National Securities Depository Limited
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Investor Guided Tour

Dear site visitor,

Detailed information on NSDL operations is available on this website. However, as this information is exhaustive, to access all the details relevant to you, you may have to visit several pages and undergo numerous click-throughs.

We have, therefore, designed a special tour, which is brief and at the same time covers all the features of the depository system that are of importance to you.

This guided tour will take you through the following stations :

The advent of automated trading in India brought with it several associated benefits such as transparency in trading and equal opportunity for market players all over the country but the problems related to settlement of trades such as high instances of bad deliveries and long settlement cycles continued.

As an answer to these settlement problems and in order to provide a safe and efficient system of trading and settlement, National Securities Depository Ltd. was inaugurated in November 1996.

NSDL was set up with an initial capital of INR one billion (USD 28 million), promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and National Stock Exchange of India Ltd. (NSEIL). Subsequently, State Bank of India, Oriental Bank of Commerce, Citibank NA, Standard Chartered Bank, HDFC Bank Limited, The Hongkong and Shanghai Banking Corporation Limited, Deutsche Bank, Dena Bank and Canara Bank have became a shareholder of NSDL.

An investor who buys securities from exchanges connected to NSDL may receive his delivery in the dematerialised form as dematerialised securities can be delivered in the physical segment at the option of the seller. Therefore, those investors who buy securities from these exchanges should necessarily open a depository account to take delivery of demat securities. Also, SEBI has made it compulsory for all categories of investors to settle trades in demat form with respect to a select list of scrips since January 4, 1999. Therefore, investors trading in these scrips will necessarily need a depository account to settle their trades. The list of scrips is being continuously expanded by SEBI. Therefore, every investor who trades in securities may have to open a depository account.

In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangers related to handling of paper. NSDL provides numerous direct and indirect benefits, like :

  • Elimination of bad deliveries - In the depository environment, once holdings of an investor are dematerialised, the question of bad delivery does not arise i.e. they cannot be held "under objection". In the physical environment, buyer was required to take the risk of transfer and face uncertainty of the quality of assets purchased. In a depository environment good money certainly begets good quality of assets.
  • Elimination of all risks associated with physical certificates - Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates and advertisements, etc. This problem does not arise in the depository environment.
  • No stamp duty for transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds.
  • Immediate transfer and registration of securities - In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered. This process usually takes around three to four months and is rarely completed within the statutory framework of two months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is to hold the securities in street names i.e. not to register the change of ownership. However, if the investors miss a book closure the securities are not good for delivery and the investor would also stand to loose his corporate entitlements.
  • Faster settlement cycle - The exclusive demat segments follow rolling settlement cycle of T+2 i.e. the settlement of trades will be on the 2nd working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor
  • Faster disbursement of non cash corporate benefits like rights, bonus, etc.- NSDL provides for direct credit of non cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit.
  • Reduction in brokerage by many brokers for trading in dematerialised securities - Brokers provide this benefit to investors as dealing in dematerialised securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker.
  • Reduction in handling of huge volumes of paper
  • Periodic status reports to investors on their holdings and transactions, leading to better controls.
  • Elimination of problems related to change of address of investor, transmission, etc. - In case of change of address or transmission of demat shares, investors are saved from undergoing the entire change procedure with each company or registrar. Investors have to only inform their DP with all relevant documents and the required changes are effected in the database of all the companies, where the investor is a registered holder of securities.
  • Elimination of problems related to selling securities on behalf of a minor - A natural guardian is not required to take court approval for selling demat securites on behalf of a minor.
  • Ease in portfolio monitoring since statement of account gives a consolidated position of investments in all instruments.

