National Securities Depository Limited
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Statistics

Statistics

August 31, 2019

arraw Investor Accounts - 1,89,16,477
arraw DP Service Centres - 31,205
arraw Demat Custody Value - 177.44
(₹ Lakh Crore)(US$ 2,483 billion)
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FAQ

 

A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities.

A depository interfaces with the investors through its agents called Depository Participants (DPs). If an investor wants to avail the services offered by the depository, the investor has to open an account with a DP. This is similar to opening an account with any branch of a bank in order to utilise the bank's services. Suggestions on how to select a DP are given in Section IV.

  • 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.
 
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  • NSDL offers following facilities
    • Dematerialisation i.e., converting physical certificates to electronic form;
    • Rematerialisation 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 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;
    • 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.
 
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Opening a demat account is quite simple. All you have to do is to approach a NSDL DP, which will help you to complete the formalities. You need to fill up a form, submit PAN card and proof of address. In addition, you need to provide details of your bank account.

After your demat account is opened, your DP will provide you DP ID and Client ID, a copy of your Client Master Report containing your demat account related details, tariff sheet and ’Rights & Obligations of Beneficial Owner and Depository Participant‘. DP ID is 8 characters long code, (example IN3XXXXX) allotted by NSDL to all DPs to identify them. Client ID is 8 digit long code used to identify the clients in the system. Combination of DP ID and Client ID makes your unique account number in the NSDL system.

You should verify the Client Master Report to ensure that all your details have been recorded correctly in depository system. If you want to trade in shares etc. (i.e. buy or sell), you would also need to open a Trading / Broking account with any SEBI registered stockbroker. There are many DPs which offer 3-in-1 arrangement for the benefit of investors (3-in-1 is a combination of demat account, trading account and bank account).

  • You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be:
    • Convenience - Proximity to your office/residence, business hours.
    • Comfort - Reputation of the DP, past association with the organization, whether the DP is in a position to give the specific service you may need?
    • Cost/ level of service - The service charges levied by DP and the service standards.

For list of DP locations and their comparative charge structure, please visit https://nsdl.co.in/joining/joincharges.php.

NSDL has specified certain basic eligibility criteria for becoming a DP. The criteria are similar or even higher in certain respects than the corresponding provisions of SEBI regulations. All the DPs are same in the sense they are appointed by NSDL only after grant of Certificate of Registration by SEBI to them. However, the type of services offered, service standards and charges for the services rendered may differ among DPs.

  • Once you have decided to open an account with a particular DP, you may approach that DP and fill up an account opening form. You would be required to provide your photograph and self-attested copy of following documents -
    • PAN Card (for Sikkim residents who may not have PAN, other proof of identity).
    • Proof of address (any one of Passport, Driving license, Voter’s Identity card, Aadhaar card and NREGA job card).
    • Copy of cancelled cheque or passbook or bank statement containing your name, account number, IFSC and MICR code
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Please remember to take original documents to the DP for verification. In case you are unable to produce original document for verification, then photocopy should be attested by any authorized entity, like a public notary. Your DP may ask additional proof of identity / address to meet its requirements in addition to above-mentioned. The process of account opening is shown in the diagram number 3

Diagram 3

It is mandatory to establish the identity of the applicant at the time of opening account as per SEBI guidelines. This is done by the DP’s staff by verifying the affixed photograph on account opening form and the photo seen on document on PAN card with the person seeking to open the account. For Joint account holders, the ’in-person verification’ is required for all the holders.

Yes. You can open more than one account with the same DP. There is no restriction on the number of accounts you can open with a DP.

No. The depository has not prescribed any minimum balance. You can have zero balance in your demat account.

Providing bank account details at the time of demat account opening is mandatory. These bank details are communicated to issuer companies / RTAs for the purpose of crediting any amount payable to you (such as dividend, interest or maturity payment or redemption amount) directly in your bank account. It is therefore suggested that you provide details of your active bank account in the account opening form. Later, in case of change therein, please remember to inform to your DP.

In demat account, debit or credit transactions are permitted only if it is duly authorized by the respective holder(s). As a Delivery Instruction Slip (DIS) is required for every debit transfer in the demat account, a 'Receipt Instruction Slip' is required for every credit transfer in the demat account. By giving a onetime standing instruction to your DP, you may avoid giving receipt instruction to your DP whenever a credit is expected in the account.

No. As per rules applicable at present, demat account cannot be operated on 'either or survivor' basis like the bank account. Therefore, every instruction given for a jointly held demat account needs to be signed by all the joint holders.

Yes. In case you have multiple demat accounts with one or more DPs and do not wish to continue with them, you may submit account closure form to your DP(s) in prescribed format. In the form, you are required to mention DP ID, DP name and Client ID of the account where you wish the balances to be transferred. Your DP will transfer all your securities as per your instruction and close your demat account. It is important to understand that a demat account cannot be closed if there is any balance in the account.

  • There are numerous uses of your NSDL demat account. Few important things that you can do with your NSDL demat account are listed below -
    • You may apply for IPOs and NFOs. Do not forget to mention your DP ID and Client ID correctly in the application form. Same demat account can be used to purchase and hold shares and other types of securities.
    • You will automatically receive all corporate benefits (bonus, rights issue, etc.) in your demat account. Cash benefits like dividend declared by your company, interest or maturity amount payable on your bond investments etc. would be credited to bank account linked with your demat account. Please ensure correct bank account details are recorded in your demat account.
    • You may use your demat account to avail 'loan against shares' facility which is offered by many banks etc. to meet your financial requirements without requiring to sell the investments.
    • You may convert all your investments in shares, bonds, debentures, government securities, sovereign gold bonds etc. held in paper form to demat form through your DP.
    • You may hold your mutual fund investments in the same demat account. Holding mutual fund units in demat account makes things a lot easier for you. You would be able to monitor your portfolio at one place through NSDL CAS. It also saves you from the need to engage with various mutual fund houses if you want to make any change in your personal information, for example, address or bank details or nominee, etc. You may subscribe to mutual fund units in demat form by simply mentioning your DP ID and Client ID in application form. Investment in mutual funds by way of SIP is also possible through your demat account. For redemption or repurchase of mutual fund units, you may give an instruction to your DP or may use NSDL's SPEED-e facility.
    • You may participate in buyback offer by tendering your shares to company through your demat account.
    • You may participate in securities lending and borrowing scheme by lending securities lying idle in your demat account and may earn market returns.
 
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Dematerialization is the process by which physical certificates of securities are converted into securities in electronic form by way of credit in investor's demat account held with a DP. Dematerialization is change in form of holding, it does not result into change of ownership.

In order to dematerialize certificates, you need to open a demat account. Once the demat account has been opened, you need to fill up a 'Dematerialization Request Form' in prescribed form and submit it to your DP along with the security certificates. Your DP will forward the demat request to the concerned issuer company or its Registrar and Transfer Agent for further processing. Once the request is confirmed by the concerned issuer company or its Registrar and Transfer Agent, it results in credit of electronic securities in the demat account of the respective investor. The process of dematerialization is shown in the diagram number 4.Diagram 4

Diagram 4
  • No, not all the share certificates can be dematerialized. For dematerialization, following conditions should be met with -
    • You can dematerialize only those share certificates that are already registered in your name in records of issuing company / its RTA
    • The Issuer company should have joined NSDL and obtained an ISIN for those shares
    • Shares should be free from any lien or charge or encumbrance.

Most of listed and active companies have already joined NSDL and their shares and other types of securities are available for demat. Many other companies are in the process of joining NSDL. You may search if the shares held by you are available for demat or not, at https://nsdl.co.in/master_search.php.

  • You should take care of following -
    • Verify that you are the registered owner of the securities.
    • Pattern of ownership of securities is same as that in demat account from which you wish to initiate the demat request. (Refer to answer for Q. 13 below if pattern is different).
    • Verify that securities you wish to dematerialize are indeed available for demat in NSDL.
    • Verify that the RTA has not stopped services to the company of which you are holding the shares. This can be searched at https://nsdl.co.in/list-comp.php.
    • After above steps, you may mark the share certificates that you wish to dematerialize with words 'Surrendered for Dematerialisation'. Your DP will provide you the rubber stamp to be used for this purpose.

