The Depository System

NSDL
Contents

 Indian Capital Market

 Need of Depository System
 The Depository System
 NSDL & its business partners
 Depository-Bank --an analogy
 Depository-Bank --the differences
 Functions of Depository System
 Benefits of Depository System
Overview of Indian Capital Market

Financial Market

Money Market Capital Market

Unorganized Primary (IPO)

Organized Secondary
(NSE & BSE)
RBI as regulator
SEBI as regulator
Need of Depository System

 Time consuming trading system

 Inefficient system of transfer of ownership

 Risk of theft, forgery & mutilation of securities

 Time consuming & costlier settlement

The Depository System

 Operations regulated by Depository Act

1996 and SEBI rules

 Solved the problems by

d. Making securities freely transferable
e. Dematerialization in depository mode
f. Ownership record in book entry form
NSDL and Its Business Partners

 National Securities Depository Limited

 Depositories participants

 Issuers and R&T agents

 Clearing Corporations\ Clearing House

Depository-Bank -- An Analogy

Bank Depository

Holds Securities in accounts

Holds Funds in accounts

Transfer funds between accounts Transfer securities between

accounts

Transfers without handling physical

Transfers without handling cash
securities

Safekeeping of securities
Safekeeping of money
Depository- Bank --The Difference
Bank
Either of holder can sign
instructions
Minimum balance to be maintained
Entitled for interest
Uses balances in accounts
Nomination is kept confidential
Depository
All joint holders to sign instructions
No minimum balance required
Interest can be earned only by
participating in stock lending
schemes
Does not move balances in account
without account holders
authorization
Signature and photograph of
nominee to be provided
Functions Of Depository System

 Dematerialization
 Account transfer
 Transfer and Registration
 Corporate actions
 Pledge and hypothecation
 Linkages with clearing systems
Benefits of Depository System
 Elimination of bad deliveries
 Immediate transfer and
registration of securities
 Faster settlement cycle
 Buyer is secured
 Reduction in rate of interest
on loans
 Periodic status report
 Reduction in handling of
huge volumes of paper
 Elimination of all risks
associated with physical
certificate
 No stamp duty
 Reduction in transaction cost
and brokerage
 Elimination of problems
related to nomination
 Convenient consolidation of
accounts and portfolio
monitoring
PRABHASH ANAND