DEPOSITORY

Depository is an organization which holds your securities in electronic (also known as book entry)
form, in the same manner as a bank holds your money. Further, a depository also transfers your
securities without actually handling securities, in the same day as a bank transfers funds without
actually handling cash.
Benefits of Depository System:
1. No danger of loss of share certificates since the shares are credited to youraccount.
2. No possibility of bad deliveries.
3. Elimination of all rise associated with physical certificates such as loss, theft, forgery, mutilation
4.
5.
6.
7.

etc.
No need to affix share transfer stamp as it is a paperless trading.
No postal / courier charges.
Less brokerage charges.
After the settlement, pay in and pay out are on the same day for paperless trading which means you

get your securities and cash immediately.

8. Script less trading helps allocate corporate benefits faster.
9. Facilitates pledging and hypothecation of your securities.
10. Eliminates the problem of odd lot shares.
11. Facility to lock your account if you are abroad

DEPOSITORY SERVICES
The depository services originated recently in the Indian Stock market. Now-a- days on-line (scrip less
or paperless) trading in the shares of any company is compulsory. To make it a success some new
trading mechanism is needed. Depository service is the name of that mechanism which makes possible
the on-line trading in shares.
Through this system transfer of ownership in shares take place by means of book entry without the
physical delivery of shares. When a person wants to deal in shares of any company he/she has to open
an account with the depository through a depository participant. Hence, there are four players who
participate in this system. These are the following:
(i) The Depository

(iii) The Investor

(ii) The Depository Participant

(iv) The Issuing Company

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(1) The Depository:

A depository is an institution which holds the shares of an investor in electronic form. It facilitates
transactions in securities simply by means of book entry. At present, there are two depository
institutions in India:
National Securities Depository Limited (NSDL)
Central Depository Services Limited (CDSL)
(2) The Depository Participant:
A Depository Participant (DP) is an agent of the depository. He functions as a mediator between the
issuing company and the investors through the depository. He opens the accounts and maintains the
securities account balance of the investors and conveys them the status of their holding from time to
time. As per SEBI guidelines, banks, stock brokers, etc. can become depository participants.
(3) The Investor:
He is a person who wants to deal in shares and whose name is recorded with a depository. The investor
is the real owner of the shares who has lodged them with the depository through book entry till the day
he sells them.
(4) The Issuing Company:

The issuing company is that organization which issues the securities. The issuing company sends a list
of the shareholders to the depositories.
Who are the Depositories?
Depositories are those who are licensed by the Securities and Exchange Board of India (SEBI) to
undertake depository functions i.e. holding and handling of securities in electronic form.
The National Securities Depository Ltd. (NSDL) promoted by UTI, IDBI and NSE is the first
depository of India.
The Stock Exchange, Mumbai has promoted Central Depository Services (India) Ltd. (CDS)
which has drawn plans to set up the second depository in the country.

NATIONAL SECURITIES DEPOSITORY LTD

NSDL, the first and largest depository in India, established in August 1996 and promoted by
institutions of national stature responsible for economic development of the country has since
established a national infrastructure of international standards that handles most of the securities held
and settled in dematerialised form in the Indian capital market.
Although India had a vibrant capital market which is more than a century old, the paper-based
settlement of trades caused substantial problems like bad delivery and delayed transfer of title till
recently. The enactment of Depositories Act in August 1996 paved the way for establishment of
NSDL, the first depository in India. This depository promoted by institutions of national stature
responsible for economic development of the country has since established a national infrastructure of
international standard that handles most of the trading and settlement in dematerialised form in Indian
capital market.

Using innovative and flexible technology systems, NSDL works to support the investors and brokers
in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian
marketplaces by developing settlement solutions that increase efficiency, minimise risk and reduce
costs. At NSDL, we play a quiet but central role in developing products and services that will continue
to nurture the growing needs of the financial services industry.

What are the facilities offered by NSDL?

NSDL offers the following facilities:
Dematerialization i.e. converting physical certificates to electronic form;
(Dematerialization is the process by which physical certificates of an investor are converted to an
equivalent number of securities in electronic form and credited to the investors account with his
DP, same as cash is deposited in your Bank Account.)
Rematerialisation which is the opposite of dematerialization;
"Rematerialisation" is the term used for converting electronic holdings back into certificates. Your
DP will forward your request to NSDL after verifying that you have the necessary balances. NSDL
in turn will intimate the registrar (in the case of RELIANCE ENERGY, its Investor Service Centre)
who will print the certificates and despatch the same to you.
Transfer of securities;
Settlement of trades done in the depository (dematerialized) segment of stock exchanges;
Pledging/hypothecation of dematerialized securities;
Electronic credit in public offerings of companies; and
Receipt of non-cash corporate benefits such as bonus and rights in electronic form.