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

  • An entity can be made operational as a DP only after registration by SEBI, which is based on the recommendation from NSDL and SEBI’s own independent evaluation. SEBI has prescribed criteria for becoming a DP in the regulations.
  • Depository Participants are allowed to effect any debit and credit to an account only on the basis of valid instruction from the client.
  • Every day, there is a system driven mandatory reconciliation between DP and NSDL.
  • There are periodic inspections into the activities of both DP and R&T agent by NSDL. This also includes records based on which the debit/credit are effected.
  • The data interchange between NSDL and its business partners is protected by protection measures of international standards such as encryption hardware lock. The protection measures adopted by NSDL are more than what is prescribed in the SEBI Regulations.
  • All transactions are recorded at NSDL Central System and in the databases maintained by business partners.
  • All investors have a right to receive their statement of accounts periodically from the DP.
  • Every month NSDL forwards statement of account to a random sample of investors as a counter check.
  • In the depository, the depository holds the investor accounts on trust. Therefore, if the DP goes bankrupt the creditors of the DP will have no access to the holdings in the name of the clients of the DP. These investors can transfer their holdings to an account held with another DP.
  • Certification in Depository Operations : NSDL has introduced a Certification Programme in Depository Operations, and it has been made compulsory for all DPs to appoint a person qualified in this certification in each of its branches. This way, NSDL wants to ensure that each branch of a DP that services investors has atleast one person who has thorough knowledge about depository system.
  • Investor grievance : All grievances of the investors are to be resolved by the concerned business partner. If they fail to do so, the investor has the right to approach NSDL at the following address :

    Officer-In-Charge
    Investor Relationship Cell
    National Securities Depository Limited.
    Trade World, 4th Floor, A – Wing,
    Kamala Mills Compound, Senapati Bapat Marg
    Lower Parel, Mumbai- 400013
    Email:
    The investor relationship cell of NSDL would work towards resolution of the grievance.

  • Insurance Cover : NSDL has taken a comprehensive insurance policy to protect the interest of the investors in cases of failure of the DP to resolve a genuine loss.

Computer and communication infrastructure

  • NSDL and its business partners use hardware, software and communication systems, which conform to industry standards. Further, the systems are accepted by NSDL only after a rigorous testing procedure. NSDL's central system comprises an IBM mainframe system with a back-up facility and a remote disaster back-up site.
  • Machine level back-up : The IBM mainframe in which the data is processed has adequate redundancy built into its configuration. There is a standby central processing unit (CPU) to which processing can be switched over to in case of main system CPU failure. The disk has RAID implementation, which ensures that a single point failure will not lead to loss in data. System has spare disk configuration where data is automatically copied from the main disk upon encountering the first failure (due to RAID implementation - first failure does not result in loss of data).

    All network components like router, communication controllers etc., have on-line redundancy and thus a failure does not result in loss of transaction.
  • Disaster back up site : A disaster back up site equipped with a computer identical to the mainframe computer & computing resources has been set up at a remote location about 175 km away from Mumbai. The depository operations are often switched between the computing resources at Mumbai office and disaster back up site to ensure that the disaster site is always operational.
  • Back-up in case of power failure : Continuity in power supply to the main systems is assured by providing for;
    • dual uninterrupted power supply (UPS) for IBM-Mainframe and related components wherein the two UPSs are connected in tandem. In case of failure of primary UPS, the secondary UPS takes over instantaneously and thus, there is no interruption in operation, and
    • back-up diesel generator set.
  • Periodic Review : The NSDL hardware, software and communication systems are continuously reviewed in order to make them more secure and adequate for the size of business. These reviews are a part of an ongoing exercise wherein security considerations are given as much importance as operational efficiency.

Note

  • You can open more than one demat account in the same name with single DP/ multiple DPs.
  • No minimum balance is required to be maintained in a demat account.
  • You can give a one time standing instruction to your DP to receive all the credits coming to your demat account automatically.
  • You may choose your DP based on your evaluation of their reputation, service standards, charges, comfort level, other conveniences, etc.
  • Open the demat account in single or joint names. If the same set of joint holders held securities in different sequence of names, these joint holders were earlier required to open different demat accounts in NSDL depository system. NSDL has introduced "Transposition-cum-Demat" facility to help joint holders, to dematerialise securities in the same account even though share certificates are in different sequence of names. For this purpose, Transposition-cum-Demat Form should be submitted to the DP.

    Eg: If 100 securities of company ABC are registered in the name of Suresh as first holder & Rajesh as second holder & 200 securities of company PQR are registered in the name of Rajesh as first holder & Suresh as second holder, both these securities can be held in one single demat account opened in the name of Suresh as first holder & Rajesh as second holder or Rajesh as first holder & Suresh as second holder.
  • Account opening procedure should typically take 1-5 days.
  • In case of holdings of a partnership firm, the account should be opened in the name of the 'partner(s)'.
  • In case of holdings of a HUF, the account should be opened in the name of the 'karta'.
  • In case of a minor, the demat account should be opened in the name of the minor and the guardian's name should be mentioned. The guardian will sign as signatory on behalf of the minor.
  • In case of any difficulties, contact your DP.