After ensuring that the certificates have been duly marked as above, you may submit the DRF to your DP along-with the share certificates for further processing.

As per SEBI's guidelines, DP is required to process the demat request received by it within 7 days. Further, issuer company / its RTA may take up to 15 days to process the demat request received by them. Considering the time required for transmission of documents from DP to issuer company / RTA, dematerialization will normally take about 30 days.

No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. For example, if one share certificate is in your name and another certificate has your name along with your wife's name, then you would need to open two demat accounts (one in your name and other in joint names of yourself and your wife).

The Depositories Act, 1996 gives investors an option to hold securities in physical form or demat form. Hence, if you do not intend to sell the securities, you may not dematerialize them. However, holding the securities in demat form entails numerous benefits and is therefore highly recommended. Further, there are existing / proposed restrictions on transfer of securities belonging to listed companies and unlisted public limited companies, if held in physical form. It may therefore be better to dematerialize the securities.

Yes. You can dematerialize your tax-free bonds even when they are under lock-in. The process of demat is similar to that applicable to demat of shares. You need to submit duly filled in and signed DRF to your DP along with bond certificates. DP will forward the request to concerned issuer / its RTA and upon confirmation, credit will be received in your demat account.

Yes. Now the market of government securities like bonds and Treasury Bills (T-Bills) is easily accessible to retail investors. In fact, RBI does keep a portion of new issues reserved for retail investors. You may invest in G-Sec by participating in auction of new securities or by purchasing already issued securities in secondary market. For both, you need to approach any authorized bank or primary dealer or stock broker, mentioning your demat accounts details (DP ID and Client ID).

The SGB offers a superior alternative to holding gold in physical form. Option to hold SGB in demat form makes it even better and convenient. The process to buy or subscribe to sovereign gold bonds in demat form is quite easy. All you need to do is to mention your DP ID and Client ID in your subscription form. Some banks offer online application facility also (if investor makes application online and does payment electronically, then some price discount is also available at present). Upon allotment by RBI, your demat account will credited with the requisite number of bonds.

Yes, you may do so. For this purpose, you need to contact the bank / agent from whom you had purchased the SGBs. They will assist you in conversion of SGBs held in form of Certificate of Holdings into demat form.

Yes. You need to provide a duly filled in and signed request in prescribed format (known as Dematerialization Request Form - Government Securities) along with 'Form of Transfer' to your DP. Your DP will forward the request to NSDL. NSDL will arrange for necessary credit in your demat account.

The joint holders are entitled to change the sequence of names by making a written request to the company. This does not constitute a transfer. Changing the sequence of joint holders is called 'Transposition'. However, transposition facility can be availed for entire holdings in a folio and not allowed for part of the holdings.

If the same set of joint holders hold securities in different sequence of names, then there is no need to open multiple demat accounts for dematerialization of such securities. Using 'Transposition cum Demat facility' such securities held vide certificates in different combinations, can be dematerialized in one demat account. For this purpose, Dematerialization Request Form (DRF) and an additional form called 'Transposition cum Demat Form' should be submitted to the DP. This is explained in the diagram number 5 - Diagram 5

Diagram 5
 
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Yes. If you wish to get back your securities in physical form, you need to submit 'Rematerialisation Request Form' in prescribed format to your DP. After necessary checks, your DP will forward your request through NSDL's depository system to the concerned Issuer company / RTA. The company / RTA will print the certificates and dispatch the same to you directly. You should check the rematerialisation charges with your DP before submitting the request.

 

Nomination is a simple process by which a holder of securities communicates his / her preference regarding who should receive these securities in case of his / her death. Process of nomination in respect of demat account can be done at the time of opening of demat account or any time later.

Nomination can be made only by individuals holding demat account singly or jointly. Non-individual holders like society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family and holder of Power of Attorney cannot nominate.

Yes. Nomination is permitted for accounts with joint holders. However, in case of death of any of the joint holder(s), the securities will be transmitted to the surviving holder(s). Only in the event of death of all the joint holders, the securities will be transmitted to the nominee (if nomination given, else to legal heir).

Yes, NRI can nominate directly. However, the power of attorney holder cannot nominate on behalf of NRI.

No. Minor cannot nominate either directly or through his / her guardian.

Only an individual can be a nominee. Non individuals like society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a Power of Attorney holder cannot be a nominee in the demat account.

Yes, at present up to three nominations can be made for one demat account. In case, two or three nominees are mentioned, then it is also required to mention the proportion (%) in which various securities are desired to be transmitted upon death of the account holder.

Yes, a minor can be a nominee. Whenever, a minor is mentioned as a nominee in a demat account, details of his / her guardian should also be mentioned.

No. Nomination can be made account wise and not security wise. This means, in case of death of account holder, all the securities lying in the demat account, are liable to be transmitted to nominee(s) in the pre-registered proportion. If you wish different nominees for different securities, then you may consider keeping the securities in different demat accounts and mention nominee(s) as per your choice.

Yes, NRI can be a nominee in a demat account subject to the provision of foreign exchange regulations in force.

The demat account holders need to mention the information related to nominee(s) in the account opening form at the time of account opening. Up to three different individuals may be mentioned as nominee in one demat account.

In case, nomination was not done at the time of account opening or was done but account holder(s) wants to change it anytime later, then a ‘Nomination’ form needs to be filled up and provided to DP.

Yes, the nomination can be changed anytime by the account holder(s) by simply filling up the nomination form once again and submitting it to the DP.

Nomination is not mandatory for demat account. However, it is very much recommended to have nominee mentioned in the demat account. In the unfortunate case of death of sole account holder, it makes the process of transmission very easy and fast. In you do not wish to mention any nominee at the time of account opening, you are required to state that “I/We do not wish to make a nomination”.

 
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Transmission is the process of law by which securities belonging to a deceased account holder are transferred to surviving joint holder(s) / legal heirs / nominee of the deceased account holder. Process of transmission in case of dematerialized holdings is relatively convenient as the transmission formalities for all securities held in a demat account can be completed by submitting the requisite documents to DP. There is no need to approach various companies for this purpose, as is required when securities are held in physical form.

Upon death of account holder (sole holder or joint holder), how the transmission will take place, is described in the diagram number 6 -

Diagram 6Diagram 6

In case of the death of the sole holder, for transmission of securities, the nominee needs to submit duly filled-in transmission form along with a copy of the death certificate duly attested by a Notary Public or a Gazetted Officer. In case the account of the claimant is not with the same Participant, copy of Client Master Report of the account of the claimant (certified by the concerned DP) is also required. After verification of these documents, the DP will transmit the securities to the demat account of the nominee.

  • In such a case, the securities would be transmitted to the account of legal heir(s), as may be determined by an order of the competent court. Following documents are required for this purpose -
    • Duly filled in Transmission Form.
    • Copy of the death certificate duly attested by a Notary Public or by a Gazetted Officer.
    • A copy of the Succession certificate duly attested by a Notary Public or by a Gazetted Officer or
    • An order of a court of competent jurisdiction where the deceased has not left a Will or
    • A copy of the Probate of Will or
    • Letter of Administration duly attested by a Notary Public or by a Gazetted Officer.
    • In case the account of the claimant is not with the same Participant, copy of Client Master Report of the account of the claimant is also required (certified by the concerned DP).
  • However, if the value of securities to be transmitted is below ₹5,00,000/- (on the day of application for transmission), the DP may process the request based on following documents:
    • Duly filled in Transmission Form.
    • Copy of the death certificate duly attested by a Notary Public or by a Gazetted Officer.
    • Letter of Indemnity (in prescribed format).
    • Affidavit (in prescribed format) and
    • No Objection Certificate(s) in prescribed format or Family Settlement Deed.
    • In case the account of the claimant is not with the same Participant, copy of Client Master Report of the account of the claimant is also required (certified by the concerned DP).
  • In such a case, the securities would be transmitted to the surviving holder(s), irrespective of the nomination. For example, if the account is in the joint names of Mr. A, Mr. B and Mrs. C, in the event of the death of Mr. B, the securities will be transmitted to surviving holders that is, Mr. A and Mrs. C. The surviving holder(s) would need to submit the following documents to the DP:
    • Duly filled in Transmission Form
    • Copy of the death certificate duly attested by a Notary Public or by a Gazetted Officer.

