A STUDY ON INDIAN DEPOSITORY SYSTEM: GROWTH & ROLE IN ...

© 2018 JETIR July 2018, Volume 5, Issue 7 www.jetir.org (ISSN-2349-5162)

JETIR1807641 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 266

A STUDY ON INDIAN DEPOSITORY SYSTEM:

GROWTH & ROLE IN INDIAN FINANCIAL MARKET 1Dr. Shree Bhagwat,

2Ritesh Omre

1Assistant Professor,

2Research Scholar

1Department of Business Management,

1Dr. H.S. Gour University, Sagar (MP), India

2Department of Business Management,

2Dr. H.S. Gour University, Sagar (MP), India

Abstract: In India, Depository system was started in June (1996). It was initiated by Stock Holding Corporation of India Limited

(SHCIL) in July,1992. A depository is an organisation for financial services where the securities of shareholders are held in electronic

form. A depository interfaces with its investors through their agents called depository participants (DPs). The main objective of depository

is to reduce settlement risk by minimizing the huge paper work. At present there are two depositories NSDL & CDSL are working in

India. The present study is an attempt to know the role and growth of their depositories in Indian capital market for 22 years (i.e. from

March,1997 to June,2018). On the basis of results, it is concluded that number of beneficiary accounts, number of companies for Demat,

number of depository participants, number of depository participants centres, quantity of Demat shares and value of Demat shares of

depository organisations. This paper is divided into six sections namely, Introduction, Research Methodology, Role of Depositories,

Growth and Comparison of NSDL & CDSL, Findings, and Conclusion.

Keywords: National Security Depository Limited (NSDL), Central Depository Services (India) Limited (CDSL), Dematerialisation, Indian

Capital Market, Depository, Depository Participants (DPs)

________________________________________________________________________________________________________

I. INTRODUCTION

The economic growth and development of any country depends upon a well-knit financial system. This financial system supplies

the necessary financial inputs for the production of goods and services which in turn promote the well-being and standard of living of the

people of the country. In the developed countries, these two sides of the economic coin work together to promote growth and to avoid

runaway price inflation. When in a developing country, the lack of a strong and sound financial system generally works against the national

economy. An efficient functioning of the financial system facilitates the free flow of funds to more productive activities and thus promotes

investment. Thus, the financial system provides the intermediation between savers & investors and promotes faster economic development.

Financial system comprises a set of sub-systems of financial institutions, markets, instruments and services which help in the formation of

capital.

The financial system is characterised by the presence of an integrated, organized and regulated financial markets and institutions

that meet the short-term and long-term financial needs of both the household and corporate sector. Both financial markets and institution

plays an important role in financial system by rendering various financial services to the community. They operate in close combination with

each other.

The financial market exists to facilitates sales and purchases of financial instruments and comprises of two major markets namely the capital

market (deals in medium and long-term investment) and money market (deals in short-term investment). These markets can be divided into

two segments viz, primary and secondary. The primary market is used by issuer for raising fresh capital by making initial public offer or

rights issue or offer for sale of equity or debt. The secondary market is the place for old securities which have been already issued and

granted stock exchange quotations. It provides a regular and continuous market for buying and selling of securities. Thus, the capital market

is important for raising funds for capital formation and investments and forms a very vital link for economic development of any country.

In the year 1947, the first depository of the world was set up by Germany. The total no. of depositories in the world was 22 only.

The number had crossed 250 by the end of 2004 and at the end of 2014 the number become 310, and at present it is more than 310 in

number. In July 1992, the move on depository in India was initiated by the Stock Holding Corporation of India Limited this was the time

when it prepared concept paper on “National Clearance and Depository System “in collaboration with Price water house under a programme

sponsored by the US agency for international development. Under the chairmanship of Shri R. Chandrashekharan (Managing Director,

SHCIL) the government of India Constituted a technical Group, which submitted its report on December, 1993. A seven-member action

squad constituted by the Security & Exchange Board of India (SEBI) subsequently to discuss the various structural and operational

parameters of Depository system. Considering the various problems and issues.The government of India promulgated the Depository

ordinance in September,1995 thus paving the way for setting up of depositories in the country. The depositories Act was passed by the

parliament in August, 1996.The Act provides that a depository, which is required to be a Company under the company act 1956 and

depository participants need to be registered with SEBI. The Depository shall carry out the dematerialization of securities and the transfer of

beneficiary owner through electronic book entry. The investors however, have the option to hold securities in the physical or electronic form,

or they can rematerialise securities previously held in electronic form. After the enforcement of depositories act 1996, The first depository of

India (NSDL) came into operation in 1996 and in 1999 the second depository (CDSL) came into operation.

On the simplest level, depository is used to refer to any place where something is deposited for storage or security purposes.

Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures,

mutual funds, derivatives, F&O and commodities. Indian capital market has been witnessing rapid growth in recent past. However, this

growth has not watched with supporting infrastructure to handle the growing huge volume of paper that has flooded the market, choking our

existing system. This has caused problems like delay in transfers, long settlement period, high levels of failed trade and bad deliveries, high-

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risk exposure etc. These characteristics were normally the attributes of an under developed market. To overcome delay in forgery

certificates, mutilation of certificates, settlement, loss in transit, stolen certificates, litigation etc. a new system of trading, viz. Depository

system was introduced, which facilitates investor to hold securities in electronic form and to trade in these securities. The needs for

depository occur mainly due the following reasons:

Limitations of Physical Transfer

To ensure transparency in allotment of shares

Consolidation of folios & instruments.

