, delays, thefts etc. are mostly eliminated)
Reduced paperwork for transfer of securities
Reduced transaction cost
No "odd lot" problem: even one share can be sold
Change in address recorded with a DP gets registered with all companies in which
investor holds securities eliminating the need to correspond with each of them separately.
Transmission of securities is done by DP, eliminating the need for notifying companies.
Automatic credit into demat account for shares arising out of bonus/split,
consolidation/merger, etc.
A single demat account can hold investments in both equity and debt instruments.
Traders can work from anywhere (e.g. even from home).

Benefit to the company


The depository system helps in reducing the cost of new issues due to lower printing and
distribution costs. It increases the efficiency of the registrars and transfer agents and the
secretarial department of a company. It provides better facilities for communication and timely
service to shareholders and investors.

Benefit to the investor


The depository system reduces risks involved in holding physical certificates, e.g., loss, theft,
mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of shares.
It ensures faster communication to investors. It helps avoid bad delivery problems due to
signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on
transfer of shares. It provides more acceptability and liquidity of securities.

Benefits to brokers
It reduces risks of delayed settlement. It ensures greater profit due to increase in volume of
trading. It eliminates chances of forgery or bad delivery. It increases overall trading and
profitability. It increases confidence in their investors.

Agency in Depositories
India has chosen the concept of multi-depositories. Presently, there are two depositories
registered with SEBI;
National Securities Depository Limited (NSDL)
Central Depository Service (India) Limited (CDSL)

National Securities Depository Limited (NSDL)


Both agencies are linked with each other. NSDL is a public limited company incorporated under
the Companies Act, 1956. Four renowned institutions participate in it. Unit Trust of India (UTI),
Industrial Development Bank of India (IDBI), National Stock Exchange of India (NSE), State
Bank of India (SBI).UTI is the largest mutual fund of India and IDBI is the largest development
bank, NSE is the largest stock exchange of India and SBI is the largest commercial bank of India
having clearing facility. HDFC and Citibank also share in this system. NSDL is managed by
Board of directors headed by a managing director. It is governed by its bye-laws and its business
operations are regulated by business rules. NSDL interfaces with the investors through players or
business partners. Constituents of depository compromise of clearing corporation, brokers,
clearing member, registrar and transfer agents, company or issuer, stock exchange, bank
depository participant and investors. All are electronically linked to the main depository for the
settlement of trades and to perform a daily reconciliation of all accounts held with NSDL.

CENTRAL DEPOSITORY SERVICE (INDIA) LIMITED (CDSL)


Second agency is CDSL - Central Depository Service (India) Limited. Main functions of this
agency are centralized database and accounting. Major participant in CDSL are LIC, GIC and
BSE. This agency is set up with the object to keep in mind to accelerate growth of scripless
trading, with major thrust of individual participation and creating competitive environment,
responsible to the users interests and demands to enhance liquidity. CDSL aims to retain the
entire data of the investors in the central database of CDSL. It has opted for it with the following
objectives:
Within time information is available to issuers/registrars and share transfer agents.
Companies can monitor critical holdings, e.g., holding of FIIs and FIs, investment companies,
etc., by using up the parameters through their front-end terminals.
There is no other database in the system to reconcile.
DIFFERENCE IN NSDL AND CDSL
CDSL is promoted by Bombay Stock Exchange Limited (BSE) jointly with Bank of
India, Bank of Baroda, State Bank of India and HDFC Bank Many other banks are also
stake holders. More at CDSL promoters

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) , Unit Trust
of India (UTI) and National Stock Exchange of India Limited (NSE). Many other banks
are also stake holders More at NSDL promoters

Comparison as on 30 th Nov 2013 from Statistics of NSDL, Statistics of


CDSL

Description NSDL CDSL

Number of Account 1,30,04,661 86,54,044

Number of Depository Participants 280 581

Number of securities (in million) 7,41,542 1,62,880

Value of securities (in million) 820,32,360 96,35,680


TRANSFER OF SHARES BETWEEN (DEPOSITORY
PARTICIPANT) DPS
To transfer shares, an investor has to fill one of two kinds of Depository Instruction Slip (DIS).
The first check made is whether both Demat accounts are at the same depository. There are two
depositories: (CDSL (Central Depository Service (India) Limited) and NSDL (National
Securities Depository Limited)). If both demat accounts are not at the same depository, then an
Inter Depository Slip (Inter DIS) has to be filled and submitted. For example:

If there is one Demat account with CDSL and the other Demat account with NSDL, then an
Inter-DIS is needed. (In case the investor needs an Inter-DIS, the investor should check with the
broker, since brokers usually issue an Inter-DIS).

