PROBLEMS FACED BY INVESTORS

• Bad deliveries

• Fake certificates

• Loss of certificates in transit

• Mutilation of certificates

• Delays in transfer

• Long settlement cycles

• Mismatch of signatures

• Delay in refund and remission of dividend etc

DEPOSITORY SYSTEM

Presented By

Bismay Mishra

M. Com BF ‘A’

Regd No - 13351016

MEANING

• In India, the Depositories Act, 1996, defines a depository to mean “A company formed and registered under the Companies Act, 1956 and which has been granted a certificate of registration under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act,1992”.

• As per German Depository it is defined as “A Depository is a file or a set of files in which data is stored for the purpose of safe keeping or identity authentication”.

• The term Depository means a place where a deposit of money, securities, property etc is deposited for safekeeping under the terms of depository agreement

• A depository is an organisation, which assists in the allotment and transfer of securities and securities lending.

• The shares here are held in the form of electronic accounts i.e. dematerialised form and the depository system revolves around the concept of paper-less or scrip-less trading

LEGAL FRAMEWORK

• Depository Act in August, 1996- dematerialisation route to book entry based transfer of securities and settlement of securities trade.

• ByeLaws:- scope of the functioning of NSDL and its business partners.

• Business Rules:- outline the operational procedures to be followed by NSDL and its Business Partners

• SEBI(Depositories and Participant) (Amendment) Regulation, 2012:- Adoption of CODE OF CONDUCT for its Directors and CODE OF ETHICS for Directors and Key Management Personnel of NSDL to create better investor integrity of the market.

• The Companies Act, 1956

FACILITIES OFFERED BY DEPOSITORY SYSTEM

• Opening of depository account

• Dematerialisation

• Rematerialisation

• Settlement of trades in dematerialised securities

• Account transfer

• Transfer ,transmission and transposition

• Pledge and hypothecation

• Redemption or repurchase

• Stock lending and borrowing

• Corporate action

• Account freezing

• Nomination

• Demat of debt instruments

• Dealing in govt securities

CONSTITUENTS OF A DEPOSITORY SYSTEM

• Depository

• Depository Participant (DP)

• Issuers and Registrars and Share Transfer Agents

• Stock Exchanges and Stock Brokers

• Clearing Corporation/ Clearing House and Clearing Members

• Banking system

• Investors

DEPOSITORY SYSTEM-BUSINESS PARTNERS

Depository Participants

A depository Participant is an

agent of the depository who is

authorized to offer depository

services to investors. Some of

them are Financial Institutions,

Banks, Custodians and

Stockbrokers complying with the

requirements prescribed by SEBI/

Depositories can be registered as

Depository Participant.

Issuing companies and their Registrars

and Share Transfer Agents"Registrar to an Issue" means the

person appointed by a body corporate

or any person or group of persons to

carry on the following

collecting applications from investors

in respect of an issue;

Keeping a proper record of

applications and monies received from

investors or paid to the seller of the

securities. and

3)Assisting body corporate or person

or group of persons

Clearing Corporations or Clearing Houses

of Stock Exchanges

A clearing corporation is a

financial institution which

provides the services as

clearing and settlement for

commodities and financial

derivatives and securities

transactions.

SERVICES BY NSDL

Basic Services• A/c Maintenance

• Dematerialisation

• Rematerialisation

• Market Transfers

• Off Market Transfers

• Inter-Depository Transfer

• Transmission/Nomination

• Corporate Action

Value Added Services• Auto Delivery Out

• Dividend Distribution

• Lending & Borrowing

• Pledge

• Public Issue

• SMS Alert

SERVICES BY CDSL

• Account Opening

• Dematerialisation

• Processing Delivery & Receipt Instructions

• Account Statement

• Rematerialisation

• Pledging

• Nomination

• Transmission of Securities

• Change of Address

• Bank Account Details

• SMS

NSDL CDSL

DP

Entry Fee 25000(non-refundable)

20000(non-refundable)

Custody Fee Nil Nil

Pledge Fee 25 Pledge acceptance-12Unpledged acceptance-12

Demat Charges Nil Nil

Remat Charges •a fee of Rs.10 for every hundred securities or part thereof ; or•a flat fee of Rs.10 per certificate,whichever is higher.No rematerialisation fee shall be charged for Government Securities.

•10 (INR) for every 100 securities or part thereof; subject to maximum fee of 5,00,000 (INR) or• a flat fee of 10 (INR) per certificate whichever is higher.

COMPARISON OF CHARGES

COMPARISON BETWEEN NSDL & CDSL

BASIS NSDL CDSL

Abbreviation National Securities Depository Limited

Central Depository Securities Limited

Founded Nov 1996 Feb 1999

Headquarters Trade World, A wing, 4th & 5th Floors, Kamala Mills Compound, Lower Parel, Mumbai-400013

Phiroze Jeejeebhoy Towers, 16th Floor, Dalal Street Mumbai-400001

Promoters IDBI, UTI, NSE BoI, BoB, SBI, HDFC, BSE

Market NSE BSE

BENEFITS OF DEPOSITORY SYSTEM

Reduced workload & manpower requirements due to paperless settlement

Instantaneous transfer of ownership

No risk of damaged, lost, forged or duplicate certificates

No impact in case of sudden increase in settlement volumes

Instant credit of bonus, rights and new issues (IPO)

Convenient pledging of securities

Particulars NSDL CDSL

Investor Accounts 1 30,67,581 87,29,972

DP 279 580

Companies 12,013 14,349

DP Service Centers 14,428 11,639

Custody Quantity (In millions) 7,63,036 1,69,940

Custody Value(Rs in millions) 8,46,33,020 96,02,860

Equity 12,141 7,365

Others 10,596 6,683

CONCLUSION

• Depository system in India is suffering from awareness problem. people are not aware of this system. People are not participating in this system. people are confused about these two major depositories. There is a rivalry between these two depositories. Formulation and promulgation of necessary laws –Depository has set of different challenges e.g. authentication and non-repudiation of transaction should have legal backing, paperless share holding etc. Lack of Developing a well trained Trainer & Support staff for giving training and customer support to all the relevant parties.

REFERENCES

• www.nsdl.co.in

• www.cdslindia.com

• “Capital Market” by N Gopalsamy – Macmillan India Ltd, Delhi

• “Capital Markets” by Dr S Gurusamy - Vijay Nicole Imprints Private Limited, Chennai

• “Capital Markets” by Frank J. Fabozzi and Franco Modigliani – Prentice Hall of India pvt. Ltd., New Delhi

• “Financial Market & Institutions” by Dr K. Venugopalan - Calicut University Central Co-op Stores Ltd No 4347, Calicut University

THANK YOU