A

PROJECT REPORT ON
DEPOSITORY
OF
LUDHIANA STOCK EXCHANGE
A training report submitted in partial fulfillment of the requirement for the degree of
MASTERS OF BUSINESS ADMINISTRATION
(2013-2015)



SUBMITTED TO : SUBMITTED BY :
MISS POOJA M.KOHLI VIVEK KAURA
[Executive director of LSE] MBA 3
RD
SEM
MR. SANDEEP ARORA 132562036
[Our Mentor]
BABA FARID COLLEGE OF MANAGEMENT AND
TECHNOLOGY
DEON, BATHI NDA
2


CERTIFICATE

This is to certify that the Summer Project work of Mr. / Ms
___________________________ batch 2013-15, entitled
________________________________________________________ is a bona-fide
piece of work and that this work has not been submitted elsewhere in any form earlier.
The project work was carried out from __ /__ / 2014 to __ /__ / 2014 in
_________________________ at____ _____________________ .



Date: __ / __ / 2014








3

PREFACE

In order to make the student competent, all students are required to make a real time
project work . This exposure to real life situation given an insight to the students about
what problem he/she can expect to face during this career.

Studying and merely passing exams is not worth, the education, knowledge and infect
experience is incomplete without being exposed to what is happening in real. With the
introduction of compulsory trading by SEBI, there has been mushroom growth of
depository participants with so many DPs to choose from, client still had to face so
many problems while carrying on their transaction. LSE also entered the DP business
with the aim of providing more efficient services.

Our study aims of finding our how far it has been successful in keeping its promise of
efficient services. The main intention of this report is to compile the subject matter in
such a way that anybody who has no prior knowledge of elements of LSE and DP, can
understand properly without any difficulty . Actually this report is result of assignment
to improve us and gain confidence . We have to done our best to make it genuine study
but as well as all know maxim TO ERR IS HUMAN so there is a chance for some
mistake.


4

DECLARATION

This project entitled empirical study on DEPOSITORY is submitted in partial
fulfillment of requirement for the award of degree of MASTERS OF BUSINESS
ADMINISTRATION OF PUNJABI UNIVERSITY , PATIALA . This research
work is done by vivek kaura . This research work done for MBA and none of this
research work has been submitted for any other degree. This assistance and helping
the executive of the project has been fully acknowledged.


VIVEK KAURA
MBA 3
rd
SEM



5

ACKNOWLEDGEMENT

Behind this successful undertaking is the blessing and guidance of many. This formal
piece of acknowledgement may not be sufficient to express my feeIings of gratitude and
deep respect that have experienced during my learning process at Ludhiana stock
exchange.
I am extremely thankful to Mrs .Pooja M. Kohli, executive director
(officiating),Ludhiana stock exchange, for assigning me the project Depository, and
also taking a keen interest and rendering valuable help that ultimately proved to be very
helpful in the successful completion of my project.
I am also very thankful to Mr.Sadhu Ram, coordinator of the training programme, for the
knowledge and experience that I have gained from him during the course of training
which I can easily look at my most rewarding phase the course of my study. He in spite
of his busy schedule, provided me valuable guidance and has shown utmost interest in
imparting this training.








6


S.NO.

PARTICULARS

PAGE NO.

1.

Executive Summary

10

2.

Introduction to Ludhiana stock exchange
vision and mission of stock exchange
Board of Directors
Governance and Management
Strength of LSE Group
Infrastructure & asset base at LSE
Listing of Securities of Company & LSE
Investor Related Services
Educational Initiative of Exchange

11
12

13


14
15
16
17


3.

Introduction to Depository
History
What is Depository
Legal Framework of Depository
Eligibilty Criteria For Depository
Records Maintained by Depository
Benefits Of Depository
Depositories In India

18

19



20
21


22

4.

Nation Securities Depository limited
Introduction of NSDL
Management of NSDL
Bye-Laws of NSDL
Business Rules of NSDL
Fee structure of NSDL


23


24


25
7


5.

Central Depository Services (India) limited
Introduction of CDSL
Fee structure of CDSL

26


27

6.

Facilities offered by NSDL and CDSL

28

7.

Depository System is a boon to Capital Market


28

8.

Main depository players
Depository (new NSDL and CDSL)
Depository Participant
Issuer companies/Registrars of Transfer agent
(RTA)
Clearing Corporations
Stock Brokers/ stock exchange
Investor


29



30


31





9.

Difference Between Bank & Depository

32

10.

Important Function in depository system
Account opening
Dematerialisation
Rematerialization
Initial public offers
Trading and Settlements
Corporate Actions
Nomination
Account Transfer Instruction
Freezing of an account

33




35
36
37
39

40


8

Unfreezing of an account
Account Closing
Transmission
Pledging
Suspension of an account


41

42


43

11.

Scope of depository

43

12.

Safety features in the depository system


44


13.

Objectives of the Study


45

14.

Research Methdology

46

15.

Analysis And Interpretation

47 to 55

16.

Findings

56

17.