Now that the correct DIS has been determined, information pertaining to the transfer transaction
has to be entered: scrip name, INE number, quantity in words and figures.

Finally, the investor should submit that DIS to the broker with signatures.

The transfer broker shall accept that DIS in duplicate and acknowledge receipt of DIS on
duplicate copy.

The investor should submit the DIS when the market is open. Accordingly, date of submission of
DIS and date of execution of DIS can be same or a difference of one day is also acceptable. The
investor also has to pay the broker some charges for the transfer.

DEMAT OPTIONS
There are many hundreds of Depository Participants (DPs) offering the Demat account facility in
India as of September 2011. A comparison of the fees charged by different DPs is detailed below.

There are a few distinct advantages of having a bank as a DP. Having a Demat account with a
bank DP, usually provides quick processing, accessibility, convenience, and online transaction
capability to the investor. Generally, banks credit the Demat account with shares in case of
purchase, or credit a savings account with the proceeds of a sale, on the third day. Banks are also
advantageous because of the number of branches they have. Some banks give the option of
opening a demat account in any branch, while others restrict themselves to a select set of
branches. Some private banks also provide online access to the demat account. Hence, the
investors can conveniently check online details of their holdings, transactions and status of
requests through their bank's net-banking facility. A broker who acts as a DP may not be able to
provide these services.

Fees involved
There are four major charges usually levied on a demat account: account opening fee, annual
maintenance fee, custodian fee and transaction fee. Charges for all fees vary from DP to DP.

Account-opening fee
Depending on the DP, there may or may not be an opening account fee. Private Banks, such as
HDFC Bank and AXIS Bank, ICICI Bank, do not have one. However, players such as Kotak
Securities, Sushil Finance, Globe Capital, Karvy Consultants and Bajaj Capital Limited do
impose an opening fee. But in Ventura Securities ltd, and some other companies doesn't have an
any opening charge. State Bank of India does not charge any account opening charge while other
maintenance and transaction charges apply. Most players levy this when re-opening a demat
account. However, the Stock Holding Corporation offers a lifetime account opening fee, which
allows the investor to hold on to his/her demat account for a long period. The fee is also
refundable.

Annual maintenance fee


This is also known as folio maintenance charges, and is generally levied in advance. It is charged
on annual or monthly basis.

Transaction fee
The transaction fee is charged for crediting/debiting securities to and from the account on a
monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and
ICICI Bank pay the fee to the transaction value, which is subject to a minimum amount. The fee
also differs based on the kind of transaction (buying or selling). Some DPs charge only for
debiting the securities, while others charge for both. Some DP's also charge the investor even if
the instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs

In addition to the other fees, the DP also charges a fee for converting the shares from the physical
to the electronic form or vice versa. This fee varies for both demat (physical-to-electronic) and
remat (electronic-to-physical) requests. For demat transactions, some DPs charge a flat fee per
request in addition to the variable fee per certificate, while others charge only the variable fee.

For instance, Stock Holding Corporation has charged Rs 25 as the request fee and Rs 3 per
certificate as the variable fee. However, SBI has charged only the variable fee, as Rs 3 per
certificate. Remat requests also have charges akin to that of demat. However, variable charges for
remat are generally higher than demat.

Some of the additional features (usually offered by banks) are as follows. Some DPs offer a
frequent-trader account, where they charge frequent traders at lower rates than the standard
charges. Demat account holders are generally required to pay the DP an advance fee for each
account that will be adjusted against the various service charges. The account holder needs to
raise the balance when it falls below a certain amount prescribed by the DP. However, if the
holders also hold a savings account with the DP, they can provide a debit authorisation to the DP
for paying this charge. Finally, once choosing a DP, it would be prudent to keep all accounts with
that DP, so that tracking of capital gains liability is easier. This is because when calculating
capital gains tax, the period of holding will be determined by the DP, and different DPs follow
different methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute
the period of holding. The proof of the cost of acquisition will be the contract note. The
computation of capital gains is done account-wise.

Indian Banking System


First, an investor has to approach a DP and fill up an account opening form. The account opening
form must be supported by copies of any one of the approved documents to serve as proof of
identity (POI) and proof of address (POA) as specified by SEBI. An investor must have his/her
PAN card in original at the time of opening of the account (mandate effective from April 1,
2006).