After verifying the above documents and satisfying himself, the DP will transmit the securities to the surviving holder(s) account and will close the account of the deceased

'Transmission cum Demat' is a very useful facility when one of the joint holders mentioned in securities certificate (held in physical form) has died and remaining holder(s) wish to have the securities transmitted in their name in demat form. Using this facility the twin objectives of deletion of name of one of the deceased joint holders and dematerialization of securities can be achieved in a single step. This is explained in diagram number 7 - Diagram 7

Diagram 7
 
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  • The procedure for selling dematerialized securities is very simple, as given below -
    • You need to give a sell instruction to your stockbroker.
    • Once your sell order has been executed and you receive confirmation of execution of your order, you are required to provide the securities sold to your stockbroker to meet your pay-in obligation. For this purpose, you need to submit a duly filled in 'Delivery Instruction Slip' to your DP within the time frame prescribed by your DP.
    • The DIS should contain instruction to your DP to debit your account with the number of securities sold by you and credit your broker's clearing account. Alternatively, NSDL SPEED-e service can be used to give electronic instruction online.
    • Once the instruction is successfully processed by your DP, your broker will get the shares and will arrange securities pay-in to the clearing corporation.
    • Upon receipt of (funds) payout from the clearing corporation, your broker will arrange the credit of due sale proceeds to your linked bank account.
  • The procedure for buying securities in demat form is very simple, as given below -
    • You need to give purchase instruction to your stockbroker.
    • Once your buy order has been executed and you receive confirmation of execution of your order, you are required to provide the due amount to your stockbroker to meet your (funds) pay-in obligation.
    • Your broker receives credit of securities in its clearing account on the (securities) pay-out day.
    • Your broker gives instruction to its DP to debit its clearing account and credit your demat account for the securities bought by you.
    • If you have not given standing instruction in your demat account, then you will need to give 'Receipt Instruction' to your DP for receiving credit.
    • You should ensure that your broker transfers the securities to your account, before the book closure. If the securities remain in the account of your broker, the company will give corporate benefits (dividend, bonus etc.) to the broker. In that case, you will have to collect the benefits from your broker.

Any trade settled through a clearing corporation is termed as a 'Market Trade'. These trades are done through stockbrokers on the platform of a recognized stock exchange. An 'Off Market Trade' is one which is settled directly between the two parties, without the involvement of clearing corporation.

Transfer of securities from a demat account held with one depository to another demat account held with a different depository is known as 'Inter Depository Transfer' (IDT). IDT is possible for those ISINs which are active in both the depositories

In case you give a pay-in instruction for quantity which is more than the quantity available in demat account at the time of settlement of the instruction, then your demat account is debited to extent of balance available. In case of off market transfer, if sufficient balance is not available then the entire instruction fails, meaning that debit does not take place.

On every stock exchange, various transactions happen under different trade windows. These windows are identified by a distinct combination of a market type and a settlement number. It is important that you mention correct market type and settlement number (together said to be settlement details in depository system) in the delivery instruction slip so that your pay-in obligations are settled correctly. These details can be found in the contract note issued by the broker

Under T+2 rolling settlement system, trades (buy and sell) happening on the platform of stock exchange on day 1 (T) are settled by the concerned clearing corporation two days later, means on the day 3 (T+2). For example, trades undertaken on Monday will be settled on Wednesday (presuming all days are working days). Similarly, all trades undertaken on Tuesday are settled on Thursday, so on and so forth. This kind of settlement system is known as T+2 rolling settlement.

Clearing corporations prescribe timelines for pay-in and payout of securities as well as funds for each settlement. Stockbrokers are required to adhere to them. In order to enable them to do so, DPs in turn prescribe time lines for securities pay-in for clients doing the sell trades (funds settlement happens through banks and therefore, is out of depository system).

As the trade has happened on Monday, pay-in of securities will take place on Wednesday, meaning your broker must get the securities before the clearing corporation prescribed time on Wednesday. As your DP will need some time to process the delivery instruction slip given by you, it would have prescribed some timeline for submission of pay-in related instructions (typically previous day of pay-in day). You need to ensure that your delivery instruction slip reaches your DP well before the given time and day. It may therefore be better to submit your delivery instruction slip to your DP immediately once you receive confirmation of your sell order from your broker.

Your DP will prescribe the timelines to be followed by you for submission of delivery instruction slips and communicate to you. These are generally printed on the DIS booklet given by the DP also for your information.

The broker is required to transfer the securities to you within one working day, after securities are received in its clearing member account, provided you have made the requisite payment to the broker.

Every DP prescribes some timelines for submission of delivery instruction slips. If it happens that your instruction slip reaches your DP after such deadline time, your DP can accept it with limited liability for its execution in the depository system. In such cases, DPs do mark the instruction slip (client copy as well as their office copy) with stamp containing description similar to 'Received late, Subject to best efforts' or 'Late, received at Client's risk'. If for some reason, DP is unable to execute the late received instruction in depository system successfully, and this results into client failing to meet its pay-in obligation, leading to financial loss (auction charges etc.), DP cannot be held liable for such loss.

  • Delivery Instruction Slips are similar to your bank account cheque book. You should take care of following points in respect of DIS -
    • Ensure that you receive DIS book from your DP. Do not accept loose slips (unless required so in urgent situations).
    • Ensure that each DIS is pre-printed and serially numbered.
    • Ensure that your Client ID is pre-stamped or pre-printed on each DIS.
    • Do not leave your DIS with anyone else. Fill it and hand it over to your DP when you need to do so
    • Keep your DIS book safely. In case you happen to lose or misplace any slip or booklet, please inform your DP immediately in writing.
    • If DIS has place (lines) to mention more than one instruction and you are not using all of them, then please remember to strike out the unused lines / space before handing it over to your DP to prevent misuse by any.
    • Please ensure that the instruction slip is duly filled in with all required details and signed by all the joint holders before handing it over to your DP.

Execution date is the date on which securities will be actually debited from your account. In order to ensure that the instruction gets executed on the execution date written on the delivery instruction slip, it must be entered by DP in the depository system. You may issue the instruction well in advance of the date on which you want the securities to be debited from your account (your account will be debited only on the execution date mentioned in DIS).

By giving a future dated instruction the risk of non-execution of instruction due to lack of time or last minute rush is avoided. You may like to use this facility to ensure that shares etc. are transferred to intended beneficiary's account on a day of your choice.

  • As per SEBI's guidelines, the reason or purpose for which the off market transfer is undertaken and consideration for such transfer, needs to be mentioned on the delivery instruction slip submitted for such transfer. There are various options given in the DIS booklet for 'Reason / Purpose'. You need to select the appropriate one and mention it on the DIS. If the Reason / Purpose of the transfer is 'off market sale' then in addition to amount of consideration, you need to mention the following details also -
    • Date of payment.
    • Mode of payment (cash, cheque or electronic payment).

In case mode of payment is cheque or electronic payment, transferee's name, bank account number, bank name, transaction reference number for electronic payments or cheque number for cheque payments are required.

 
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Pledging is basically committing the shares held by a person (pledgor) in favour of another person (pledgee) as a security or collateral for the exposure granted by pledgee. Generally, shares are pledged by the concerned shareholder for taking loan against shares.

  • The procedure is as follows:
    • You need to arrive at a deal with the bank in terms of loan amount, tenure, rate of interest and kind of securities offered as collaterals, etc. The commercial aspects of such deal are subject matter of mutual negotiation and hence outside the purview of Depository.
    • Both of you (pledgor) and bank / lender (pledgee) must have demat account with the same depository (with same or different DPs).
    • You as pledgor need to initiate the pledge by submitting a duly filled up ‘Pledge Initiation Instruction Slip’ to your DP.
    • Once your DP processes your instruction, the details can be seen (or searched) by the DP of the bank / lender (pledgee). Then Pledgee needs to give duly filled in ‘Pledge Confirmation Instruction Slip’ to its DP. (Alternatively, pledgee may opt to have automatic pledge confirmation facility in its demat account). Upon execution of such instruction, the pledge will be created in the depository system.