Reduced cost of transaction

Centralised Systems in Securities Dealings

1.1 Services provided by Depository

Transfer of securities, change of beneficial ownership

Corporate action benefits directly transfer to the Demat and Bank account of customer

Electronic credit in public offerings of companies.

Dematerialization

Rematerialisation

1.2 Benefits of Depository System:

Depository system takes hold of all securities in the country listed in that particular stock exchange.

Introduction of electronic system enables speedy transactions and accuracy.

In a depository system, the security holders can sell and buy securities by which liquidity is brought to the securities.

Blank transfers are avoided and holding of shares in Benami names is also prevented.

Registration and stamp charges for the sale of securities could be easily collected by the government which was evaded under the

previous system.

Depository promotes more activity in the capital market as trading in genuine share. is ensured under Depository system.

Depository avoids use of stationery and prevents delay in registration of transfers.

Dividend and interest on securities are properly distributed through this system and in the case of convertible debentures, on the due

date, the securities are converted into company shares.

Depository acts as collateral security for the raising of 1oans from any financial institution.

no bad deliveries

It enhances the liquidity of securities in the market.

reduction in transaction cost

It eliminates problems relating to change of address of investors, transmission etc

It makes faster disbursement of non cash corporate benefits like rights, bonus, etc. possible.

faster settlement cycle

no stamp duty on transfer of shares;

faster disbursement of corporate benefits like rights and bonus;

It eliminates problems relating to selling securities on behalf of a minor.

1.3 Disadvantage of Depository System

Discrimination between dematerialized and physical shares will affect transactions in the market. This has to be avoided.

Lack of control

Depository system is not effectively regulated by SEBI. This is evident from the fact that the Clearing and Settlement Corporation is

not effectively handled by the SEBI.

Complexity of the system

Promoters of some companies dematerialised shares in excess of the company‟s issued capital.

Some listed companies had obtained duplicate shares after the originals were pledged with banks and then sold the duplicates in the

secondary market to make a profit.

1.4 Key Features of the Depository System in India: Multi-Depository System:

Depository services through depository participants:

Dematerialisation:

Fungibility:

Registered Owner/ Beneficial Owner:

Free Transferability of shares

II. Research Methodology

2.1 Objectives of the Study 1. To know the role of NSDL and CDSL in Indian Capital Market.

2. To know the growth of NSDL and CDSL in Indian Capital Market for 21 years i.e. from 1997 to 2017.

3. To know the features of depository system in India

2.2 Research Design and Methodology

(i) Research Design Research Design of the study is analytical

(ii) Methodology The basis of present analysis is comparison of data between NSDL and CDSL on yearly (financial year) basis.




(iii) Data Collection and Analysis The study is based upon secondary data collected from various websites i.e. NSDL, SEBI, CDSL,

NSE and Official publications, annual reports of NSDL and CDSL and research articles published in journals for a period of 21

years i.e. from 1997 to 2017.

III. Role of Depositories

Depositories and Their Role in The Indian Capital Market

All the functions of depositories are undertaken by NSDL with the help of electronic network. The magnitude of transactions of

NSDL could be judged by the volume of transactions undertaken by NSE which has gone up multifold. This is no mean an achievement,

especially when the NSE could overtake BSE during previous years. Comparatively, BSE is oldest. Their role comes into play from the time

an investor makes a decision on investing. Their role comes into play from the time an investor makes a decision on investing. In India, there

are two depositories namely National Securities Depository Limited (NSDL) or Central Depository Services (India) Limited (CDSL) that are

registered with SEBI.

3.1 About NSDL

NSDL, the first and largest depository in India, established in August 1996 and promoted by institutions of national stature has

established a state-of-the-art infrastructure that handles most of the securities held and settled in dematerialized 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, etc. The enactment of Depositories Act in August 1996 paved the way for

establishment of NSDL.

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,

minimize risk and reduce costs. At NSDL, we play a central role in developing products and services that will continue to nurture the

growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less

similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does

away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is

considerably lower as compared to transacting in certificates.

NSDL provides bouquet of services to end investors, stock brokers, stock exchanges, custodians, issuer companies etc. through its network

of more than 264 Depository Participants / Business Partners. NSDL has been able to win the trust of crores of investors and other

intermediaries, thus standing true to its tag line −Technology, Trust and Reach. We at NSDL believe that „Every Indian should not only

become an „Investor‟ but a „Prudent Investor‟ indeed.

3.2 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) - the largest stock exchange in India. Some of the prominent

banks in the country have taken a stake in NSDL.

Other Shareholders

State Bank of India

HDFC Bank Limited

Deutsche Bank A.G.

Axis Bank Limited

Citibank N.A.

