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NSDL - National Securities Depository Limited

The NSDL was established as an attempt to modernise the Indian financial market by building a dematerialized format for all securities traded across India. These securities include bonds and shares in the form of physical and non-physical certificates, held in specialised bank accounts known as demat accounts. A demat account facilitates fast electronic transfer of the securities in comparison to the traditional practice of physical exchange which was required after a particular trade is completed.

Central Depositories in India

There are two central depositories in India:

  • 1. NSDL - National Security Depository Limited
  • 2. CDSL - Central Depository Services Limited

Benefits of National Securities Depository Limited

No risks associated with physical certificates

The primary reason for the establishment of NSDL is the elimination of risks associated with certificates. Risks such as physical wear and tear, fire, destruction etc. are all avoided when securities are held in a demat format. Additionally, it saves the cost of issuing duplicate physical copies of certificates.

No risk of bad deliveries

NSDL has eliminated the issue of bad deliveries. This is because NSDL holds securities in a dematerialised format which does not require the examination of asset before purchasing.

No stamp duty

Since the securities are transferred via depositories electronically, there is no need for paying stamp duty link in the traditional method. No stamp duty is required while transferring equity shares, debts, bonds and mutual funds.

Transfer and registration of securities

Once you have purchased a security, you are the legal owner for the same. This implies that there is no need to send the transaction receipt to the registrar which is time consuming like the traditional physical system. This also would add a risk of loss and delays in the transaction.

Faster settlement process

NSDL provides the fastest mode of settling transactions. The settlement is done on the second day from the day of trading. This also improves liquidity and enables a faster turnover for the investor.

Faster disbursement of non-cash corporate benefits

With NSDL, corporates can easily credit corporate benefits in the form of shares, bonds and debentures straight to the account of the investor. It also offers a quick and safe way to transfer these funds.

Reduction in paperwork process

Since everything is available online, there is less paperwork involved. Less paperwork means that there is no need to maintain a huge trail of lengthy documents which are time consuming.

Periodic reports

With NSDL, you receive a periodic set of statements and accounts via email. These reports comprise of the consolidated account statement which has details of all the transaction that have taken place.

Investor’s details

In the traditional system, it was a difficult task when it came to updating any of the communication details of the investor. To do the same, an investor would have to update the same in every company that they have invested in. Under the depository system, all information can be updated online, simply by uploading the relevant KYC documents at the Depository Participants (DPs).

Process of transmission

If an investor decides to transfer their securities of ownership, the can do that by simply providing the relevant documents to the DPs, and the details for the same are immediately updated in the database of all the companies. In the traditional system, an investor will have to individually communicate to all the companies where they hold the shares.

Easy process to sale of securities held on behalf of minor

As a guardian of a minor, you do not need the permission of the court for selling the securities which have been invested on behalf of the minor in the demat account.

Value added Services Offered by NSDL

Basic Services

The basic services of NSDL include services to brokers, banks, investors and other agencies which issue securities, and participate in the Indian financial market. In order to avail these services, an investor has to open a depository account with DPs. The depository account is of three types - beneficiary account, clearing member account and intermediary account.

  • Dematerialisation: The process by which a physical security certificate is converted into electronic balances.

    • To begin with, an investor is required to deface the certificates and surrender them to the DPs.
    • Next, the DPs sends the relevant certificates to the concerned authority of NSDL.
    • Once the authorised issuer verifies the claim, the confirmation is made and the securities are submitted in the depository account of the investor.
  • Rematerialisation: The process by which the securities are held in electronic form, are converted into physical certificates.

    • To begin with, an investor is required to submit a rematerialisation request to the concerned DPs.
    • The DPs block the specific holding of the investor which has been submitted for rematerialisation.
    • The DPs send the service request to the NSDL and the concerned issuer for confirmation.
    • Once confirmed, the issuer blocks the balance submitted for rematerialisation and the NSDL is updated with the same information and the transaction is processed.
  • Market Transfer: As an investor, you can purchase/sell the securities held by you in the dematerialized format.

  • Off-Market Transfer: Any trade which does not settle via the clearing house is an Off-Market Trade. They include delivery of securities from sub-brokers or trade-for-trade transaction.

  • Inter-depository transfer: An inter-depository transfer is a transfer of securities in the form of one account in one depository to an account in another depository.

  • Transmission: It is the devolution of the shares to another instead of self. This is operation by law under cases of death, succession, bankruptcy, marriage or inheritance.

  • Corporate actions: These are the benefits in the form of ESOPs, dividends, bonus etc. which are given by corporates to the investors.