Once the pledge instruction is confirmed in depository system, the underlying securities are blocked in the demat account of pledgor. Until this block remains, pledgor is disabled from disposing of those securities.

Upon repayment of loan, pledgor should submit a duly filled in ‘Pledge Closure Initiation Slip’ to its DP. Once executed, the information is forwarded to DP of the pledgee. The pledgee then may submit ‘Pledge Closure Confirmation Instruction’ to its DP. (Alternatively, the pledgee may give instruction to its DP to close the pledge without waiting for request from the pledgor).

Once pledge is closed, the block created on the underlying securities is removed and they become available once again for disposal by the erstwhile pledgor.

Yes, if the pledgee (lender) agrees, you may change the securities offered in a pledge. For this purpose, a new request for creation of pledge will have to be given by the pledgor and the existing pledge needs to be closed.

The pledgor continues to be the beneficial owner of the underlying securities during the period of pledge. Therefore, all the corporate benefits declared by the company during this period belong to pledgor. The pledgee will get the benefits if pledge is invoked and on record date, the shares remain in pledgee’s account.

If the shares are in pledged status on the record date, bonus shares are credited to pledgor’s account with pledge marked in favour of the pledgee. Later when the pledge is closed, all the shares (including the bonus) will be credited to the pledgor’s account as free balances. In case of invocation of pledge, all the shares (including the bonus) will be moved to pledgee’s account.

Digital LAS (Loan Against Shares) is a facility enabled by NSDL for making the process of loan against shares online. Using this facility, a demat account holder can obtain finance (loan) against pledge of eligible securities held in demat account in favour of lending bank. For more information on this, you may check with a participating bank.

In depository system, there is no difference between pledge and hypothecation except that pledge can be invoked by the lender (pledgee). Whereas, in case of hypothecation, for invocation to take place, consent of borrower (hypothecator) is also required.

 
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Securities Lending and Borrowing Scheme (SLBS) is a mechanism by which short sellers can borrow the required securities on the stock exchange platform to meet their delivery obligations or as collaterals. This scheme is run by clearing corporations which are registered as ‘Approved Intermediaries’.

Stockbrokers who register themselves as ‘Participant’ with the Approved Intermediary, may participate in SLBS for their own account or on behalf of their clients. Retail investors may participate in the scheme through their stockbroker as lender or borrower. Lending and borrowing are effected through the depository system on a T+ 1 settlement basis. SLBS is permitted in dematerialized form only.

SLBS is a market based system which helps to meet the temporary need of the securities. Short sellers may meet their delivery obligation or collateral requirement by borrowing the securities from the market. Lenders on the other hand are able to earn lending fee by lending the securities lying idle in their portfolio.

Yes. You can lend your securities through your stockbroker who has registered itself as ‘Participant’ with the ‘Approved Intermediary’ (clearing corporation). You need to enter into a standard agreement with your stockbroker.

The tenure of lending and borrowing may be between 1 to 12 months. However, lenders and borrowers do have the option of recall of securities and early return of securities, respectively.

No. Securities, which are available for trading in Futures and Options segment of the stock exchange, are available for lending and borrowing at present. The list of securities eligible under SLBS are periodically announced by the respective approved intermediaries.

You may place your order to your broker for lending the securities. Your broker will enter the order on the platform of the stock exchange. After successful execution of the order, you will need to give delivery instruction slip to your broker for the purpose of payin.

Borrower of securities may return the securities at the end of the agreed period of lending or before it (if foreclosure of transaction is permitted by approved intermediary for that security). Upon return, securities will be credited to your demat account through your broker or directly by the clearing corporation.

Securities in which there are corporate actions are subject to either foreclosure of transaction or adjustment depending on the type of corporate action. All transactions in case of corporate actions other than dividend and stock-spilt are foreclosed on the ex-date. In case of dividend, the dividend amount is collected from the borrower by clearing corporation and paid to the lender. In case of stock split, the position of the borrower is proportionately adjusted and the lender will receive the revised quantity on the reverse leg settlement date.

You may place your order with your broker specifying the details like name and quantity of securities required, borrowing period). Your broker will enter your order in exchange platform. Upon receiving the pay-out, your broker will arrange the credit of securities in your demat account. You will need to return the borrowed securities at the end of period (or before it, if so desired and permitted by the approved intermediary).

 
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The concerned company obtains the details of beneficiary holders and their holdings from NSDL. The payment to the investors will be made by the company through the ECS ( Electronic Clearing Service) facility or by issuing warrants on which your bank account details are printed. The bank account details will be those which you would have mentioned in your account opening form or changed thereafter.

The concerned company obtains the details of beneficiary holders and their holdings from NSDL. Your entitlement will be credited by the company directly in your NSDL depository account.

An allotment advice will be sent by the Issuer/ its R&T agent for bonus/ rights entitlement. The Transaction Statement given by the DP, will also show the bonus/ rights credit into the account. The quantity shown in the advice and statement of transaction should match.

 
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Yes. You can dematerialise and hold all such investments in a single demat account.

 
 

NSDL has no restriction on type of instruments that can be admitted in the depository. Instruments like Bonds, Debentures, Commercial Papers, Certificate of Deposit, etc. irrespective whether these instruments are listed/unlisted/privately placed or even issued to a single holder can be dematerialized.

NSDL does not charge any fee one-time or on recurring basis from issuer for admitting any securities for dematerialisation. The only cost that will have to be borne by the company is towards electronic connectivity with NSDL. Electronic connectivity can obtained either through setting up in-house connectivity or through appointing a Registrar & Transfer Agent connected with NSDL.

Company has to send a request to NSDL detailing type of instrument alongwith a Letter of Intent. On receipt of request, a tripartite agreement will be signed between NSDL, Issuer and Registrar & Transfer Agent. Ones admitted, these securities would be made available for dematerialisation by NSDL.

No. The same terms and conditions of the existing bipartite/tripartite agreement will be applicable for the debt instruments. The Issuer has to provide a confirmation on the same to NSDL before admitting the securities.

Each instrument will be identified separately in NSDL system through a unique code called ISIN. Description of each instrument will be communicated to all the DP and Issuers on activation.

Unique characteristic of each instrument will be incorporated in the company and security descriptor in NSDL system. The coupon rate and the date/year of maturity are a part of the standard descriptor. This will enable both Investors and the Depository Participants to easily identify these instruments.

Any new instrument can be issued directly in dematerialized form without recourse to printing of either Letter of Allotment or Certificates. Securities will be directly credited into the accounts of the investor by NSDL on receipt of allotment details from Issuer/Registrar & Transfer Agent.

Letter of allotment (LOA) issued to investors prior to issue of debenture certificates can be issued in demat form. On creation of charge, the issuer will have to submit the corporate action information form for conversion of LOA to Debentures/ Bonds and the description of the security will be changed in the system to reflect the conversion.

Yes, the Issuer has to pay the relevant stamp duty as applicable irrespective whether it is issued in either physical or demat form. As per the Finance Act 2000, stamp duty is waived only for transfers within the depository.

One way of handling of redemption in dematerialised form is through transfer of all balance under the instrument (i.e. ISIN) to a demat account opened by issuer for the purpose. Prior to the date of redemption, the issuer has to complete all formalities associated with redemption in physical form. On the day of redemption, a debit-credit action will be undertaken wherein all balances under the instrument will be transferred to say, an Issuer Redemption Account. Alternatively, on receipt of information regarding completion of statutory requirements for redemption, ISIN will be deactivated in NSDL.

Interest payment for debt instruments will be handled in the same way as corporate benefits are handled for equity. On communication of record date by the Issuer, beneficiary position will be downloaded to the Issuer/Registrar by NSDL. In addition to the above statutory requirement, NSDL provides weekly download of beneficiary position to all Issuer/Registrar.

Exercising of call/put option only prepones the redemption date of an instrument. On exercising call option by the company, the same procedure will be followed as in normal redemption. For put option, once the same is exercised by all/part of the investors, the details of which is communicated by the Issuer a debit action will be carried out by NSDL for those accounts of the investors.