Standard Chartered Bank

The Hongkong and Shanghai Banking Corporation Limited

Union Bank of India

Canara Bank

Kotak Mahindra Bank Limited

Dena Bank

Kotak Mahindra Life Insurance Company Limited

3.3 Major Events & Milestones of NSDL.

2018

Launch of redemption of mutual fund units through SPEED-e facility

Joint Awareness Programmes with Nirmal Bang Securities Private Limited at Changanassery & Palakkad

during February 2018

2017 NSDL Celebrates 20 glorious years of Services to Indian Capital Market

2016 NSDL completes two decades of depository operations

Demat accounts cross 1.5 crores

2015 NSDL receives the Payments Bank License

Launch of Consolidated Accounts Statement [CAS]

2014 Value of securities held in dematerialized form at NSDL crosses INR 100 Lakh crore [US $1.6 Trillion]

Launch of FPI regime


https://nsdl.co.in/about/general



2012

Launch of NSDL e-Signer

Launch of NSDL e-Voting System

Launch of KYC Registration System by NSDL's subsidiary NDML

2011 NSDL appointed as Registrar for UID

2010

NSDL hosts 14th Asia-Pacific Central Securities Depository Group (ACG) Meeting

Launch of New Depository System

Facility for conversion of mutual fund units represented by Statement of Account (SoA) into

dematerialised form

2009

Launch of SPICE (Submission of Power of attorney based Instructions for Clients Electronically) on

SPEED-e / IDeAS

NSDL launches facility for delivery of shares using mobile phones

Launch of DIRECT (Direct Ideas Registration of Client account) at NSDL upon activation of Client

accounts

Demat Accounts cross one crore

2008

Launch of Central Recordkeeping Agency (for National Pension System)

NSDL and Japan Securities Depository Center sign Information Sharing and Collaboration Pact

NSDL and National Depository Center (Russia) sign Information Sharing and Collaboration Pact

NSDL and Euroclear (Belgium) sign Information Sharing and Collaboration Pact

2007

Value of securities held in dematerialised form at NSDL crosses US$ 1 trillion

Launch of SMS alert facility for investors

NSDL and DTCC (US Depository) sign Information Sharing and Collaboration Pact

NSDL and TDCC (Taiwan Depository) sign Information Sharing and Collaboration Pact

2006 NSDL completes a decade of depository operations

Launch of National Skills Registry by NDML

2005 Launch of Tax Information Network - PAN Ledger

Launch of online upload of Central Excise challan data

2004

Intraday production shifting to Disaster Recovery Site Incorporation of NSDL Database Management

Limited (NDML) - wholly owned subsidiary company of NSDL

Launch of Online Tax Accounting System (OLTAS)

Launch of PAN card services

Launch of Tax Information Network (TIN)

Launch of IDeAS

2003

Introduction of demat of Warehouse Receipts

Launch of Market Participants and Investors Database (MAPIN)

Demat Accounts cross 6 million

Introduction of T+2 Rolling Settlement

2002

Demat Accounts cross 5 million

Launch of STEADY - An STP initiative by NSDL

Introduction of T+3 Rolling Settlement

2001 NSDL launches SPEED-e

Introduction of T+5 Rolling Settlement and Uniform Settlement Cycle

2000

98% settlement in demat form Commencement of Demat of Debt Instruments

Demat accounts with NSDL cross 2.5 mn

NSDL launches internet based service - SPEED - for CMs

1999 NSDL launches NCFM - Depository Operations Module

Commencement of compulsory trading for retail investor




1998

Introduction of Demat of Government Securities

Establishment of NSDL branches at Chennai, Delhi & Kolkata

Demat accounts with NSDL cross 100,000

Demat delivery in physical segment at NSE and BSE

Value of securities held in dematerialised form at NSDL crosses US$ 5 bn.

Compulsory demat trading for Institutional investors

1997 Commencement of Demat trading at BSE

Value of securities held in dematerialised form at NSDL crosses US$ 1 bn.

1996

Commencement of Demat trading at NSE

NSDL Inauguration

Enactment of Depositories Act

1995 NSDL Incorporation

Promulgation of Depositories Ordinance

3.4 Stock exchanges linked with NSDL The following stock exchanges have linked up with NSDL to facilitate trading and settlement of dematerialized securities.

Madras Stock Exchange Ltd. (MSE)

National Stock Exchange of India Ltd. (NSE)

Inter-connected Stock Exchange of India Ltd. (ISE)

OTC Exchange of India (OTCEI)

The Calcutta Stock Exchange Association Ltd. (CSE)

The Delhi Stock Exchange Association Ltd. (DSE)

The Stock Exchange, Mumbai (BSE)

The Stock Exchange, Ahmedabad (ASE)

3.5 NSDL offers the following facilities: - Dematerialisation i.e., converting physical certificates to electronic form;

Rematerialization i.e., conversion of securities in demat form into physical certificates;

Facilitating repurchase / redemption of units of mutual funds;

Electronic settlement of trades in stock exchanges connected to NSDL;

Pledging/hypothecation of dematerialized securities against loan;

Electronic credit of securities allotted in public issues, rights issue;

Receipt of non-cash corporate benefits such as bonus, in electronic form;

Freezing of demat accounts, so that the debits from the account are not permitted;

Nomination facility for demat accounts;

Services related to change of address;

Effecting transmission of securities;

Instructions to your DP over Internet through SPEED-e facility. (Please check with your DP for availing the facility);

Account monitoring facility over Internet for clearing members through SPEED facility;

Other facilities viz. holding debt instruments in the same account, availing stock lending/borrowing facility, etc