Limitation of the Study

56

18.

Suggestion And Recommendations

57

19.

Conclusion

57

20.
Annexure
Questionnaire
Application form for opening an
account(for individual only)
58

58 to 60

61 to 64



9

Application form for opening an account
(for corporate/clearing member only)
Application form for closing an account


65 to 68


69

21.

Bibliography

70

10

Executive Summary
Since the Beginning of liberalisation process in 1991, the
size of Indian capital market expanded maniford. The Tradition system of settlement
through physical transfer of securities failed to cope with the requirement of growing of
the market, Physical settelment mechanisms gave rise to inefficiencies & risk of bad
deliveries. Delays in transfer & registration, fake certificates & forgies.
Minimisation of settement risks & shortening of settelment
cycles are the basic rrquirement for greater depth & expantion of markets by upgrading
the existing trading system into a modern internationally competitive one.
The depository Act has paved the way for Instituting an
infrastructure for eliminating various risks associated with capital market transaction &
increasing the efficiency of clearance & settlement systems. The Depository is an
organization which hold securities in electronic form. This Depository are made under
the Depository & participant Regulation Act 1996.
In India their is only two Depository NSDL
& CDSL. The Ludhiana stock exchange is a regional stock exchange that deals with
securities. This exchange is an intermediary that create a link between Depository &
Investor's. This exchange is established in 1981 by Sh. S.P oswal of vardhman group &
Sh. B.M Lal Munjal of Hero group. Before coming of Depository only Manual based
trading are made means Physical transfer of shares that need for transfer deed when we
can sell or buy shares. But due to Depository the screen based trading are used which
means electronic transfer of share. Depository means dematerialization of securities .
This all work is done by the depository players. This include Depository participant,
Registratrar & Transfer Agent [RTA], Clearing Corporation & Stock exchange.
The depository can perform many function
like Account Opening, Initial public offer [IPO], Trading & Settlements of transaction,
Corporate Actions, Nomination facilities , freezing & unfreezing of an account,
Transmission, Pledging & suspension of an account etc. It also allows for
dematerialisation & rematerialisation of securities in depositories through electronic
Book entry thus reducing settlement risks & removing same of the infrastrual bottlenecks
11

Introduction to Ludhiana stock exchange



The Ludhiana stock exchange limited was established in 1981, by Sh. S.P. Oswal of
Vardhman group and Sh. B.M Lal munjal of hero group, leading industrial
luminaries, to fulfill a vital need of having a stock exchange in the region of Punjab, -
Himachal Pradesh, Jammu & Kashmir and union territory of Chandigarh, since its
inception, the stock exchange has grown phenomenally. The stock exchange has played
an important role in channelizing savings into capital for the various industrial and
commercial units of the state of Punjab and other parts of the country. The exchange has
facilitated the mobilization of funds by entrepreneurs from the public and thereby
contributed in the overall, economic, industrial and social development of the states under
its jurisdiction.
Ludhiana stock exchange is one of the leading regional stock exchange and has been in
the forefront of other stock exchange In every spheres, whether it is formation of
subsidiary for providing the platform of trading to investors, for brokers etc, in the era of
screen based trading introduced by national stock exchange and Bombay stock exchange,
entering into the field of commodities trading or imparting education to the public at
large by way of starting certification programmed in capital market.
Further, the exchange has 295 members out of which 162 are registered with national
stock exchange as sub- broker and 121 with Bombay stock exchange

12

The vision and mission of stock exchange is:
Reaching small investors by providing services relating to capital market including
trading, depository operation etc. and creating mass awareness by way of education
and training in the field of capital market.To create educated investors and fulfilling
the gap of skilled work force in the domain in capital market
BOARD OF DIRECTORS


S.NO.

Name Of The Director

Category

1.

Prof. Padam Parkash Kansal

Chairman

2.

Sh. Joginder Kumar

Vice chairman

3.

Sh. Vikas batra

Shareholder director

4.

Sh. Ashok Kumar

Shareholder director

5.

Sh.Jagmohan Krishan

Shareholder director

6.

Sh.Anup Kumar Jain

Shareholder director

7.

Dr. Raj Singh

Registrar of companies

8.

Sh. Ashwani Kumar

Public interest director

9.

Sh. V.P. Gaur

Public interest director

10.

Sh. Jasminder Singh

Public interest director

11.

R.L. Behl

Public interest director

12.