 

It depends upon the convenience of investor whether one wants to open a separate account for debt instruments. NSDL has no restriction if existing account or multiple accounts are used for dematerialisation of debt instruments.

Procedure for dematerialisation of debt instrument is same as that carried out for equity shares. In order to dematerialise his/her certificates; an investor will have to first open an account with a DP and then request for the dematerialisation of certificates by filling up a dematerialisation request form [DRF], which is available with DP and submitting the same alongwith the physical certificates. The investor has to ensure that before the certificates are handed over to the DP for demat, he marks "submitted for dematerialisation" on the face of the certificates.

No. Single statement of holding will reflect all holdings in a particular account irrespective of type of instrument. Along with Statement of Holding, the DP's will also provide periodically each client with a Statement of Transaction giving the details of all transaction during the period under each depository account.

Procedure involved for delivery or receipt of debt instrument will be same as involved for equity shares.

NSDL does not charge any fee for dematerialisation of certificates from depository participants. DPs are free to charge any charges towards dematerialisation from its clients. A detailed fee structure charged by NSDL from DP's is provided in the Fee Structure Schedule.

Payment of interest is handled in the same way as corporate benefit like dividend in equity. List of beneficiary holders as on book closure date consisting of Holder Name and account number, address, bank details and DP ID is downloaded to the Issuer. Based on the information provided above, the issuer despatches interest warrants to the holders of dematerialised instruments.

On exercising put option by an investor, a debit corporate action will be carried by NSDL where the balance under the instrument is reduced to zero. The details of put option exercised by investors will be provided by the company to NSDL.

Procedure followed will be identical to that followed for direct credit of equity shares during IPO/Bonus/Rights. The issuer will provide an option for allotment of securities in demat form in its issue prospectus. Investors opting for demat will have to provide demat account number alongwith DP ID in their application form. On being allotted, a direct credit will be carried out in accounts of the allottees.

 

The company has to sign a tripartite/bipartite agreement with NSDL. If the company has admitted any of its securities in NSDL (shares, debentures, etc.) and wishes to appoint the same R & T agent for CP, then the company need not sign a separate tripartite / bipartite agreement. Company has to send a Letter of Intent (LoI) and a Master File Creation Form (MCF) for admitting its securities. Once admitted these securities would be made available for dematerialisation by NSDL.

Commercial paper can be issued in multiples of ₹5 lacs. The face value of the CP by default will be taken as ₹5 lakh in the NSDL system. The securities (CP) will be credited in the IPAs allotment account in terms of units. For e.g. If the company proposes a ₹50 crore issue, then 1000 units will be credited in the IPAs allotment account.

No. The same terms and conditions of the existing bipartite/tripartite agreement will be applicable for the CP. Only, a LoI and a MCF submitted by the issuer is sufficient.

Each instrument will be identified separately in NSDL system through a unique code called International Securities Identification Number (ISIN). Description of each instrument will be communicated to all the Depository Participants and Issuers on activation of ISIN in NSDL system.

On the receipt of LoI alongwith duly filled in MCF and requisite documents complete in all respects, an ISIN will be allotted on the same day.

The company name will be accompanied by CP alongwith date/year of maturity as a part of the standard descriptor. This will enable both Investors and the Depository Participants to easily identify these instruments. e.g. RIL 90D CP 10NV00 indicates 90 day (duration of the paper) CP issued by Reliance Industries with maturity date as November 10, 2000.

If the CP is allotted on different days say for 89 days to one investor, 88 days for another investor, the number of days in the descriptor will indicate the number of days the Issuer has provided NSDL at the time of the activation of the ISIN. Also, if the CP has been provided a backstop facility then the descriptor changes to RIL 90D CP 10NV00-BS.

A CP shall be issued in the form of a promissory note and held in dematerialized form.

Yes. The Issuer has to pay the relevant stamp duty as applicable. The stamp duty may be paid online and the Electronic - Secure Bank and Treasury Receipt (e-SBTR) may be submitted to the IPA alongwith the usance promissory note. In case the issuer is not in a position to make payment of stamp duty through e-SBTR, it can make the payment as per the manual process and submit a payment challan copy to IPA.

As per the FIMMDA guidelines, in case of default in payment by the issuer, the IPA will intimate the investors, the depositories, R&T Agents, trustee (if any) and the credit rating agencies. The holders would have recourse to the Issuer and stand-by credit provider (through trustee, if any), on the strength of default advice received from IPA.

In case of corporate action of CPs, a flat rate of ₹10,000/- is levied on the Issuer for 5 normal corporate actions. Additional fee of ₹10,000/- for every additional five issues.

No. It is to be agreed between the issuer and the RTA.

CP being a ‘standalone’ product, it would not be obligatory in any manner on the part of banks and FIs to provide stand-by facility to the issuers of CP.

However, Banks and FIs have the flexibility to provide for a CP issue, credit enhancement by way of stand-by assistance/credit backstop facility, etc., based on their commercial judgement and as per terms prescribed by them. This will be subjected to prudential norms as applicable and subject to specific approval of their Board.

Yes. Non-bank entities including corporates can provide unconditional and irrevocable guarantee for credit enhancement for CP issue provided that the offer document for CP properly discloses the net worth of the guarantor company, the names of the companies to which the guarantor has issued similar guarantees, the extent of the guarantees offered by the guarantor company, and the conditions under which the guarantee will be invoked.

issuer shall have the issue of Commercial Paper underwritten or co-accepted.

Issuer:

The issuer of CP shall -

  • Appoint an IPA for issuance of a CP.
  • Comply with all relevant requirements under RBI directions and furnish a declaration in this regard to the IPA.
  • Ensure that the proceeds from CP issues are for declared end uses.
  • Furnish the board resolution authorizing the company to borrow through issuance of a CP to the IPA.
  • Keep the bank(s) from whom it has outstanding fund or non-fund based credit facility(ies) informed of its market borrowings, including through CPs, latest by the end of the month in which a CP was issued.
  • Arrange for crediting the CP to the demat account of the investor with the depository through the IPA within 7 days of issue.
  • Route all subscriptions/redemptions/buybacks/payments and default details through the IPA.
  • Make disclosures in the offer document as stipulated in RBI directions.
  • Submit a certificate from the CEO/CFO to the concerned IPAs on quarterly basis that CP proceeds are used for disclosed purposes, and certifying adherence to other conditions of the offer document and the CP directions. The certificate may be provided within 15 days from the close of the quarter.
  • Inform the CRA and IPA on the same day about any default/delay in CP related payments.
  • The issuer who has defaulted on a CP shall not be allowed to access the CP market for six months from the date of repayment of the defaulted obligation.

IPA:

The IPA for a CP issuance shall

  • Ensure that the borrower is appropriately authorised to borrow through CPs.
  • Verify all information disclosed in the offer document before issuance.
  • Verify all documents submitted by the issuer and ensure that they are in order and issue a certificate to this effect.
  • Make available the IPA certificate in electronic form on the website of the depositories for the CPs.
  • Verify and hold certified copies of original documents and/or digitally signed documents in its custody.
  • Report the details of issuance of a CP or its buyback and instances of default on the F-TRAC platform, by close of business hours, of the day of issuance, buyback or default as the case may be. Until CCIL advises full operationalisation of F-TRAC, the current reporting arrangements shall continue.

Credit Rating Agency (CRA):

  • A CRA must act responsibly in rating CP issuances and continuously monitor the rating assigned to an issue and disseminate rating revisions, if any, to public through its publications and on its website.
  • A CRA must publicly disseminate the ratings of the CP and any subsequent change in the ratings, on the date of rating or change in rating, as the case may be.

Yes. FIMMDA has specified the formats for letter of offer to be issued by CP issuer and IPA certificate to be issued by IPA in its Operational guidelines on CPs.