3.6 Benefits of NSDL

Elimination of bad deliveries -

Elimination of all risks associated with physical certificates -

No stamp duty

Immediate transfer and registration of securities -

Faster settlement cycle -

Faster disbursement of non cash corporate benefits like rights, bonus, etc. -

Reduction in brokerage by many brokers for trading in dematerialised securities -

Reduction in handling of huge volumes of paper

Periodic status reports

Elimination of problems related to change of address of investor -

Elimination of problems related to transmission of demat shares -

Elimination of problems related to selling securities on behalf of a minor -

Ease in portfolio monitoring

Certification in Depository Operations :

Investor grievance :

Insurance Cover :

Computer and communication infrastructure

Machine level back-up :

Disaster back up site :

Back-up in case of power failure




Periodic Review

3.7 Safety features

There are various checks and measures in the depository system to ensure safety of the investor holdings. These include

A DP can be operational only after registration by SEBI, which is based on the recommendation from NSDL and their own

independent evaluation. SEBI has prescribed criteria for becoming a DP in the regulations.

DPs are allowed to effect any debit and credit to an account only on the basis of valid instruction from the client.

Every day, there is a system driven mandatory reconciliation between DP and NSDL.

All transactions are recorded at NSDL Central System and in the databases maintained by business partners.

There are periodic inspections into the activities of both DP and R&T agent by NSDL. This also includes records based on which

the debit/credit are effected.

All investors have a right to receive their statement of accounts periodically from the DP.

Every month NSDL forwards statement of account to a random sample of investors as a counter check.

In the depository, the depository holds the investor accounts on trust. Therefore, if the DP goes bankrupt the creditors of the DP will

have no access to the holdings in the name of the clients of the DP. These investors can transfer their holdings to an account held

with another DP.

The data interchange between NSDL and its business partners is protected by protection measures of international standards such as

encryption hardware lock. The protection measures adopted by NSDL are more than what is prescribed in the SEBI Regulations.

3.8 Freeze Facility

A depository account holder (beneficiary account) may freeze securities lying in the account for as long as the account holder wants

it. By freezing the account, account holder can prevent unexpected debits or credits or both, creeping into its account. The following types of

freeze facility available in the NSDL system may be availed of by submitting freeze instruction to the DP in the prescribed form.

Freeze for debits only

Freeze for debits as well as credits

Freeze a particular ISIN in the account

Freeze a specific number of securities held under an ISIN in an account

3.9 The benefits of participation in a depository are: Immediate transfer of securities;

No stamp duty on transfer of securities;

Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.;

Reduction in paperwork involved in transfer of securities;

Reduction in transaction cost;

Nomination facility;

Change in address recorded with DP gets registered electronically 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 correspondence with companies;

Convenient method of consolidation of folios/accounts;

Holding investments in equity, debt instruments and Government securities in a single account;

Automatic credit into demat account, of shares, arising out of split/consolidation/merger etc.

3.10 CDSL

CDSL was incorporated at Mumbai on December 12, 1997 as “Central Depository Services (India) Limited”, a public limited

company under the Companies Act, 1956. Our Company obtained its certificate of commencement of business from Ministry of Corporate

Affairs on December 19, 1997. Our Company was initially registered by way of a certificate of registration on August 19, 1998 by SEBI

under the Depositories Regulations and subsequently obtained its certificate of commencement of business as a depository under

Depositories Regulations on February 8, 1999.

CDSL is a depository that holds securities in dematerialized form and facilitates trading and settlement of securities to be processed

by book entry. It is the second largest central depository of securities in India, based in Mumbai, Maharashtra. The depository began its

operations in February 1999. It is promoted by Bombay Stock Exchange in association with prominent banks of the nation, i.e. State Bank of

India, Union Bank of India, Bank of Baroda, Bank of India, Standard Chartered Bank.

Securities available for demat includes equity, debentures, bonds, commercial papers, government securities, certificate of deposit, mutual

funds and so on.

3.11 Major events and milestones

1999

CDSL received the certificate of commencement of business from SEBI in February, 1999.

Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the operations of CDSL on

July 15, 1999.

Settlement of trades in the demat mode through BOI Shareholding Limited, the clearing house of

BSE Ltd., started in July 1999.

All leading stock exchanges like the BSE Ltd, National Stock Exchange and Metropolitan Stock

Exchange of India have established connectivity with CDSL.




2000

Mr. P Rajeshwar Rao, Chief General Manager, Treasury, State Bank of India (SBI), signed the

Depository Participant agreement with CDS on September 20, 2000. SBI, which is a sponsor of

CDS, holds 10% stake in CDS. SBI has commenced Depository services at its Ludhiana branch and

will shortly commence Depository services from its Mumbai, Indore, Kanpur and Guwahati

branches.

2001

CDS proudly announces having attained membership of The Asia Pacific Central Securities

Depository Group (ACG). The ACG is an organisation that facilitates exchange of information and

promotes mutual assistance among member depositories and clearing organisations in the Asia-

Pacific region.

Shri Pramod Deshpande, Asst. Vice President (Hardware) has been promoted as Vice President

(Information Technology) with effect from February 1, 2001. Shri Deshpande brings to the office a

wealth of IT and Banking experience, and an astute approach, which has stood him in good stead

during a long and successful career in IT.

2002

Our Company launched its internet facility “easi” (electronic access to securities information).

