Demat Information

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Meaning of dematerialization:-

In India,sharesand securities are held electronically in a Dematerialized (or "demat

account, instead of the investor taking physical possession of certificates. A

Dematerialized account is opened by the investor while registering with aninvestment

broker(or sub-broker). The Dematerialized account number is quoted for alltransactions to enable electronic settlements of trades to take place. Every shareholder

will have a Dematerialized account for the purpose of transactingshares.

Access to the Dematerialized account requires aninternetpasswordand a transaction

password. Transfers or purchases ofsecuritiescan then be initiated. Purchases and

sales of securities on the Dematerialized account are automatically made once

transactions are confirmed and completed.

Definition:-Demat account is a safe and convenient means of holding securities just like a bank

account is for funds. Today, practically 99.9% settlement (of shares) takes place on

demat mode only. Thus, it is advisable to have a Beneficiary Owner (BO) account to

trade at the exchanges.

Benefits Of Demat Account:-

1. A safe and convenient way of holding securities (equity and debtinstruments both).

2. Transactions involving physical securities are costlier than those involvingdematerialized securities (just like the transactions through a bank tellerare costlier than ATM transactions). Therefore, charges applicable to aninvestor are lesser for each transaction.

3. Securities can be transferred at an instruction immediately.

4. Increased liquidity, as securities can be sold at any time during the tradinghours (between 9:55 AM to 3:30 PM on all working days), and payment canbe received in a very short period of time.

5. No stamp duty charges.

6. Risks like forgery, thefts, bad delivery, delays in transfer etc, associatedwith physical certificates, are eliminated.

7. Pledging of securities in a short period of time.

8. Reduced paper work and transaction cost.

9. Odd-lot shares can also be traded (can be even 1 share).
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10. Nomination facility available.

11. Any change in address or bank account details can be electronicallyintimated to all companies in which investor holds any securities, withouthaving to inform each of them separately.

12. Securities are transferred by the DP itself, so no need to correspond withthe companies.

13. Shares arising out of bonus, split, consolidation, merger etc. areautomatically credited into the demat account of the investor.

14. Shares allotted in public issues are directly credited into demat account ofthe applicants in quick time.

Concept of Demat Shares:-

The Depository system has the following benefits to different groups:

Benefit to the CountryThe depository system helps the capital market to be more liquid, attracting more

foreign investors and is in compliance with international standards, as it creates

efficient and risk-free trading environment.

It minimizes the settlement risks and frauds in carrying out transactions in capital

markets and thus can restore faith of investors in capital markets.

It helps to reduce delay in trading practices creating investor friendly atmosphere inthe capital markets.

Benefit to the CompanyThe depository system helps in reducing the cost of new issues due to less printing

and distribution cost.

It increases the efficiency of the registrars and transfer agents and the Secretarial

Department of the company.

It provides better facilities for communication and timely services with shareholders,

investor etc.

Benefit to the InvestorThe depository system reduces risks involved in holding physical certificated, 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 problem due to signature differences, etc.


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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.

Benefit to Brokers

The depository system reduces risk of delayed settlement.It ensures greater profit due to increase in volume of trading.

It eliminates chances of forgerybad delivery.

It increases overall of trading and profitability.

It increases confidence in investors.

Agency in DepositoriesIndia has chosen the concept of multi-depositories.[5] 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.[6] 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[7]

are LIC, GIC and BSE. This agency is set up with the object to keep in mind to

accelerate growth of scrip less 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:


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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.

No additional security or storage cost of data or critical database residing at the front-

end terminals with the issuers/registrars.

Recover only the annual maintenance charges.

CDSL signed a memorandum of understanding with NSDL for inter-depository

connectivity. Presently, more than half the business of depositories is handled by this

agency. Role of both these agencies has become very vital after SEBIs declaration

that there would be no deals in physical form and only dealing to happen in market

through demat accounts.

