NSDL & CDSL

MERCHANT BANKING & FINANCIAL SERVICES SUBMITTED BY: ANIL JAGADAL (1OX10MBA11)

October 22

2011

PRESENTATION 1

DEPOSITORY SYSTEM:
The earlier settlement system on Indian stock exchanges was very inefficient as it was unable to take care of the transfer of securities in a quick/speedy manner. Since, the securities were in the form of physical certificates; their quick movement was again difficult. This led to settlement delays, theft, forgery, mutilation and bad deliveries and also to added costs. To wipeout these problems, the Depositories Act 1996 was passed. It was formed with the purpose of ensuring free transferability of securities with speed, accuracy & security. It has been able to do so by: a) Making securities of public limited companies freely transferable, subject to certain exceptions. b) Dematerializing the securities in the depository mode; and c) Providing for maintenance of ownership records in a book entry form. To perform these above activities the two depositories have come up. They are 1) NSDL (National Securities Depository Ltd) 2) CDSL (Central Depository Services Ltd)

NSDL:
NSDL does the above mentioned activities; it is the joint venture of 1) IDBI (Industrial Development Bank of India Ltd) 2) NSE (National Stock Exchanges) 3) UTI (Unit Trust of India)

Other shareholders are: axis bank ltd, State Bank of India, Oriental Bank of Commerce, Standard chartered Bank, HDFC Bank ltd, deutche bank etc. NSDL is the first depository to set up in India. It was registered by SEBI on June 7, 1996 in Mumbai. It is promoted by institutions of national stature responsible for the economic development of India and has established a national infrastructure of international standards that handles most of the securities held and settled in dematerialized form in the Indian capital market.

SOME FACTS AND FIGURES:

Number of certificates eliminated (Approx.) : 702 Crore Number of companies in which more than 75% shares are dematted: 2670 Average number of accounts opened per day since November 1996: 3646 Presence of demat account holders in the country: 80% of all pin codes in the country.

THE DIFFERENCES BETWEEN A BANK AND NSDL

BANK Holds funds in accounts Transfers funds between accounts. Transfers without handling cash. Safe keeping of money

NSDL Holds securities in account. Transfers securities between accounts. Transfers without handling physical securities Safe keeping of securities

CDSL:
Its 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, an agent of the depository, offers depository services to investors). According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. 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. The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. The DP is required to provide the investor, at regular intervals, a statement of account which gives the details of the securities holdings and transactions. The depository system has effectively eliminated paper-based certificates which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities. CDSL was formed in February 1999 and was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank and Union Bank of India and Centurion Bank.

FUNCTIONS OF NSDL AND CDSL:

Enable surrender and withdrawal of securities to and from the depository. Maintain investor holdings in the electronic form. Effect settlement of securities traded on the exchanges. Carry out settlement of trades not done on the stock exchanges i.e. off market trades.