Value Added Services

  • Automatic Delivery out Instructions: If you need to move your securities from CM Pool Account to CM Delivery Account automatically, you need a series of instructions for the same. Such instructions on your behalf have to be authorised by the clearing corporation. This facilitates the clearing corporation to execute all the auto-transactions on your behalf.

  • Dividend Distribution: Dividend distribution is only given in the form of dividends to the shareholder as a form of corporate cash benefits.

  • Lending and Borrowing: This is applicable only to intermediaries approved and authorised under the Securities Lending Scheme, 1997 with SEBI. Also, the intermediary requires the approval of NSDL as well.

  • Public Issue: The Securities and Exchange Board of India have issued a statement that all respective trades of public shares will be held only in demat form.

  • SMS Alerts: NSDL also offers SMS alerts for all demat account holders with respect to all transactions, alerts and notifications free of cost.

NSDL CAS (Consolidate Account Statement)

This is a single statement which has the details of all your investments in the security market. It contains the following information of - equity share investment, mutual funds, bonds and debentures, government bonds and certificates and money market instruments like treasury bills. This statement also helps an investor to electronically access their investment portfolio.

  • NSDL e-Services: E-services by NSDL facilitates faster execution of transactions. The various e-services are:

  • Speed-e: A smart transaction facility which enables an investor to directly upload delivery instruction on SPEED-e website via a smart card or e-token. Its aim is to reduce the overall turnaround time.

  • IDeAS (Internet-based Demat Account Statement): With this facility, you can view the balances and transactions which have been executed online in the demat account with a delay of maximum 30 minutes.

  • STeADY (Securities Trading Information easy Access and DeliverY): Specific to contract notes, brokers can electronically deliver/submit contract notes to custodians/ fund managers and it also allows for modification of the contract notes.

  • Depository Account Validation (DAN): Under this facility, you as investor can validate/authenticate identities such as client ID, DP ID, PAN and other basic details via the online platform.

  • SPICE (Submission of Power of attorney based Instructions for Clients Electronically): With this service, Clearing Members can submit auto pay-in instructions to participants (where Clients maintain demat accounts) on SPEED-e facility to debit from their respective demat accounts of the Clients and credit their Clearing Member (CM) Pool Accounts. These clearing members have authorized Power of Attorney to conduct on behalf of the Clearing Member.

  • SIMPLE (Submission of Instruction through Mobile Phone Login Easily: If you have registered for SPEED-e services, you can issue transfer instructions with the registered mobile number with NSDL.

How to Become a NSDL Business Partner?

NSDL has a number of business partners for carrying out its activities. Mentioned below are the same:

Depository Participants (DP)

As an investor, the services rendered by NSDL is via DPs. They include banks, financial institutions, brokers and any other intermediary as appointed by SEBI. For appointment as a DPs, there are two requirements to be met - evaluation and confirmation by SEBI and evaluation and approval by NSDL.

Issuers

In order to become an issuer, the agency must be able to provide dematerialization facilities to the investors. Next, they need to submit the relevant financial documents for the last two years to NSDL. This request is forwarded to Tripartite Agreement to R & T agent. The R&T agent along with the issuer signs the agreement and sends the same to the NSDL.

Registrar and Transfer (R&T) Agent

There are different ways by which an issuer can create as well as extinguish the respective securities held in the demat form.

The way in which a security can be created is via dematerialisation, while the way in which a security can be extinguished is through rematerialisation.

Clearing Corporation/House

A clearing corporation/house is an authorised mediator between investors who buy/sell securities from the financial market. It provides the following functions of - clearing trades, collecting margin money, updating status reports, settling trade accounts etc. All stock exchanges are required to have a clearing corporation house with a settlement guarantee mechanism, pre-approved by SEBI.

Investor

Any individual who invests in financial instruments via demat account is an investor.

Broker

Brokers are mediators between investors and clearing corporations. The broker does not have any ownership rights on the shares of the investor. A broker is simply a facilitator who provides a clearing account for the investor for the purpose of receiving and transferring shares from one party to another.

Clearing Member Accounts

This account has three parts:

  1. Pool account: Transfers and receptions from buying/selling clients is done via pool account.
  2. Delivery account: Shares received from the selling clients is moved to the respective clearing corporation house via delivery account.
  3. Receipt account: It holds the shares received from the pool account to the clearing corporation house.