 

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

  • Companies, including Non-Banking Finance Companies (NBFCs) and All India Financial Institutions (AIFIs), are eligible to issue CPs subject to the condition that any fund-based facility availed of from bank(s) and/or financial institutions is classified as a standard asset by all financing banks/institutions at the time of issue.
  • Other entities like co-operative societies/unions, government entities, trusts, limited liability partnerships and any other body corporate having presence in India with a net worth of ₹100 crore or higher subject to the condition as specified under (a) above.
  • Any other entity specifically permitted by the Reserve Bank of India (RBI).
  • All residents, and non-residents permitted to invest in CPs under Foreign Exchange Management Act (FEMA), 1999 are eligible to invest in CPs; however, no person can invest in CPs issued by related parties either in the primary or secondary market.
  • Investment by regulated financial sector entities will be subject to such conditions as the concerned regulator may impose.

CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue. However, the maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid.

CP can be issued in denominations of Rs.5 lakh or multiples thereof.

Yes. CP may be issued on a single date or in parts on different dates provided that in the latter case, each CP shall have the same maturity date. Further, every issue of CP, including renewal, shall be treated as a fresh issue.

Yes.

  • Eligible issuers, whose total CP issuance during a calendar year is ₹ 1000 crore or more, shall obtain credit rating for issuance of CPs from at least two Credit Rating Agencies registered with SEBI and should adopt the lower of the two ratings. Where both ratings are the same, the issuance shall be for the lower of the two amounts for which ratings are obtained.
  • The minimum credit rating for a CP shall be ‘A3’ as per rating symbol and definition prescribed by SEBI.

Any scheduled bank can act as an IPA for issuance of CP.

Yes. A CP will be issued in the form of a promissory note and will be held only in dematerialised form through any of the depositories approved by and registered with SEBI.

Yes. CP is issued at a discount to face value as may be determined by the issuer

The investor can hold CP in same account along with other securities like equity, debentures, bonds, etc. However, if an investor desires, the investor can hold the CP in a separate demat account also. NSDL has no restriction if existing account/different accounts are used for holding CPs in dematerialised form.

Yes. CPs are actively traded in the OTC market. Such transactions are to be reported to the Financial Market Trade Reporting and Confirmation Platform (“F-TRAC”) of Clearcorp Dealing System (India) Ltd. within 15 minutes of the trade by all eligible market participants.

Buyer and Seller decide upon price and quantity of securities to be transacted. Seller authorises its DP through delivery instructions to debit his account and transfer the securities into the account of Buyer who may have opened account with the same or any other DP. Buyer receives the securities in its account immediately if the buyer has provided standing instruction to its DP. Settlement of funds is between the parties as agreed between them.

For account transfers, NSDL charges the DPs and not the investors. NSDL's charges to its DPs are fixed and are based on the usage of NSDL system. Complete details of NSDL charges as are payable by the DPs are available on NSDL website (www.nsdl.co.in). The charge payable by the investor to the DP is determined as per the agreement between the investor and the DP

No. A single consolidated account statement received by investor will reflect all holdings and transactions in a particular account irrespective of type of instrument(s).

 

Sign a tripartite/bipartite agreement with NSDL. The Issuer has to send the Master Creation Form to NSDL providing the details of instrument along with a Letter of Intent. Once admitted, these securities would be made available for dematerialisation by NSDL.

No. The same terms and conditions of the existing bipartite/tripartite agreement will be applicable for the Certificate of Deposit.

Certificate of Deposit can be issued in multiples of Rs. 1 lakh. The face value of the CD by default will be taken as Rs. 1 lakh in the NSDL system. The securities (CDs) will be credited in the investor's account in terms of units. For e.g. If the Issuer proposes a 1 crore issue, then 100 units will be credited in the Investors account.

Yes, the Issuer has to pay the relevant stamp duty as applicable irrespective whether it is issued in either physical or demat form.

Yes, each type of security like Equity Shares, Debentures, bonds, Commercial Paper etc. is identified separately in the NSDL System by a unique code called ISIN (International Securities Identification Number). Certificate of Deposits having different maturity dates will be identified separately in NSDL system through separate ISINs. However Certificate of Deposits having the same maturity date will be identified by the same ISIN irrespective of the date of allotment. Description of each ISIN will be communicated to all the DP and Issuers on the activation of ISIN in NSDL system.

The Issuer Name will be accompanied by CD (Certificate of Deposit) alongwith date/year of maturity as a part of the standard descriptor. This will enable both Investors and the Depository Participants to easily identify these instruments. e.g. ICICI Bank CD 10NV05 indicates Certificate of Deposit issued by ICICI Bank Limited with maturity date as November 10, 2005.

As per the RBI Monetary and Credit Policy 2002-03, with effect from June 30, 2002, banks and FIs should issue CDs only in the dematerialised form. A new CD can be issued directly in demat form without recourse to printing of Certificates. Securities will be directly credited into the allotment account of the investor's by NSDL on receipt of allotment details from Issuer/Registrar & Transfer Agent. The issuance in demat form will be in accordance with the Fixed Income Money Market and Derivatives Association of India (FIMMDA) Guidelines on issuance of CD's, details of which are available on the www.fimmda.org.

The steps to be taken for allotting CDs in demat form are enumerated in the Process Flow.

According to the guidelines issued for the CD by the FIMMDA the Issuer has to ensure that the investor receives the credit (of the CD) in his demat account latest by the following working day from the date of realization of the cheque.

The procedure for dematerialisation of Certificate of Deposit is same as that carried out for equity shares. Investor shall submit the Certificate of Deposit alongwith demat request form (which is available with DP) to the DP. Only those Certificates of Deposit, which have been made available for dematerialisation by its Issuer, can be dematerialized.

The Issuer has to open a redemption account with Depository Participant (DP). The details of the Redemption Account (DP_ID, Client ID) have to be provided at the time of activation of ISIN. The Investors holding CDs in demat form will give the Delivery Instruction Slip (DIS) to their respective Depository Participants to transfer the CDs to the Issuers Redemption Account so that the transfer takes place by 3.00 p.m. atleast two working days prior to the maturity date.

After the confirmation from the Issuer to NSDL on payment of redemption proceeds to all the investors, the balance in the redemption account is extinguished by carrying out debit-type corporate action of the redemption account. The Depository Registrar (at the Issuers instance) in co-ordination with NSDL will initiate this corporate action

As per the FIMMDA guidelines, the investor after giving the transfer instructions as mentioned above should also communicate to the issuer the place at which the payment is request by a letter/fax enclosing the copy of the DIS it had given to its DP. On the receipt of Certificate of Deposit in the redemption account, the issuer will make payment to the investors.

The issuer can request for beneficiary download on T-2 settlement date or as on the record date. This beneficiary position will only indicate the details of the CD holders to the Issuer as on that particular date but will no way imply that redemption amount will be paid to the above beneficiary holders. Redemption amount will be paid to the investor who finally transfers the balances to the Issuers redemption account. This is considered as a statutory download and is free of cost.

In addition, NSDL on a weekly basis provides the download of beneficiary position to all the Registrars (on every Friday - there is no need for an issuer to solicit a special benpos on a Friday). Issuers can take the details from the registrar. The same can be exported to the back office of the Registrar & Transfer agent on Saturday morning.

NSDL also provides downloads of beneficiary position as and when requested by the Issuer. For these type of download NSDL charges a flat fee of Rs 5000 where number of records are less than 10,000 and a fee of Rs 10,000 for records exceeding 10,000.

The ISIN will be freezed at the end of the redemption date. It will be done so only after the Issuer confirms that all the investors have been paid the redemption proceeds.

Yes, A new ISIN has to be generated to identify these rolled over Certificate of Deposit separately in the NSDL system, as the date of maturity will be different. However in case an ISIN already exists for the maturity date of the rolled over CD, then the Issuer can directly do the allotment in the existing ISIN.

In case of issue of Certificate of Deposits and for Short term Debt instruments (less than or equal to 365 days), excluding Commercial Paper, a fee of Rs. 10,000/- (plus service tax) shall be levied on the Issuer for five such issues made in a financial year. Provided however an additional fee of Rs.10,000/- (plus service tax) shall be levied on the Issuer for every additional five issues.

No. The charges are to be decided mutually by the issuer an its Depository Registrar.

 

It depends upon the convenience of investor whether one wants to open a separate account for Certificate of Deposit. NSDL has no restriction if existing account or multiple accounts are used for dematerialisation of Certificate of Deposit.