Online inter-depository transfer commenced. This facility enables on-line transfer of securities

between both the depositories any time during the specified business hours.

2003

The unique direct pay-in facility, which is offered only by CDSL, has now been extended to

investors trading on NSE, OTCEI, DSE and CSE as well.

CDSL is pleased to announce that it has implemented a new, state-of-the-art business continuity

programme with effect from December 20, 2003.

2004 Our Company launched its internet facility “easiest” (electronic access to securities information &

execution of secured transaction).

2005 Number of active demat accounts with our Company crossed 1 million.

The number of companies admitted with our Company for demat crossed 0.005 million.

2006

Our Company was awarded the BS7799 certification from Det Norske Veritas (Rotterdam).

CDSL Ventures, a wholly owned subsidiary of our Company was incorporated.

Our Company was awarded the ISO 27001 from Det Norske Veritas (Rotterdam).

CDSL Ventures, a wholly owned subsidiary of our Company began “Customer profiling and Record

Keeping” of the KYC of investors for mutual funds.

2007

Our Company signed an MoU with the Depository Trust & Clearing Corporation of New York

(“DTCC”), designed to build a closer working relationship and exchange of information.

Our Company signed an MoU with the Korea Securities Depository (“KSD”), aimed at promoting

development of financial services industries in India and Korea.

Our Company launched its SMS Alert facility, called “SMART” (SMS Alerts Related to

Transactions).

2008

Number of active demat accounts with our Company touched 4.5 million.

Our Company signed an MoU with Japan Securities Depository Center, Inc. (“JASDEC”) of Tokyo,

designed to build a cooperative relationship.

Our Company signed an MoU with National Depository Center (“NDC”) to bolster economic

relations between India and Russia by encouraging cooperation through the mutual exchange of

experience.

Our Company signed an MoU with Taiwan Depository & Clearing Corporation (“TDCC”), aimed at

mutual benefits and further development in the financial market by cooperation in operations and

operation linkages, exchange of personnel and new developments.

Our Company signed an MoU with Euroclear SA/NV designed to promote cross border investment

and explore the possibility of establishing an operational link between us and Euroclear SA/NV.

2009

Honourable Minister for Corporate Affairs of India, Mr. Salman Khurshid launched our Company‟s

e-voting platform.

Our Company and Bursa Malaysia Depository Sdn. Bhd. (“Bursa Malaysia Depository”) signed an

MoU to pursue cooperative relationship and opportunities in the areas of securities clearing and

depository.

2010

Our Company signed an agreement with Nepal Stock Exchange Limited (“NEPSE”) to set-up a

depository and clearing and settlement system in Nepal and to provide technical assistance and

consultancy services to NEPSE.

Mr. PadalaSubbi Reddy, Managing Director and Chief Executive Officer of our Company signed an

agreement with Mr. Shanker Man Singh, Chief Executive Officer and General Manager, The Nepal

Stock Exchange Limited (NEPSE), in the presence of Mr. S.M. Krishna, Minister of External




Affairs, Government of India and Smt. Sujata Koirala, Deputy Prime Minister, Nepal to set-up a

Depository and Clearing & Settlement system in Nepal.

Our Company introduced the National Academic Depository with a view to obviate the issues

associated with the issue of academic mark sheets, degrees and convocation certificates in paper

form.

2011

Access your cdsldemat account through mobile phone Upload facility in dp's “easiest” login

“easiest” - increase in validity of e-token for "account of choice"

In order to eliminate the use of multiple reports to update the DP back office, CDSL has introduced a

"SINGLE DOWNLOAD" report called "DP57".

2012 Mr. U. K. Sinha, SEBI Chairman launched CDSL Ventures KRA, India‟s first and largest KYC

Registration agency.

2013 Transaction Using SMS Texting (“TRUST”), the acronym for our Company‟s mobile based utility,

“Transaction Using Secured Texting” was formally launched.

2014

Finance minister proposes single demat account for all financial assets.

SEBI had constituted a Depository System Review Committee (DSRC) to undertake a

comprehensive review of the depository system of Indian Securities market.

IDC Insights Award” in the CIO category

EMC Transformers Award” in the best use of IT to transform business category

2015 The number of active demat accounts opened with our Company crossed 10 million.

2016

As an NISM accredited CPE Provider for conducting the Depository Operations Program, CDSL has

conducted CPE training programmes in Kochi on February 11, 2016, Mumbai on February 12, 2016,

Ahmedabad on February 13, 2016 and Jaipur on February 20, 2016.

The Government of India has established a digital depository of academic awards to be known as

National Academic Depository (NAD) on the pattern of securities depository.

2017

INVESTOR AWARENESS PROGRAMS (IAPs) During February 2017, CDSL BOPF Trust has

conducted 28 IAPs across India. DPs/CMs also participated in these IAPs.

CDSL conducted CPE training programmes at Kolkata on February 09, 2017, Mumbai on February

10, 2017, Indore and Ludhiana on February 25, 2017.

2018

CDSL is pleased to inform that it has opened new regional offices at Kanpur and Indore.

CDSL is pleased to inform that it has been awarded the Net App Innovation Award.

During April 2018, CDSL IPF Trust has conducted 22 IAPs across India. DPs / CMs also

participated in these IAPs.