Procedure

  • Fill account opening form (available with your DP).
  • Give your DP the duly filled account opening form with proof of identity and proof of address documents as may be required.
  • Sign agreement with DP (agreement will state rights & obligations of both parties). The agreement will contain the fee structure of your DP. Your DP would give you a copy of this signed agreement for your record.
  • DP would give you "Client Id" no. (account no.) once your demat account is opened. This 'Client Id' number alongwith your 'DP Id' number forms a unique combination. Both these numbers should be quoted in all your future dealings with DP/NSDL/ Issuing company/their registrar & transfer (R&T) agent.
  • Your DP would give you instruction slips for depository services viz., dematerialisation, delivery instruction for trades, etc. These instruction slips will bear preprinted serial numbers and your client-id prestamped. Preserve these carefully.
  • Your DP would give you a list of deadlines for giving instructions for various depository activities viz., transfer for effecting sale, purchase, etc. If not, check with the DP.

Note

  • Dematerialisation of your holdings is not mandatory. You can hold your securities either in demat form or in physical form. You can also keep part of your holdings (in the same scrip) in demat form & part in physical form. However, a select list of securities announced by SEBI can be delivered only in demat form in the stock exchanges connected to NSDL.
  • Only securities admitted by depositories can be dematerialised.
  • Only securities registered in the name of the account holder can be dematerialised.
  • Dematerialisation is normally completed within 15 days after the share certificates have reached the issuer/ its R&T Agent. Thus it may take you a month from the date you hand over shares, to receive demat credit.
  • Dematerialisation would be done only when the issuer / its R&T Agent is satisfied of genuineness of securities & ownership status.
  • All the joint holders should sign the DRF.
  • In case of joint holdings, if the same set of joint holders held securities in different sequence of names, the securities can be dematerialised in the same account even though share certificates are in different sequence of names. For this purpose, Transposition-cum-Demat form should be submitted to the DP.
  • Demat requests with name(s) not matching exactly with the name(s) appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, would be processed, provided the signature(s) of the client(s) on the DRF tallies with the specimen signature(s) available with the issuer / its R & T agent.
  • If the signature in the DRF does not match with the signature available with the issuer/ its R & T agent, the issuer/ its R & T agent may at the time of demat confirmation, ask for additional documentation (like bank attestation/ notarisation, etc.) to prove that the certificate belongs to the person who forwarded the DRF.
  • In case there is any problem in processing the DRF, contact your DP and if he cannot resolve the problem you may contact NSDL.

Procedure

  • Fill demat request form ( DRF ) ( obtained from DP with whom your demat account is opened ).
  • Deface the share certificate(s) you want to dematerialise by writing across "Surrendered for dematerialisation".
  • Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / its R&T Agent.
  • After dematerialisation, your demat account with your DP, would be credited with the dematerialised securities.

Securities transactions can be settled in demat form for the transactions done on stock exchanges connected to NSDL. At present, NSE, BSE, CSE, DSE, OTCEI, MSE, ISE & ASE are connected to NSDL.

Procedure

Trading in dematerialised securities is done through your broker just like trading in physical securities.

Sell dematerialised securities

  • You sell your dematerialised securities in any of the stock exchanges linked to NSDL through a broker of your choice.
  • You give instruction to your DP for debit of your depository account and credit of your broker's clearing member account before the deadline ( pay in / non pay in )prescribed by your DP, so that your broker's clearing account is credited at the time arranged with him. This instruction should be given using the 'delivery instruction slip' allotted to you by your DP.
  • On the pay-in day, your broker gives instruction to his DP for delivery to clearing corporation/clearing house of the relevant stock exchange.
  • The broker receives payment from the clearing corporation/ clearing house.
  • You receive payment from the broker for the sale in the same manner you would receive payment for a sale in the physical mode.

Buy dematerialised securities

  • You purchase securities in any of the stock exchanges connected to NSDL through a broker of your choice and make payment to your broker. Make sure you tell your broker you want only demat shares.
  • Broker arranges payment to clearing corporation/ clearing house of the stock exchange.
  • Broker receives credit in his clearing account with his DP on the pay-out day. He can immediately transfer these securities to your depository account, provided your account is already active.
  • Broker gives instructions to his DP to debit his clearing account and credit your depository account.

You will receive corporate action (as announced by the issuing company) for securities held in demat form.

Cash corporate action (dividend, interest, etc.)