Promoters / Shareholders
NSDL is promoted by Industrial Development Bank of India (IDBI) - the largest development bank of
India, Unit Trust of India (UTI) - the largest mutual fund in India and National Stock Exchange (NSE)
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- the largest stock exchange in India. Some of the prominent banks in the country have taken a stake in
NSDL.
Promoters
Industrial Development Bank of India Limited (Now, IDBI Bank Limited)
Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit Trust of India)
National Stock Exchange of India Limited
Other Shareholders
State Bank of India
Standard Chartered
Oriental Bank of
HDFC Bank Limited
Bank
Commerce
Deutsche Bank A.G.
The Hongkong and
Union Bank of India
Shanghai
Banking
Axis Bank Limited
Dena Bank
Corporation Limited
Citibank N.A.
Canara Bank

CENTRAL DEPOSITORY SERVICES

CDSL's demat services are extended through its agents called Depository Participants (DP).
The DP is the link between the investor and CDSL. An investor who opens a demat account
with a DP can utilise the services offered by CDSL. While the DP processes the instructions of
the investor, the account and records thereof is maintained with CDSL. A DP is thus a "Point of
Service" for the investor.
CDSL's system is based on centralized database architecture with on-line connectivity with
DPs. Because of this centralized architecture, the cost for setting up a DP outfit under CDSL
system is significantly lower. Similarly, the recurring costs to be incurred by a CDSL-DP in
terms of maintaining back-ups and the related data storage are minimal. This enables a CDSLDP to offer depository services to investors at an attractive price and at the same time achieve
break-even faster at much lower volumes. The centralised architecture also allows CDSL-DP to
make available to the investors a to-the-minute status of their account and transactions.

CDSL-DPs can also set up branches with direct electronic connectivity with CDSL.
CDSL -DPs can also extend service to investors through their various service centers connected
through their back office.

Benefits:
In the demat form transfer of securities takes place at CDSL and if the entire issue of a security is
held in demat form, the issuer can save considerable time and money being incurred on its share
department / RTA.
Dematted securities are not subject to loss, theft, mutilation or misuse by faking or forging
certificates, thereby saving companies from lengthy correspondence, litigation and complaint
handling. It will therefore eliminate instances of bad delivery.
All non-cash corporate actions such as rights, bonus, subdivision of holdings, conversion of
securities, issuing securities on mergers/amalgamations and in initial public offerings (IPO) can be
handled in demat form without any hassles in the shortest possible time and at very low cost.
With the CDSL's centralised database, the issuer can get upto-the-moment information on any
changes in its holding pattern of a security. Thus, the company effectively monitors the change in
holding and is alert to any undue threat.
Safety:

CDSL has acquired state-of-the-art equipment including the HP 64 Bit Enterprise server system
(super computer technology with the robustness of enterprise class), which is the highest performing
RISC/UNIX server system available in the marketplace.
This system is connected to a near fault tolerant storage system from EMC2 Corporation. This
is the world's best storage system and the first of its kind to be installed in India, nay Asia.
The software is developed by CMC Ltd.,which has all the security features conforming to
world standards. The software facilitates a robust accounting and transaction management system.
CDSL's system is based on a centralised database with on-line connectivity with Depository
Participants (DPs) who provide on-line services to investors. All data pertaining to investor holdings
are stored at CDSL. CDSL has also established extensive back up systems, where a back up of the data
is also stored at a remote site.
CDSL ensures the security and integrity of all data by protecting it from any misuse or
manipulation by unauthorized users as all communications between CDSL and its users is encrypted.
There is no dial-up access for any user and only authorised users can access the system.
The hardware, software and connectivity systems are reviewed continuously to strengthen the
systems & procedures and to comply with the stringent international standards.
Promoters
CDSL was promoted by BSE Ltd. in association with Bank of India, Bank of Baroda, State
Bank of India and HDFC Bank. Standard Chartered Bank , Canara Bank , Union Bank
of India , Bank of Maharashtra , The Calcutta Stock Exchange Limited , BSE Ltd. has
been involved with this venture right from the inception and has contributed overwhelmingly
to the fruition of the project. The initial capital of the company is 104.50 crores(INR).