3.12 Role of CDSL in Indian Depository System are:

Maintenance of individual investors‟ beneficial holdings in an electronic form

Dematerialization and re-materialization of securities

Account transfer for settlement of trades in electronic shares

Allotments in the electronic form in case of initial public offerings

Distribution of non-cash corporate actions

Facility for freezing/locking of investor accounts

Facility for pledge and hypothecation of securities

3.13 Benefits of CDSL

Convenience: Benefits related to convenience are: Wide DP Network, On-line DP Services,Wide Spectrum of Securities Available for

Demat, Competitive Fees Structure, Internet Access, Client level pay-in, Lower transaction cost, No custody fee, Settlement of trades at BSE

(Pay-in, Auto Pay-in, Early Pay-in, Pay-out), Settlement of trades at NSE and other exchanges (Pay-in, Early Pay-in, Pay-out).

Dependability: Benefits related to Dependability are: On-line Information to Users, Convenient to DPs, Contingency Arrangements,

Meeting User's Requirements, Audit and Inspection, Dormant Account Monitoring, Helpdesk.

Security: The security related benefits of CDSL are: Computer Systems, Unique BO Account Number, Data Security, Claims on DP,

Insurance Cover.

IV. Growth and comparison of NSDL & CDSL The below tables show that, the growth and development of de-materialization with reference to NSDL & CDSL period ending

March 1997 to June 2018 under the study.




Table I: Beneficiary Accounts Growth in NSDL & CDSL during March 1997 to June 2018

Year NSDL Accounts

in Lakhs

NSDL Annual

Growth Rate (%)

CDSL Accounts

in Lakhs

CDSL Annual

Growth Rate (%)

1997 0.02 -

Not Established

1998 0.5 2400

1999 9.4 1780.00

2000 29.2 210.64 0.29 -

2001 37.48 28.36 0.76 162.07

2002 37.18 -0.80 1.28 68.42

2003 37.95 2.07 2.47 92.97

2004 52.03 37.10 6.29 154.66

2005 63.00 21.08 10.11 60.73

2006 75.60 20.00 15.51 53.41

2007 79.03 4.54 23.68 52.68

2008 93.72 18.59 47.98 102.62

2009 96.85 3.34 55.27 15.19

2010 105.85 9.29 65.86 19.16

2011 115.44 9.06 74.79 13.56

2012 120.48 4.37 79.17 5.86

2013 126.88 5.31 83.27 5.18

2014 130.57 2.91 87.77 5.40

2015 137.08 4.99 96.10 9.49

2016 145.66 6.26 100.08 4.14

2017 155.80 6.96 122.67 22.57

2018 173.06 11.08 153.52 25.15

Average Annual Growth Rate 218.34 48.51

Source: Monthly Updates and Annual Reports of NSDL and CDSL

The table number I shows that:

The beneficiary account growth in NSDL and CDSL during the period of March 1997 to June 2018.

The beneficiary accounts of NSDL increased continuously from 0.02 lakhs to 173.06 lakhs account & beneficiary accounts

of CDSL increased continuously from 0.29 lakhs to 153.52 lakhs account. Except a marginal decrease in NSDL in the year

2002.

The highest growth of percentage was in 1998 at 2400% and the lowest growth of percentage was in 2002 at -0.80% in

NSDL & the highest growth of percentage was in 2001 at 162.07% and the lowest growth of percentage was in 2016 at

4.14% in CDSL.

The average annual growth rate during 1997 to 2018 is 218.34% of NSDL & 48.51 % of CDSL.

The average annual growth rate of NSDL is higher than CDSL during the years.

But during 2004 the number of accounts recorded a sudden jump in the opening of accounts in CDSL (154.66%).

Table II: Companies Available for DEMAT in NSDL & CDSL during March 1997 to June 2018

Year NSDL (No. of

Companies)

NSDL Annual

Growth Rate (%)

CDSL (No. of

Companies)

CDSL Annual

Growth Rate (%)

1997 101 -

Not Established 1998 228 125.74

1999 462 102.63

2000 1304 182.25 765 -

2001 2786 113.65 2789 264.58

2002 4172 49.75 4296 54.03

2003 4761 14.12 4628 7.73

2004 5212 9.47 4720 1.99

2005 5536 6.22 5068 7.37

2006 6022 8.78 4819 -4.91

2007 6483 7.66 5135 6.56

2008 7354 13.44 5969 16.24

2009 7801 6.08 6233 4.42

2010 8124 4.14 7049 13.09

2011 8842 8.84 8265 17.25

2012 9741 10.17 9983 20.79

2013 10843 11.31 11030 10.49

2014 12210 12.61 12765 15.73

2015 13992 14.59 9069 -28.95

2016 15605 11.53 9658 6.49

2017 17719 13.55 10200 5.61

2018 20461 15.47 10992 7..76






The table number II shows that:

The growth in number of companies available for demat in NSDL and CDSL during the period of March 1997 to June

2018.

The companies available for demat at NSDL increased continuously from 101 to 20461 & companies available for demat

at CDSL increased continuously from 765 to 10992.

The highest growth of percentage was in 2008 at 182.25% and the lowest growth of percentage was in 2010 at 4.14 %

in NSDL & the highest growth of percentage was in 2001 at 264.58% and the lowest growth of percentage was in 2015 at -

28.95% in CDSL.

The average annual growth rate during 1997 to 2018 is 35.33% of NSDL & 23.68% of CDSL.