The minimum size to be subscribed/transacted by investor is Rs. 1 lakh.

Dematerialisation is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited in the investor's account with his DP.

The procedure for dematerialisation of Certificate of Deposit is same as that carried out for equity shares. The client (holder) will submit a request to the DP, in the Dematerialization Request Form (DRF), along with the original CD certificate/s to be dematerialized. Before submission, the client/holder has to write on the reverse of the 'CD' (certificate/s) in the space provided for endorsement followed by signature of authorized official of holder;

"SURRENDERED FOR DEMATERIALISATION and credit to my/our demat ACCOUNT. (account number) with (DP) name /-------- number.

The DP would give an acknowledgment (DRF acknowledgement portion) to its client confirming the acceptance of the CD for dematerialisation. Only those Certificates of Deposit, which have been made available for dematerialisation by its Issuer, can be dematerialized. However, as per the RBI Monetary and Credit Policy 2002-03, with effect from June 30, 2002, banks and FIs should issue CDs only in the dematerialised form.

No. Single Statement of Transaction will reflect all holdings in a particular account irrespective of type of instrument.

Buyer and Seller decide upon price and quantity of securities to be transacted. Seller authorises its DP through Delivery Instructions to debit his account and transfer the security into the account of Buyer who may have opened account with the same or any other DP. Buyer receives said securities in its account immediately if the buyer has given one-time standing instruction to its DP. Settlement of funds between the parties will be settled outside the ambit of NSDL

NSDL does not charge any fee for dematerialisation of certificates from depository participants. Also, no settlement fee shall be charged by NSDL. However, DPs are free to levy any charges towards dematerialisation/trade from its clients.

Procedure followed will be identical to that followed for direct credit of equity shares during IPO/Bonus/Rights. Investors will have to provide demat account number alongwith DP ID to the issuer.

The Issuer has to open a redemption account with Depository Participant. The Investors holding CDs in demat form will give the Delivery Instruction Slip (DIS) to their respective Depository Participants to transfer the CDs to the Issuers Redemption Account so that the transfer takes place by 3.00 p.m. atleast two working days prior to the maturity date. On sighting the securities in the Redemption account, the Issuer will initiate the steps to pay the investors the redemption proceeds.

Issuer will open a redemption account with the DP at the time of issue of Certificate of Deposit in demat mode. This redemption account will be the same for all the CDs Issued by the Issuer. As per the FIMMDA guidelines the Issuer will provide the details of the redemption account in the form of a certificate to the first investor of the CD. The details of the Issuers redemption account will also be communicated to all its Depository participants by NSDL.

 
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BSDA is like a regular demat account but with no or low annual maintenance charges

  • Individual persons meeting the following conditions may avail the benefits of BSDA -
    • Individuals who have only one demat account as sole or first holder (across depositories).
    • Individuals can be second or third having any other demat account(s).
    • Value of securities held in the demat account shall not exceed ₹4,00,000 at any point of time.
    • It is necessary to provide a mobile number and opt for SMS alert facility in order to avail BSDA.
  • The annual maintenance charges for BSDA, as stipulated by SEBI are as below:
      Sr.No Value of Debt Securities Value of Other than Debt Securities Total Value of Holdings AMC
      1 50,000/- 50,000/- 1,00,000/- No AMC
      2 1,00,000/- 50,000/- 1,50,000/- No AMC
      3 1,50,000/- 50,000/- 2,00,000/- Maximum 100
      4 1,50,000/- 1,00,000/- 2,50,000/- Maximum 100
      5 2,00,000/- 2,00,000/- 4,00,000/- Maximum 100
      6 2,00,000/- 2,50,000/- 4,50,000/- As per Regular Account
      7 3,00,000/- 3,00,000/- 6,00,000/- As per Regular Account
      8 2,50,000/- 2,00,000/- 4,30,000/- As per Regular Account
      9 50,000/- 2,50,000/- 3,00,000/- As per Regular Account
      10 2,50,000/- 50,000/- 3,00,000/- As per Regular Account

The value of the holding for this purpose is determined by the DP based on the daily closing price or NAV for the securities / mutual fund units. If value of holding in BSDA exceeds the above limits on any day, DP may levy charges as applicable to regular accounts (non-BSDA) from that day onwards.

 
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Yes. NSDL has recently launched a facility for delivering instructions to your DP over Internet , called SPEED-e. The facility can be used by all registered users. Your DP will help you in registering for the facility.

You can submit delivery instructions electronically, on the SPEED-e website https://www.speed-e.nsdl.com, after your DP has authorised you to operate your account through the SPEED-e facility. You can monitor the status of such delivery instructions to ensure that the instructions have been executed.

The benefit offered by SPEED-e to a demat account holder / Clearing Member is the convenience of conducting demat account transactions using an Internet connection from anywhere at anytime eliminating paperwork. Time and efforts for obtaining delivery instruction forms from your DP and submitting them to the DP everytime you sell securities is saved.

For using the SPEED-e facility it is essential that your DP must be registered with NSDL for this facility. There are two types of users for this facility , one is password based user who logs in with his password and can transfer securities only to three pre-specified broker accounts of his choice. The second is the smart-card based user who is issued a smart card for logging on to the site and can transfer the securities to any account. A password user can visit the SPEED-e website, fill-up the registration form available on the website. The website would allot a registration number and the DP of the client would authorise him for using the facility upon submission of a request with the registration number.

A smart card user can download the form from the website, fill it and submit the same to its DP. The DP will process the form and enable the client for using the facility. The smart card user will also be issued a smart card reader and a smart card.

Smart card based access to SPEED-e is more secure as your identification is based both on "What you have i.e. smart card" and "what you know i.e. PIN code" and provides a digital signature to identify you. In the case of password based access , you should handle your password carefully. In view of this security difference, the password based users have been permitted to transfer securities through SPEED-e facility to only three pre-specified broker accounts. These three accounts can be changed by the user.

  • Following are the additional benefits of smart card option in SPEED-e facility :
    • smart card user can transfer securities to any account unlike password users where transfer of securities is permitted only to three pre-notified broker accounts;
    • single smart card can be used to access all your demat accounts, opened with the same DP;
    • facility of multiple authorisation;
    • you can freeze your demat account or any particular ISIN or specific quantity within an ISIN yourself, through SPEED-e. The account freezed using SPEED-e can be unfreezed only by you.

Thereby you can deliver instructions and transfer securities when you wish, lock the account and unlock it only when you need, i.e. complete control of your account in your hands.

For password based operation, only one user can operate the account. Joint holders will have to give a power of attorney to one joint holder among themselves. For smart card based operation, in addition to what is stated above, all the joint holders can operate the account independently or jointly using multiple authorisation facility.

 
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NSDL charges the DPs and not the investors. NSDL's charges to its DPs are fixed and are based on the usage of NSDL system. Complete details of NSDL charges as are payable by the DPs are available on NSDL website (www.nsdl.co.in). The DP charges its client for the services offered. The charges that the DP will be charging you for various services are mentioned in the Schedule of Charges which forms a part of the account opening agreement. You may keep a copy of this for your future reference. You can get the details of the charges from the DPs. You can also get a comparative list of DP charges from NSDL's office or from the NSDL website.

Your DP may revise charges by giving you 30 days notice in advance.

 
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Your DP will give you a Transaction Statement periodically, which will detail your current balances and the various transactions you have done through the depository account. If you so desire, your DP may provide Transaction Statement at intervals shorter than the stipulated ones, probably at a cost.

You will receive a Transaction Statement from your DP once in a quarter. If you have done any transaction during the quarter, you will receive the statement within fifteen days of the transaction.

In case of any discrepancy in the transaction statement, you can contact your DP. If the discrepancy cannot be resolved at the DP level, you should approach NSDL. NSDL also sends out a statement of holdings to a few clients of DPs, picked at random. In case the balance in your account as indicated by your DP does not tally with the balance as indicated by NSDL, you can contact your DP/ NSDL for clarification.

You should inform your DP and obtain a duplicate Transaction Statement.

No transaction can be effected in your account without your written authorisation. Further, if you are away for a long time, you have the facility of freezing your account wherein only credits into your account will be allowed and no debit will be possible.