All applicants should carry original documents for verification by an authorized official of the
depository participant, under his signature. Further, the investor has to sign an agreement with
the DP in a depository prescribed standard format, which details rights and duties of investor and
DP. DP should provide the investor with a copy of the agreement and schedule of charges for
their future reference. The DP will open the account in the system and give an account number,
which is also called BOID (Beneficiary Owner Identification number). The DP may revise the
charges by giving 30 days notice in advance. SEBI has rationalized the cost structure for
dematerialization by removing account-opening charges, transaction charges for credit of
securities, and custody charges vide circular dated January 28, 2005.

RELATIONSHIP BETWEEN DEMAT & TRADING ACCOUNT


When considering investing in stock trading, the need for having a Demat and a trading account
comes into the equation. For those who are relatively new to investing in stocks, the most
frequent queries are about why is there a need to have both these accounts and what is the
relationship between them. Well, the difference will be evident soon enough.

The age of maintaining your stock portfolio is a thing of the past. The Depository Act of 1996 by
SEBI (Securities and Exchange Board of India) mandates equity investors to have a Demat
account which dematerializes or converts your shares and stores them in electronic form. Now,
whenever you go in to open a Demat account, the Bank (or any other Depository Participant)
will offer to open a Trading Account for you as well.

The Relationship
You can only store or rematerialize (convert back from electronic to physical form) securities in
your Demat account. For buying and selling shares, you need to have a Trading account. In other
words, a Demat account is like a storage facility while a Trading Account is the transacting
medium to buy and sell shares.

Now in a scenario where you have significant units of shares of different scrips (shares of a
particular company) but does not feel the need to get into stock trading, you may feel that having
a trading account might not be required. What needs to be clear here is that as of now, a Trading
account is the only medium through which you will be able to sell the shares that you are holding
in a Demat account. Since the process of opening a trading account is simple, you can easily
understand how to operate your own account and even learn to plan to trade shares in the near
future.
COMPARISON OF FEW DEMAT ACCOUNT PROVIDERS IN
INDIA
Most brokers offer different types of accounts or plans to suit different individual investors need.
The below comparison is done for selected account type. (We have chosen then randomly. Many
readers have pointed out that brokerage in other plans are less For ex ICICIDirect Variable
structure plan. So please check the plan)

By 2-in-1 we mean Demat Account and online trading by 3-in-1 we mean Savings account,
Demat account, Online trading . Chittorgarh provides Comparison of demat accounts providers

Account Annual
Services Opening Charges Maintenance Brokerage
(AOC) Charge

ICICI Direct 0.55% Delivery


3-in-1 975 450
(iSecure plan) 0.275% Intra Day
ICICI Direct Rs 25/-per trade Or 2.5% of
Variable Brokerage 3-in-1 975 450 trade value (which ever is
structure lower)

IndiaBulls(power 0.40% Delivery


2-in-1 900 450
IndiaBulls) 0.04% Intra Day

0.50% Delivery
SBI(ezTrade) 3-in-1 500 350
0.15% Intra Day

FEES CHARGED FOR DEMAT ACCOUNT/TRADING


ACCOUNT
The fees charged for DP services differ across the industry. Though the rates change, the charges
normally go under the following heads:

Account opening fee: Fee for opening the demat and trading account or 3-in-1 account.
Depending on the DP, account opening charges range between Rs. 500 to Rs. 700 or
no opening account fee

Annual maintenance fee: The fee required to maintain the account. Usually it is charged
in advance

Transaction fee or Brokerage: Fee charged for buying or selling securities. While some
DP charge a flat fee per transaction, some peg the fee to the transaction value, which is
subject to a minimum amount. The fee also differs based on the kind of transaction
(buying or selling) also for different types of transactions intraday, delivery, F&O etc..
Other than Brokerage Service tax (at the rate of 12.36%) and Securities Transaction Tax
(STT) ,Stamp Duty, Exchange Levy etc are also charged by DP. An example of fees and
taxes of buying and selling shares is given below,

Basic Services Demat Account (BSDA). is a demat account for all holdings under Rs 50,000
has no annual maintenance charges which otherwise a normal demat account would be
charging. . Anything above Rs 50,000 and up to Rs 2 lakh would attract annual maintenance
charges of Rs 100.
SEBI GUIDELINES

SEBI has taken various policy initiatives to popularize the demat concept. One of them is
delivery of demat shares compulsorily for institutional investors and OCBs. However, these
investors have been allowed to buy shares in physical form, get them transferred in their names
and thereupon get them dematerialized.