Table III: Depository Participants Growth in NSDL & CDSL during March 1997 to June 2018

Year NSDL

(No. of DPs)

NSDL Annual

Growth Rate (%)

CDSL

(No. of DPs)

CDSL Annual

Growth Rate (%)

1997 65 -


1999 1008 194.74

2000 1842 82.74 61 -

2001 186 -89.90 158 159.02

2002 212 13.98 161 1.90

2003 213 0.47 191 18.63

2004 214 0.47 211 10.47

2005 216 0.93 271 28.44

2006 223 3.24 322 18.82

2007 240 7.62 365 13.35

2008 251 4.58 423 15.89

2009 275 9.56 471 11.35

2010 286 4.00 506 7.43

2011 293 2.45 546 7.91

2012 283 -3.41 568 4.03

2013 282 -0.35 579 1.94

2014 278 -1.42 578 -0.17

2015 273 -1.80 574 -0.69

2016 270 -1.10 583 1.57

2017 264 -2.22 588 0.86

2018 277 4.92 597 1.53



The table number III shows that:

The growth in number of Depository participants in NSDL and CDSL during the period of March 1997 to June 2018.

The Depository Participants of NSDL increased continuously from 65 to 277 & Depository Participants of CDSL increased

continuously from 61 to 597.

The highest growth rate of percentage was in 1998 at 426.15% and the lowest growth rate of percentage was in 2001 at -

89.90% in NSDL & the highest growth rate of percentage was in 2001 at 159.20% and the lowest growth rate of

percentage was in 2015 at -0.69% in CDSL.



Table IV: DP Service Centers Growth with NSDL & CDSL during March 1997 to June 2018

Year NSDL (No. of DP

Service Centers)

NSDL Annual

Growth Rate (%)

CDSL (No. of DP

Service Centers)

CDSL Annual

Growth Rate (%)

1997 34 -


1999 101 65.57

2000 144 42.57 15 -

2001 1896 1216.67 132 780.00

2002 1648 -13.08 346 162.12

2003 1718 4.25 414 19.65

2004 1719 0.06 441 6.52

2005 2819 63.99 532 20.63




2006 3017 7.02 586 10.15

2007 5599 85.58 634 8.19

2008 7204 28.67 6000 846.37

2009 8777 21.84 6000 0.00

2010 11170 27.26 6000 0.00

2011 12767 14.30 9200 53.33

2012 14033 9.92 10600 15.22

2013 14641 4.33 12500 17.92

2014 14444 -1.35 11381 -8.95

2015 15960 10.50 11000 -3.35

2016 26765 67.70 16500 50.00

2017 27389 2.33 17489 5.99

2018 30512 11.40 19176 9.65



The table number IV shows that:

The growth in number of DP Service Center in NSDL and CDSL during the period of March 1997 to June 2018.

The DP Service Center of NSDL increased continuously from 34 to 30512 & DP Service Center of CDSL increased

continuously from 15 to 19176.





The average annual growth rate of CDSL is higher than NSDL during the years.

But during 2008 the number of DP Service Center recorded a sudden jump in CDSL.

Table V: Quantity of DEMAT Shares/Securities (No. of Dematerialized Securities)

in NSDL & CDSL during March 1997 to June 2018

Year NSDL In Billions NSDL Annual

Growth Rate (%)

CDSL In Billions CDSL Annual

Growth Rate (%)

1997 0.56 -

Not Established 1998 2.56 357.14

1999 9.23 260.55

2000 19.92 115.82 0.57 -

2001 37.21 86.80 1.89 231.58

2002 51.67 38.86 4.82 155.03

2003 68.76 33.08 8.21 70.33

2004 83.69 21.71 14.01 70.65

2005 128.66 53.73 19.08 36.19

2006 174.72 35.80 26.9 40.99

2007 202.70 16.01 32.01 19.00

2008 236.90 16.87 52.8 64.95

2009 282.87 19.40 70.47 33.47

2010 351.14 24.13 78.56 11.48

2011 471.30 34.22 110.41 40.54

2012 579.80 23.02 137.66 24.68

2013 686.48 18.40 151.81 10.28

2014 795.50 15.88 177.31 16.80

2015 927.36 16.58 206.01 16.19

2016 1100.20 18.64 227.55 10.46

2017 1317.63 19.76 255.23 12.16

2018 1576.58 19.65 305.73 19.79



The table number V shows that:

The growth in Quantity of DEMAT Shares in NSDL and CDSL during the period of March 1997 to June 2018.

The Quantity of DEMAT Shares of NSDL increased continuously from 0.56 Billion to 1576.58 Billion & Quantity of

DEMAT Shares of CDSL increased continuously from 0.57 Billion to 305.73 Billion.

The highest growth rate of percentage was in 1998 at 357.14% and the lowest growth rate of percentage was in 2014 at


percentage was in 2013 at 10.28% in CDSL.






