DEPOSITORIES IN INDIADEPOSITORIES IN INDIA

By:

JAGANNATH P C ALLIANCE BUSINESS ACADEMY BANGALORE

MEANINGMEANINGIt is defined as ‘a central location

for keeping securities on deposit’.A facility for holding securities,

either in certificated or uncertificated form to enable book entry transfer of securities.

In simple terms depository means “an institution which transfers the ownership of securities in electronic mode on behalf of its members”.

OBJECTIVESOBJECTIVES Reduce the time for transfer of securities.

Avoid the risk of settlement of securities

Enhance liquidity and efficiency.

Reduce cost of transaction for the investors.

Create a system for the central handling of all

securities.

Promote the country’s competitiveness by

complying with global standards.

Provide service infrastructure in a capital market.

ACTIVITIESACTIVITIESAccepting deposit of securities for

custody.Making computerized book entry

deliveries of securities which are immobilized in its custody.

Creating computerized book entry pledges of securities in its custody.

Providing for withdrawal of securities.Undertaking corporate actions like

distribution of dividend and interest.Redemption of securities on maturity.

Services given by Services given by depositories depositories

Dematerialisation

Rematerialisation

Facilitating repurchase / redemption of units of mutual funds

Electronic settlement of trades in stock exchanges

Pledging/hypothecation of dematerialised 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 Other facilities viz. holding debt

instruments in the same account, availing stock lending/borrowing facility, etc. 

Depositories in IndiaDepositories in India

   NATIONAL SECURITIES DEPOSITORY LIMITED

[NSDL] is a depository promoted  by National Stock Exchange of India Limited, IDBI,UTI,SBI and other financial institutions. NSDL commenced operation in November 1996

  CENTRAL DEPOSITORY SERVICE (INDIA) LIMITED [CDSL]

is a depository promoted by The Stock Exchange, Mumbai jointly with SBI, Bank Of India,HDFC Bank and other financial institutions.CDSL commenced its operations in July 15th 1999. 

Interacting Interacting institutionsinstitutions

There are three institutions that are interacting in a depository system.

1. The central depository

2. Share registrar and transfer agent.

3. Clearing and settlement corporation.

SEBI(DEPOSITORY AND PARTICIPANTS) REGULATION ACT;1996

Scope of the act. The scope of the legislation

extends to the issue of scripless trading, transfer of ownership by means of book entries through electronic media and holding of securities through depository system as also fungibility of shares.

DEPOSITORY PROCESS IN DEPOSITORY PROCESS IN INDIAINDIA There are four constituents in this

system.

1. The depository.

2. The depository participant

(custodian) .

3. The beneficial owner.

4. The issuer.

BENEFITS OF DIPOSITORY BENEFITS OF DIPOSITORY SYSTEMSYSTEMBENEFITS TO INVESTORS. This system will eliminate paper work as the

book entry system does not need physical movement of certificates for transfer process

The risk of bad deliveries, fraud and misplaced, mutilated and lost share certificates will not exists.

The electronic media helps to save time and increase velocity of security movement.

Investors will be able to change portfolio more frequently.

The cost of transfer is less as the share transfers are exempt from stamp duty.

Faster payment in case of sale of share.

BENEFITS TO COMPANIESBENEFITS TO COMPANIES

The companies will be able to know the particulars of beneficial owners and their holdings periodically.

At the time of declaration of dividends, bonus etc. there will not be any rush for transfer related activities for the companies.

It would be possible to send notices and annual reports without delay.

BENEFITS TO THE CAPITAL BENEFITS TO THE CAPITAL MARKETMARKETThe capital market will be more

transparent as the trading, clearing and settlement mechanism have to be highly automated and interlinked with the depository among themselves.

The investors confidence will improve

The existence of depository will result in increase in the volume of trade both by number and value.

REFERENCEREFERENCEE Gordon and Dr K Natarajan, Financial

markets and services, Himalaya publishing house

Websiteswww.sify.comwww.moneypore.comwww.hsbc.co.inwww.dicindialtd.com

THANK YOU