Fees for various NSDL Services

Fee Paid by Issuers

Annual Custody Fees₹8 per folio in NSDL plus service tax with respect to the minimum amount mention below
0-5 crores₹6000
5-10 crores₹ 22,500
10-20 crores₹ 45,000
20 cores plus₹ 75,000

Fee Paid by Depository Participants

Entry fees₹25000
Pledge fees₹ 25 per instruction for creation of pledge/hypothecation
Settlement fees₹4.50 per debit instruction
Custody feesNil
Dematerialisation feesNil
Rematerialisation fees
  • 1. ₹10/hundred securities or part thereof, or flat fee of ₹ 10 per certificate (whichever is higher)
  • 2. No rematerialisation fee is charged for government securities
Minimum fees₹ 1 Lakh (with respect to the entry fees)
Security deposit
  • 1. As a participant you are required to pay an interest free refundable security deposit of ₹10 Lakhs
  • 2. Also, the Clearing Corporation/House of a Stock Exchange is exempted from paying the security deposit

Safety & Securities with NSDL

NSDL offers a variety of new generation safety protocols to begin with. Mentioned below are some of the most prominent ones.

  1. The Securities and Exchange Board of India follows a strict evaluation method when it comes to selecting Depository Participants as only a selected few with a successive line of credit are selected.
  2. NSDL maintains the data of its various business partners with respect to every transaction which has been conducted.
  3. All investors receive periodic account statements from their respective DPs, thereby allowing them complete control over their individual securities portfolio. Investors have complete control over their portfolio as they receive periodic consolidated account statements from their DPs. The investors also have an option to compare between these statements send by their DPs against the one issues by NSDL. Also, the DPs are not allowed to make any type of transaction without the permission of their client.
  4. NSDL provides a freeze facility to the account holder, in case the holder intends to freeze their existing securities.
  5. The NSDL is also responsible for initiating any grievance redressal which has been addressed before. The NSDL also has a potent insurance policy in place, as a countermeasure against any damages and errors.
  6. The NSDL has also provided a back-up website as a disaster backup available 24x7.
  7. All systems, hardware and software are state of the art and heavily encrypted by NSDL.

Authorized Banks for NSDL

The following are the authorised banks and principal shareholders in NSDL:

  • Axis Bank
  • Citibank
  • Deutsche Bank
  • HSBC
  • State Bank of India
  • HDFC Bank
  • Union Bank of India
  • Standard Chartered Bank
  • Dena Bank
  • Canara Bank
  • Oriental Bank of Commerce

FAQs on NSDL

How many depositories are there in India?

There are two depositories in India, NSDL - National Security Depository Limited and CDSL - Central Depository Services Limited.

Is demat account safe?

Yes, every demat account is heavily encrypted with respect to access and conducting transactions.

Is NSDL safe?

Yes, all systems, hardware and software are state of the art and heavily encrypted by NSDL with a backup maintenance site as well.

What are the functions of CDSL?

The main function of CDSL is to hold securities either in certificated or uncertificated (dematerialized) form and to facilitate transactions for the same.

What do you mean by a depository?

A depository is a financial institution where you can deposit securities such as stocks, bonds, debentures, etc. in a dematerialized format. This is in contrast to a bank, where the deposits are made in cash.

What is CDSL IR?

CDSL IR stands for The Insurance Repository in India. It is a database of insurance policies which allows policy holders to make revisions to a policy, CDSL IR is one of repositories of India.

What is a central depository?

A central depository is a financial institution where you can deposit securities such as stocks, bonds, debentures, etc. in a dematerialized format.

What are depository charges in HDFC?

The HDFC Bank charges ₹500 + Service Tax to all demat account holders on a yearly basis.

What is DP account in CDSL?

The DP is a depository personnel. The services rendered by NSDL is via DPs. They include banks, financial institutions, brokers and any other intermediary as appointed by SEBI.

What is my demat account number?

You demat number is your demat account number which holds securities that you've purchased in a dematerialised format. It is similar to a bank account number.

What is NSCCL?

NSCCL is the former name for NSE Clearing Limited (NSE Clearing). This institution is responsible for executing all trades and settlement at the NSE.

What is NSDL in PAN card?

NSDL PAN is the permanent account number assigned by the Government of India to every tax assessee, be it an individual or entity.

What are NSDL charges?

NSDL does not charge the investors at all. But it charges via DPs who have their own charge structure and rate card.

What is the difference between NSDL and CDSL?

The primary difference between NSDL and CDSL is that NSDL functions for the National Stock Exchange while CDSL functions for the Bombay Stock Exchange. These depositories hold securities in electronic form.

What is the Full Form of NSDL?

NSDL stands for National Securities Depositories Limited.

What is the function of NSDL?

The main function of NSDL is to hold securities, either in certificated or uncertificated (dematerialized) form, and to facilitate transactions for the same.

Who are depository participants?

The services rendered by NSDL is via DPs. They include banks, financial institutions, brokers and any other intermediary as appointed by SEBI.

Who is issuer in a depository?

An agency that provides dematerialisation facilities to investors on behalf of the DPs.

Who is the chairman of NSDL?

Mr. G. V. Nageswara Rao is the MD and CEO of NSDL.

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