Table VI: DEMAT Custody in NSDL & CDSL (Value of Dematerialized Securities) during March 1997 to June 2018

Year NSDL In Billions NSDL Annual

Growth Rate (%)

CDSL In Billions CDSL Annual

Growth Rate (%)

1997 100 -

1998 409 309 Not Established

1999 1812 343.03

2000 3508 93.60 0.96 -

2001 3262 -7.01 127.36 13166.67

2002 4426 35.68 243.37 91.09

2003 5513 24.56 361.64 48.60

2004 9662 75.26 1039.01 187.31

2005 14477 49.83 1209.59 16.42

2006 24789 71.23 2322.41 92.00

2007 31426 26.77 3150.39 35.65

2008 43770 39.28 6864.65 117.90

2009 31066 -29.02 5201.48 -24.23

2010 56178 80.83 8579.21 64.94

2011 66079 17.62 11645.81 35.74

2012 71323 7.94 10150.31 -12.84

2013 76790.27 7.67 9869.24 -2.77

2014 89398.76 16.42 10876.03 10.20

2015 117483.15 31.41 13942.64 28.20

2016 117157 -0.28 13267.97 -4.84

2017 146486.96 25.03 17735.85 33.67

2018 175865.66 20.06 19951.28 12.49



The table number VI shows that:

The growth in valueof DEMAT Shares in NSDL and CDSL during the period of March 1997 to June 2018.

The value of DEMAT Shares of NSDL increased continuously from 100 Billion to 175865.66 Billion & value of DEMAT

Shares of CDSL increased continuously from 0.96 Billion to 19951.28 Billion.





The average annual growth rate of CDSL is higher than NSDL during the years.

V. Findings: Key Differences Between NSDL and CDSL

The significant differences between NSDL and CDSL are discussed in the points given below:

NSDL is the pioneer electronic depository of securities, established in India. On the other hand, CDSL is the second central

depository of securities which facilitates book entry transfer of securities.

Account wise, the active investor accounts in NSDL are comparatively higher than in CDSL.

When it comes to promotion, NSDL is promoted by India‟s apex institutions like IDBI (Industrial Development Bank of India), UTI

(Unit Trust of India) and NSE (National Stock Exchange) whereas CDSL is promoted by Bombay Stock Exchange in association

with Bank of Baroda, State Bank of India, Housing Development Finance Corporation, Union Bank of India, Standard Chartered

Bank.

NSDL operates in the NSE. Conversely, CDSL operates in BSE.

Comparison of NSDL & CDSL

Basis for Comparison NSDL CDSL

Expands to National Securities Depository

Limited

Central Depository Services

Limited

Meaning NSDL is the first depository

established in India, which

ensures trading and settlement

of securities in electronic form.

CDSL is the second largest

depository in India, which

facilitated book entry transfer of

securities.

Key Promoters IDBI, UTI and NSE BOB, BOI, SBI, HDFC and BSE

Market National Stock Exchange

(NSE)

Bombay Stock Exchange (BSE)

Depository Participants 277 597




Active Investor Accounts (In Crores) 1.73 1.53

Demat Custody Value (In Crores) 17586566 1995128

Beneficiary Accounts Average Growth 218.34% 48.51%

Average Growth Over Available Companies

For Demat

35.33% 23.68%

Depository Participants Average Growth 31.22% 16.79%

Average Growth In DP Service Centres 83.28% 110.75%

Average Growth In Quantity Of Demat

Shares/Securities

59.34% 49.14%

Average Growth In Demat Custody 59.00% 772.01%

To classify a stock market either as a matured market or emerging market one of the important parameters is liquidity. Higher

liquidity provides opportunity for easy entry and exit options to the investors. More number of shares traded per trade is yet another sign to

indicate better liquidity. More and more institutional players appear to be participating in a bigger way in post- Demat period in the market

indicating increased level of confidence in the Indian stock market. Ultimate test of any stock market is the returns to the investor. Generally,

always though not possible, investors expect to earn abnormal returns on their investments.

Volatility and returns go hand-in-hand. Higher volatility sometimes brings higher positive returns. In the study period, volatility as a

whole (index) slightly increased and concurrently the companies studied also had higher volatility. On the whole, dematerialization played a

very positive role in further modernization of Indian capital market by providing higher liquidity, higher returns and lower volatility.

The rapid growth in number, volume of value of securities in the Indian capital market exposed the limitation of handling securities

in the physical/paper mode. The present system of settlement based on physical delivery of paper certificates was probably adequate in the

past when there was small number of investors participating in the transaction of the capital market.

VI. CONCLUSION

This study concludes that, there is a sizable increase in terms of number of beneficiary accounts, number of companies available for

Demat, number of depository participants, number of depository participants service centers, Quantity of Demat Shares/Securities (No. of

Dematerialized Securities) and Demat Custody in NSDL & CDSL (Value of Dematerialized Securities). Positive annual average growth rate

shows the growth of Indian Capital Market. The Demat account opening is same as bank account, i.e. single or joint accounts or with

nominee. Some amount has to be paid (i.e. 350/- per year+25) for the Demat account. For each transaction the DP‟s may charge nearly Rs.30

+ brokerage/commission is common. The growth rates of Demat account holder in increasing over years. The Indian system of capital

market is a Two Tire System. Indian government allows holding securities in any form i.e. either in physical securities or in electronic

(Demat) form. The transaction of securities is completely (i.e. 99.99) done through electronic format. The investors rarely utilize the

Rematerialisation Request Form. Investors are not aware of the services offered by depositories. Most of the speculators do not utilize Demat

account in day-to-day online trading. They trade through broker pool account. Dematerialization process can be done through online trading

by utilizing computers.

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