The implementation of the guidelines is subject to the condition that the company shall get a
certificate of practice that the company has followed the procedure mentioned in the scheme and
to affect that:
The company has followed the necessary procedures for effecting the original transfer;
The register of members of the company was, accordingly, amended and the shares were
transferred in favour of the transferee;
The company has adequate procedures and has satisfied itself that the transferee and the entity
requesting dematerialization are one and the same and before confirming the dematerialization
request; company has further amended its register of members to indicate the transfer from the
transferee to any agency;
The company has defaced and cancelled/mutilated all the certificates.
The company has adequate system to ensure that the investor does not lose his corporate benefits
on account of the transfer entries in favour of the agency.

RE-MATERIALIZATION

Re-materialization is a process, by which a client can get his electronic holdings converted back
into the physical holdings, i.e., he can get back the physical form of share certificates. To get the
certificate back, he has to fill up a re-mat request form and submit it to its depository with whom
he has an account. The new certificates may not necessarily bear the same folio or distinctive
numbers as previously existed. The facility to re-materializes again is offered to all those scrips
which are eligible for demat in the depositories` list of securities available for
dematerialisation.The whole process of re-materializations is completed within 30 days from the
receipt of request. This shows how speedy the electronic system works that being the essence
of todays business where the prices of scrips change many times a day.

GOAL OF DEMAT SYSTEM


India adopted the Demat System for electronic storing, wherein shares and securities are
represented and maintained electronically, thus eliminating the troubles associated with paper
shares. After the introduction of the depository system by the Depository Act of 1996, the
process for sales, purchases and transfers of shares became significantly easier and most of the
risks associated with paper certificates were mitigated.

In 1996, trading began on NSE for shares held in demat account form. It was the beginning of a
new paperless trading stock market trading environment. If an investor buys a share today, it gets
credited to the investor's account in two days. Today, shares get transferred to the investor's
demat account.

LIMITATIONS

The time constraint was one of the major problems.


The lack of information sources for the analysis part.
Geographical locations.
Extreme variability in MARKET.
FINDINGS

Most of the customers are not aware of all the facilities provided by the company.
Low advertisement and People not much aware about companies like Geojit financial
Services, India info line, ICICI etc.

SUGGESTIONS

The Brand image of Geojit financial services ltd. is good in market and their demat
holder are satisfied with the services provided by them.
They should focus on print and electronic media advertisements to make more people
aware about them.
They should provide proper guidance to their customers about demat.
They should offers and facilities to their customers to increase their attractiveness about
demat.

CONCLUSION

Over the last decade, the Indian capital market has been growing by leaps and bounds. India has
the largest number of listed companies in the world today. It also boasts of a large number of
shareholders, about 32 million. Paradoxically, the problems associated with transactions, clearing
and settlement were also on the rise. Simultaneously, they expose the investors to greater risks.
Indian market thus required a new system that would eliminate all problems of investors and
would give them healthy environment, and would strengthen their faith in the capital market,
which was very low due to scams. Inordinate delay in investigation of these scams and escape of
wrongdoers from law created doubts in the minds of investors. The position has substantially
improved after the introduction of the depository system.

BIBLIOGRAPHY
www.wikipedia.org.

www.deposits.org

www.investopedia.com.

CONTENT
ACKNOWLEDGEMENT
INTRODUCTION
ADVANTAGES & DISADVANTAGE
OBJECTIVE TO STUDY
DEMAT BENEFITS
COMPANY
INVESTOR
BROKERS
NSDL & CDSL
DIFERENCE IN NSDL & CDSL
TRANSFER OF SHARES BETWEEN (DEPOSITORY PARTICIPANT)
DPs
DEMATE OPTION
FEES INVOLVED
ACCOUNT OPENING FEE
ANNUAL MAINTAINANCE FEE
TRANSCATION FEE
RELATIONSHIP BETWEEN DEMATE & TRADING ACCOUNT
SEBI GUIDELINES
RE-MATERIALIZATION
GOAL OF DEMATE SYSTEM
CONCLUSION
BIBLIOGRAPHY

NAME : ASHWIN THAKUR


ROLL-NO : 38
DIV :A
SUBJECT : FINANCIAL MARKETING
TOPIC : DEMAT SYSTEM IN
INDIA