In a rare event of your DP going bankrupt or closing the operations, the interests of the investors will be fully protected. In such a situation, the investors will be given an option of either transferring the securities to a new DP or they may rematerialise the securities.

  • The data carries a high importance in the NSDL depository system. NSDL has taken necessary steps to protect the transmission and storage of data. The data is protected from unauthorised access, manipulation and destruction. The following back up practices are adopted to protect the data:
    • Local Back up
    • Remote Back up
    • Disaster Recovery Site

In addition to this, every DP is required to take daily back up, at the end of each day of operation

NSDL system provides the facility to freeze the depository accounts for any debits or for both, debits and credits. In an account which is "freezed for debits", no debits will be permitted from the account, till the time it is unfreezed.

In case of failure of a DP to resolve your grievance, you can write to the investor grievance cell of NSDL at the following address:

The Officer in Charge
Investor Grievance Cell
National Securities Depository Limited

4th Floor, Trade World
Kamala Mills Compound
Senapati Bapat Marg
Email :

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Non- Resident Indian [NRI] means a person resident outside India who is a citizen of India or is a person of Indian origin.

Under the Foreign Exchange Management Act, 1999 [FEMA], a person who is NOT a person resident in India, as defined under Section 2 (v) of the Act is considered as a person resident outside India. The most important change in definition [since FERA 1973] is that the citizenship of a person no longer has a bearing in determination of residential status.

  1. Person of Indian Origin (PIO) means a citizen of any country other than Bangladesh or Pakistan, if
    1. he at any time held Indian passport; or
    2. he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or
    3. the person is a spouse of an Indian citizen or a person referred to in sub-clause [a] or [b].

Investment by PIO in Indian Securities is treated the same as the investment by non-resident Indians and requires same approvals and enjoys the same exemptions.

Overseas Corporate Body means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty percent by Non-Resident Indians and includes overseas trust in which not less than sixty percent beneficial interest is held by Non-Resident Indians directly or indirectly but irrevocably.

OCBs were debarred from Portfolio Investment Scheme w.e.f November 29, 2001. OCBs have been banned as a class of investor w.e.f September 16, 2003. However, they have been permitted to continue to hold the securities acquired by them prior to these dates. Accordingly OCBs may open a demat account, however it can be only for the purpose of dematerializing the existing holdings.

NRI/PIO can open a demat account with any Depository Participant [DP] of NSDL. The NRI/PIO needs to mention the type [NRI as compared to Resident] and the sub-type [Repatriable or Non-Repatriable] in the account opening form collected from the DP.

No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated authorised dealers.

No. Securities received against investments under Foreign Direct Investment scheme (FDI), Portfolio Investment scheme (PIS) and Scheme for Investment on non - repatriation basis have to be credited into separate demat accounts. Investment under PIS could be on repatriation or non - repatriation basis. Investment under FDI scheme is on repatriation basis.

No special permission is required. Holding securities in demat only constitutes change in form and does not need any special permission. However, only those physical securities which already have the status as NR- Repatriable / NR- Non-Repatriable can be dematerialised in the corresponding Depository Accounts.

No. An NRI must open separate demat accounts for holding repatriable and non-repatriable securities.

As per section 6(5) of FEMA, NRI can continue to hold the securities which he/she had purchased as a resident Indian, even after he/she has become a non resident Indian, on a non-repatriable basis.

Yes. It is the responsibility of the NRI to inform the change of status to the designated authorised dealer branch, through which the investor had made the investments in Portfolio Investment Scheme and the DP with whom he/she has opened the demat account. Subsequently, a new demat account in the resident status will have to be opened, securities should be transferred from the NRI demat account to resident account and then close the NRI demat account.

NRIs are permitted to make direct investments in shares/ debentures of Indian companies/ units of mutual fund. They are also permitted to make portfolio investments i.e. purchase of share / debentures of Indian Companies through stock exchange. These facilities are granted both on repatriation and non-repatriation basis.

Yes. The issuing company is required to issue shares to NRI on the basis of specific or general permission from GoI/RBI. Therefore, individual NRI need not obtain any permission.

No.

Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India.

Investment can be made both on repatriation or non-repatriation basis. For making investment on repatriation basis, it will be necessary to make payments by way of inward remittance or by debit to the NRE / FCNR account of the NRI / PIO. Investment on non-repatriation basis can also be made by way of inward remittance or by debit to the NRE / FCNR / NRO accounts.

The sale proceeds of the repatriable investments can be credited to the NRE / NRO accounts of the NRI / PIO at the option of the investor, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.

The sale of shares will be subject to payment of applicable taxes.

The application is to be submitted to a designated branch of an authorised dealer in India in the prescribed form. No permission is required from RBI.

Reserve Bank has authorised a few branches of each authorised dealer to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks. NRIs will have to route their applications through any of the designated authorised dealer branches who have authorisation from Reserve Bank.

No. NRI can select only one authorised dealer for the purpose of investment under Portfolio Investment Scheme and route the transactions through the branch designated by the authorised dealer.

  • NRIs / PIOs can purchase / sell shares / convertible debentures of Indian companies on Stock Exchanges under the Portfolio Investment Scheme. The rules relating to this scheme are as given below
    • Shares purchased under PIS on Stock Exchange shall be sold on stock exchanges only. Prior approval of RBI is required if such shares are proposed to be transferred either by way of gift or under private arrangement to a non-resident/resident.
    • These trades can be done only through a registered broker on a recognised stock exchange
    • NRI shall designate a branch of an authorised dealer and route all his/her transactions through this branch of the authorised dealer.
    • NRI takes delivery of the shares purchased and gives delivery of shares sold.
    • NRI shall abide by the directions given by RBI/SEBI or such authority if the transaction results in the breach of ceilings stipulated for NRI holding in the company/scheme.

The sale of shares will be subject to payment of applicable taxes.

An NRI or a PIO can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs / PIOs (also the OCBs who had purchased shares under the earlier scheme) taken together cannot purchase more than 10% of the paid up value of the company. (This limit can be increased by an Indian company to 24% by passing a General Body resolution).

The table given below summarizes the permissions required for the off-market transfer

From To Transaction Permissions Required
NRI NRI Sale or Gift General permission, no specific permission to be taken*
NRI Resident Indian Gift Prior approval of RBI required.
NRI Resident Indian Sale under private arrangement General permission already available.
Resident Indian NRI Gift Prior approval of RBI/FIPB should be obtained.
Resident Indian NRI Sale under private arrangement General permission is already available provided the shares being transferred are not of the companies engaged in financial service sectors, such transfer does not attract SEBI takeover code and the activity of the company should be eligible for FDI.

* provided that the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares, if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied filed in which the Indian company whose shares are being transferred is engaged.

An individual NRI cannot purchase under PIS shares exceeding 5% of the paid up capital of a company. The onus of monitoring this limit is that of the designated authorised dealer. Shares purchased under PIS scheme can be sold only through a stock exchange. See the rules explained under Q.No. 19. No permission is required from RBI to purchase or sell under Portfolio Investment Scheme.

Yes.

  • The following bank accounts may be given
    • For non-repatriable - NRO [dividend/interest is repatriable]
    • For repatriable - NRE

The above details recorded by the DP in the demat account may be used by the Issuer to directly credit dividend or interest.

(Dividend/interest received on Investments made on repatriation and non - repatriation basis under Portfolio Investment Scheme is not an eligible credit to NRE (PIS) Account and NRO (PIS) Account respectively).

 
  • NRIs may read Master Circular number RBI/2004-05/4 dated July 01, 2004 relating to remittance facilities for NRIs/PIOs/Foreign nationals.
  • RBI notification No: 20 dated 3rd May, 2000.
  • FAQs hosted on RBI internet site www.rbi.org.in under the head "Chapter III - Investments in Securities /shares and company deposits.
  • AP Dir Series Circular No. 16 dated October 4, 2004

This FAQ is prepared based on NSDL's (National Securities Depository Limited's) understanding of FEMA regulations. While utmost care has been exercised while developing the FAQs, National Securities Depository Ltd. does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The readers are requested to keep abreast of the changes taking place in the underlying provisions of RBI.