Depository ParticipantSimilar to the brokers who trade on your behalf in and outside the Stock Exchange; a

Depository Participant (DP) is the representative (agent) in the depository system

providing the link between the Company and the investor through the Depository.

Depository Participant maintains investors securities account balances and intimates

him the status of your holding from time to time. According to SEBI guidelines,

Financial Institutions like banks, custodians, stockbrokers etc. can become

participants in the depository. A DP is one with whom you need to open an account to

deal in electronic form. While the Depository can be compared to a Bank, DP is like a

branch of bank with which one can have an account.

Process of Demating Sharesthe process of opening an account with a Depository Participant is similar to the

opening of a bank account.

One has to open an account with a Depository Participant (DP) by filling up an

Account Opening Form and signing a Participant-Client Agreement. Then a unique

client ID number will be given, which must be quoted in all correspondence with the

DP.

Thereafter, one has to fill up and submit a Dematerialization Request Form (DRF)provided by the DP duly signed by all the holders and surrender the physical shares

intended to be dematted to the DP.

The DP upon receipt of the shares and the DRF will issue an acknowledgement and

will send an electronic request to the Company/ Registrars and Transfer Agents of the

Company through the Depository for confirmation of demat. The DP will


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simultaneously surrender the DRF and the shares to the Company / Registrars and

Transfer Agents of the Company with a covering letter requesting the Company to

confirm demat.

The Registrars and Transfer Agents of the Company, after necessary verification of

the documents received from the DP, will cancel the physical shares and confirmdemat to the Depository. This confirmation will be passed on by the Depository to the

DP which holds investors account. After receiving this confirmation from the

Depository, the DP will credit investor account with the number of shares

dematerialized. The DP will hold the shares in the dematerialized form thereafter on

behalf of the investor. And hence one becomes the beneficial owner of these

dematerialized shares.

When the beneficial owner submits the shares for dematerialization, his DP will

deface the share certificates with the stamp SURRENDERED FOR

DEMATERIALISATION. This ensures that shares are not lost in transit or misusedtill credit is received in demat account.

Documents required for opening a Demat Account?

1) To open a demat account you have to fill demat request form

2) One Passport size photograph, proof of address like Voter ID

card, electricity bill or Ration Card, Employee ID card, Bank

attestation and Latest IT Return

3) Submit the DRF & share certificate(s) to DP. DP would forward

them to the issuer / their R&T Agent.

4) Deface the share certificate(s) you want to dematerialize by

writing across Surrendered for dematerialization

5) After dematerialization, your depository account with your DP

would be credited with the dematerialized securities.

6) You have to Submit the PAN Card as a proof of identity .As of April


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2006 it is mandatory, if any person want to open a demat account

should have a PAN CARD (Permanent Account number) . Without a

PAN CARD you are not be eligible to open a Demat account.

Demat Account Opening fees

Few banks will not charge you the demat account opening fees, but there is

some annual maintenance charges as well as transaction charges on Demat

account

Custodian fee

Custodian fees depends on the number of securities and this fees is charged

monthly (international securities identification numbers ISIN) held in the

account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month.

DPs will not charge custody fee for ISIN on which the companies have paid

one-time custody charges to the depository.

Transaction fee

On a monthly basis transaction fees is charges for crediting/debiting

securities from the account. The fee also based on the kind of transaction

(buying or selling). Some DPs charge only for debiting the securities while

others chargefor both. The DPs also charge if your instruction to buy/sell

fails or is rejected.

Demat related news:-

Demat transmission in Hindu Undivided Family (HUF )...formalities need to be initiated by the surviving members of the HUF in order to effectthe transfer of securities from the demat account of the deceased Karta to the new Karta,or members accounts, as the case may be. Form The surviving members of the HUF...

News about BSDA;--

The SEBI Board had taken decisions to encourage retail investors and to reduce the cost of

maintaining securities in demat accounts for retail individual investors. All Depository participants

(DPs) shall make available a "Basic Services Demat Account" (BSDA) for its retail investors.
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Eligibility

Any Individuals who have only ONE demat account and they are the sole or first owner.

