The Indian capital market has witnessed an unprecedented growth in the past few years which was made possible by the modernisation in the trading and settlement systems. Automation of the trading mechanism has given us a trading system comparable with the best in the world. The establishment of a settlement guarantee mechanism removed the counter-party risk in stock exchanges.
Though the advent of automated trading brought with it several associated benefits such as transparency in trading and equal opportunity for market players all over the country; the problems related to settlement of trades such as high instances of bad deliveries and long settlement cycles continued. As an answer to the myriad settlement problems, National Securities Depository Limited (NSDL) was inaugurated in November 1996 as the first depository in the country.
The introduction of scrip-less holding and transaction of securities provide various benefits to investors, such as -
All these lead to substantial reduction in transaction costs in dematerialised securities as compared to physical securities.