Issuer / its R&T agent directly forwards the dividend warrant/ interest to the depository account holder. NSDL does not handle funds. The issuer/ its R&T Agent calculates the benefits due to you on the basis of ownership data forwarded by NSDL.

Non cash corporate action ( bonus, rights, etc.)

Issuer / its R&T agent would arrange to credit your depository account with bonus/rights securities to the extent of your entitlement on the basis of ownership data forwarded by NSDL.

Note
  • NSDL does not handle cash corporate actions. In case of non-receipt of the same, contact the issuer/ its R&T agent. In future, when NSDL handles cash corporate actions, you may contact NSDL in case of non-receipt of the same.
  • In case you wish to avail of the ECS facility for receiving your cash corporate action, you may do so by informing the issuer/ its R&T Agent (provided the issuer gives this facility). You will need to inform the company even if you were availing this facility for your physical securities which were dematerialised.
  • Ensure that you give your bank particulars correctly in the account opening form. This would be printed on the dividend warrant.
  • In case of right/ bonus entitlement, irrespective of the form of your existing holding, you have to intimate issuer/ its R&T agent your choice of the form (physical/ demat) in which you would prefer to receive your right / bonus securities and the client id and DP id of the account in which you would like to have the securities credited. Although this depository account can be different from the account in which your existing securities are held, they should be in the same combination of names as the depository account where your existing securities are held. If there is any mistake in your depository account details mentioned in the rights application/ intimation letter indicating the choice of form of bonus securities, you would receive physical securities directly from the issuer/ its R&T agent.
  • In case you have not intimated issuer/ its R&T agent your choice of the form (physical/ demat) in which you would prefer to receive your right / bonus securities, you will get your non-cash corporate benefits in the form of your original holdings.
  • In case of rights issue, the rights issue form will be forwarded by the issuer/ its R&T Agent.
  • In case of problem in credit in your depository account, contact your DP. If they fail to resolve your problem, you may contact NSDL.

TRANSACTION STATEMENT

For each account opened with your DP, you will receive a "Statement of Account" from your DP on a quarterly basis. If your account has a debit / credit during the intervening period, you will receive a "Statement of Account" within 30 days of the debit / credit to your account.

Note
  • You can arrange with your DP to get the "Statement of Account" at shorter intervals. They may charge for this facility.
  • In case of any discrepancy in the "Statement of Account", contact your DP. If they fail to resolve your problem you may contact NSDL.
  • The "Statement of Account" is your proof of holding and in case you loose it you would not loose your holding.

GENERAL

  • Public issues
    :
    You can opt for allotment directly in demat form, provided the company has joined NSDL & gives you this facility.
  • Pledge
    :
    You can pledge your demat holdings.
  • Lending/ Borrowing
    :
    You can lend/ borrow demat securities to/ from an authorised intermediary.
  • Freezing of account
    :
    You can freeze your account any time. When your account is frozen, no transactions will be made from your account until you unfreeze it. Further, you also have the facility to freeze your account for debits only. In such a case, credits will automatically flow to your account.The way you can freeze your entire account, you can freeze securities of select companies in your account or you can even freeze select quantity of securities for a particular company and keep balance quantity of securities in free status.
  • Closure of account
    :
    In case you want to close your account with one DP, you can do so by shifting your holding to a depository account with another DP or by rematerialising your holding. You can rematerialise part or whole of your holdings any times
  • Transmission
    :
    If the account holder passes away, the DP of the account holder would be able to process the transmission of these securities to the legal heirs. You do not have to take up with each of the issuer / its R&T agent. NSDL does not charge its DP for transmission.
  • Nomination
    :
    You have the facility to appoint a nominee for your depository account. However, you can nominate only one person per account.
  • Change in client details
    :
    In case of any change in client details provided in the account opening form viz. Address, bank details etc., you can contact your DP. The DP will ensure that the change is updated for all holdings credited in your account.
  • Investor Grievance
    :
    In case of any unresolved dispute with a DP you can contact NSDL for resolution of your grievance at the following address:

Officer-In-Charge

Investor Relationship Cell,
National Securities Depository Limited
Tradeworld,4th Floor, A - Wing,
Kamala Mills Compound,
Lower Parel, Mumbai 400 013.
Phone : 022-24994200
Fax : 022-24972993/ 24976351
Email:

Please ensure to provide your Client Id, DP Id & DRN (DRN in case of grievance related to demat) in your correspondence.