Value of securities held in the demat account shall not exceed Rupees Two Lakes at any point of

time.

Cost Structure

No Annual Maintenance Charges (AMC) shall be levied, if the value of holding is up to Rs. 50,000.

For the value of holding from Rs 50,001 to Rs 200,000, AMC not exceeding Rs 100 may be charged.

(If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy

charges as applicable to regular accounts (non BSDA) from that date onwards).

Can NRIs maintain a domestic tradingand demat account?

If you have lost your resident status, which means if you have now become a non

resident Indian, and have had a domestic trading and demat account, you are not

entitled to trade and take delivery of shares from that account.This means that you may have to close the account or change the status.

Remember, that as an NRI you cannot trade in shares on an intradaybasis, like

domestic residents. Continuing to use the account as resident individual, after

becoming an NRI is not legal.

Procedures are different

NRIs must have a Portfolio Investment Scheme (PINS), which is mandatory as

per the Reserve Bankof India (RBI) under which the 'Non Resident Indians and

'Person of Indian Origin can purchase and sell shares by routing all such

purchase/sale transactions through their account held with a designated Bank

Branch. The designated Bank maintains a record of all investments done under

PINS (PINS portfolio). So, you may need to open a demat account, a trading

account and a PINS for buying and selling shares in India, as an NRI.
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SEBI proposes no-frills demat account:-

Market regulator Securities Exchange Board ofIndia (SEBI) on Monday slashed

the demat annual charges in a aim to extend the reach of IPOs for the benefit of

retail investors.

"With a view to achieve wider financial inclusion, encourage holding of demataccounts and to reduce the cost of maintaining securities in demat accounts for

retail individual investors, it has been decided that all depository participants

(DPs) shall make available a "Basic Services Demat Account" (BSDA) with limited

services as per terms specified herein", SEBI said in circular.

To encourage small investors SEBI announced announced no-frills or basic

trading accounts for retail individual investors with no charges applicable for

holdings up to Rs 50,000.

While, investors holding from Rs 50,001 to Rs 200,000, AMC not exceeding Rs

100 will be charged.

The value of holding shall be determined by the DPs on the basis of the daily

closing price or NAV of the securities or units of mutual funds, as the case may

be.

The circular shall be applicable with effect from October 01, 2012.

Electronic statements in this account will be free of cost. In case of physical

statements, the DP shall provide at least two statements free of cost during the

billing cycle. Additional physical statement may be charged at a fee not exceeding

Rs.25/- per statement.Also, can avail the facility of SMS alert facility for debit transactions by

registering their mobile number.

However, existing eligible individuals to convert their demat account into BSDA

on the date of the next billing cycle based on value of holding of securities in the

account as on the last day of previous billing cycle.
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Bourses restrict trading in 40 stocks for dematfailures

Mumbai: Leading stock exchanges BSE and NSE have restricted trading in stocks of as many as 40new companies on account of their failure in meeting the market regulator Sebi's direction on

dematerializing of shares.

The action comes after these these companies failed to convert a mandatory 50 per cent public

shareholding into demat or electronic format, or either they did not submit the shareholding data for

July-September quarter or provided the exchanges with wrong shareholding patterns.

The restriction in trading of these 40 stocks comes on top of shares of close to 500 companies

already being kept under restricted-trade category by the two bourses.

As per Sebi regulations, shares of all listed companies having less than 50 per cent public holding in

demat form need to be traded only in the 'Trade-for-trade' segment of the exchanges. The trading in

this segment requires compulsory delivery and these shares can be sold only after a buyer is found

at their quoted prices.

In a circular, BSE has listed out 39 such stocks that are being moved to 'Trade-for-Trade' group with

effect from November 23, 2012. The NSE has also listed out three such stocks, which includes two

named by BSE as well, taking the total number of such stocks to 40.

.

Hindu deities have PAN cards, are demat

accounts next?

Can Hindu deities have demat accounts to enable them transact in shares and debentures

on the stock market?

The Bombay High Court will decide on the issue after a religious trust filed a petition

challenging the decision of National Securities Depository Ltd (NSDL) to refuse it

permission for opening demat accounts in the names of five Hindu deities.

"When the Income Tax department has issued PAN cards to these five deities, why should


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not NSDL allow opening of demat accounts in their names," the trust asked in the petition,

which is likely to come up for hearing later this week.

Demat a/cs on the rebound, but fail to charm;-

First, the good news. The demat account growth is on the rebound. The number of investors opening such

accounts has seen a surge with the pace picking up in the latter half of 2012-13. But the bad news is it has

failed to make a mark.

The two depositoriesNational Securities Depository Ltd (NSDL) and Central Depository Services India Ltd

(CDSL)together reported a 10.46 lakh jump in the number of investor accounts during the fiscal, which read

210.16 lakh at the close of the year. The reading came in against just 9.5 lakh additions, or a growth of 5%, in

fiscal 2012, the slowest in the last 9 years.

Whats at play? Better equity market conditions last fiscal albeit for a limited periodalong with theeuphoria associated with the tax saving scheme introduced by the government could have done the trick.

Vinay Agrawal, executive director (equities) broking, Angel Broking, pegs it to a sudden surge in markets in

the latter half of calendar year 2012. The retail participation saw significant improvement in September 2012

to January 2013 as the markets were cruising upwards. This would have led to new investors rushing in, he

said.

The BSE data clearly illustrate this point, which show the monthly average turnover in retail (clients) category

during these five months improved to Rs 63,000 crore from Rs 54,500 crore earlier.

Retail investors hopping from one brokerage to another could be the other trigger point for the shift, believes

Sudip Bandyopadhyay, MD and CEO, Destimoney Securities. Last fiscal saw several small brokerages

shutting shop, which would have prompted people to move to other brokerages which in turn got these

customers to open a new demat account, he explained.

Amid all this, the no-frills basic services demat account introduced by the market regulator with effect from

October 2012 is still to take off, say analysts, who feel no brokerage would be interested to provide free service


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by itself.

The Rajiv Gandhi Equity Savings Scheme (RGESS) introduced by government may also have played its part

in bringing in new customers. A majority of these new accounts were opened post November 23, 2012, data

from the depositories reveal. While NSDL reported opening of 4.02 lakh new demat accounts, CDSL too saw

gross addition of 3.12 lakh since then.

The bigger worry, experts say, is that though the net additions during last fiscal shaped up, investor sentiment

towards equity investing still remains muted. The retail participation has been coming down structurally over

the years and with markets displaying extreme volatility in recent times, the mood remains quite sombre, said

Bandyopadhyay.

Agrawal too strikes a note of caution, who feels retail participation has been virtually dying since January and

its unlikely that we may see huge interest from new investors to get their demat accounts opened to tap

markets.

.

Demat accounts close as stock marketsweaken;-

Sarvesh Sony had opened a demat account six months ago hoping to cash in on the robust returnsoffered by the stock market, but the recent turmoil in Dalal Street has robbed him of his taste for

share trading.

Some IPOs were giving good returns, so I decided to open a demat account. I thought I would make

some money. But now the market has fallen. I have sold all my shares, and am closing my account. I

also have to pay a maintenance charge to the bank. This isn't profitable, Sony complained.

Soni's case is not in isolation. Experts say many small investors have decided to close their demat

accounts, and cut their losses.

People are losing interest because of the fall in the market and absence of good IPOs. I'd say

around 4 per cent of the accounts have been closed, DP Manager, Shah Investor Home, PraveenMaster said.

Six months ago with the Sensex near its lifetime high above the 21,000 mark there was a rush for

new demat accounts. But over the last two months, nearly 10 per cent of these accounts have been

closed due to lower returns and a now-unviable Rs 250-300 demat account maintenance charge.

Clearly, for small investors it's a case of once bitten, twice shy.


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Demat Information

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