Vijay Asdhir

Public interest director
13

GOVERNANCE AND MANAGEMENT
LSE has a strong governance and
administration, which encompasses a right balance of industry experts with highest level
educational background, practicing professionals and independents experts in various
fields of financial sectors. The administration is presently headed by Sr. General manager
CUM company secretary and team of persons having in-depth knowledge of secretarial,
legal and education & training.
The governing board of exchange comprises of 11 members. Out of which 2 are public
interest director. Who are eminent persons in the fields of finance and accounts,
education, law, capital markets and other related fields. 6 are shareholder directors and 3
are broker member director and the exchange has 4 statutory committees namely
disciplinary committee, arbitration committee, defaults committee and investor services
committee. In addition, it has advisory and standing committees to assist the
Administration.
LSE has a code of conduct in place that governs the elected board members and the
senior management team. The same is monitored through periodic disclosures
procedures. The exchange has an ethics committee, which looks into any issue of
conflicts interest and has in place general code of conduct for the senior officials.
STRENGTH OF LSE GROUP

1. LSE brand is popular among masses. The brand image of LSE can be
capitalized.
2. They have requisite infrastructure for the capital market activities which
includes a multi storeyed, centrally air conditioned building situated in financial
hub of the city i.e., feroze Gandhi market.
3. They have well experienced staff handling operations of stock exchange.
4. They have competent board and professional management.
5. They have much needed networking of sub brokers in the entire region, who are
having rich experience in stock market operations for the last 25 years.
6. They have more than 40,000 clients spread across Punjab, Himachal Pradesh,
Jammu Kashmir and adjoining areas of Haryana and Rajasthan.
7. The turnover of LSE subsidiary is the highest amongst all subsidiaries of
regional stock exchange of India.
14

Infrastructure and asset base at Ludhiana Stock Exchange



The exchange building is
situated at Feroze Gandhi market, Ferozepur road, Ludhiana. It is a six storeyed building,
which is centrally air conditioned. The building has 262 rooms, which are located on
various floor ranging from second to fifth. The first floor of the building houses the
administrative offices and rooms from second to fifth floors have been leased out to
brokers. The first floor has also canteen and banking facilities. Investor service. center is
also located at first floor which houses a well-equipped library and view-terminals to
provide live rates of NSE and BSE to investors. Investors are also provided with cable
TV and setup boxes for the purpose of viewing the latest happenings in the capital market
and around. Basement of the building has air-conditioning plant and generators to
provide air-conditioned environment and twenty-four hours power back up. The
exchange has also an additional plot of land measuring 2333 sq. yards in the prime
location of city, to enhance its infrastructure and source of income.
15

Status of Subsidiary i.e. Ludhiana Securities Ltd.

Due to nation-wide reach of bigger stock exchanges, the trading volumes at Ludhiana
stock exchange declined and ultimately, the trading stopped in February, 2002, but the
stock exchange converted the threat of bigger exchanges into opportunities and acquired
the corporate membership of these exchanges through its subsidiary companies i.e., LSE
securities limited. We have now been providing trading platforms of bigger stock
exchanges to the investors of the regions. The vast network of brokers of the exchange is
servicing millions of investors. The subsidiary company is also providing depository
services in the state of Punjab and Himachal Pradesh. The allied services like PAN
service centre, investor service centre are also being provided at major locations of the
region. The turnover of subsidiary is highest amongst all the subsidiaries of regional
stock exchanges. The growth of subsidiary is swift and it has been providing a range of
services to the public at large such as trading, depository, and IPO bidding collection
centre.
The company in its continuous Endeavour to provide qualitative services to its valued
clients, has started e-broking trading services for its clients, thereby increasing the
geographical reach of the company.

LISTING OF SECURITIES OF COMPANY AND
LUDHIANA STOCK EXCHANGE

At present Ludhiana stock exchange has 330 listed companies out of which 214 are
regional and 116 are non regional. The total listed capital of aforesaid companies is Rs.
3168.91crores approx. the market capitalization of the said companies is more than Rs.
3372.34 crores. The stock exchange is covering the vast investor base through the listing
of above said companies, which are situated in the region comprising of Punjab,
Himachal Pradesh, Jammu & Kashmir, and Chandigarh.
Despite the fact, the implementation of SEBI(delisting of securities) guidelines, 2003 has
resulted into the delisting of good companies listed at exchange, however still there are
leading companies listed with our exchange, notable among them are united breweries
16

limited, vardhman acrylics limited, SMC global securities limited, Himachal futuristic
communications limited etc.
Ludhiana stock exchange has facilitated the capital generation for agro based industries
as Punjab is an agricultural led economy. It will continue to do so, once it gets approval
for a tie up with bigger exchange for commencing trading operations.
INVESTOR RELATED SERVICES

The exchange has been providing a variety of services for the benefit of investing public.
The services include investor service centre, investor protection fund and investor
educational seminar.
(I) Investor service centers :
The exchange has set-up
investor service centers at various DP branches of its subsidiary for providing
information relating to capital market to the general public. The centers
subscribe to leading economics, financial dailies and periodic. They also store
the annual reports of the companies listed at the stock exchange. The investor
service centers are also equipped with the terminal for providing live rates
of trading at NSE & BSE a large no. of the investors visit the centers to utilize
the services being provided by the exchange.
(II) Investor awareness seminars :
The exchange has been
organizing investor awareness seminars for the benefit of investors of the
region comprising states of Punjab, Himachal Pradesh, Jammu & Kashmir and
Chandigarh and adjoining states of Haryana and Rajasthan. This massive
exercise of organizing investors awareness seminar has been launched as a
part of securities market awareness campaign launched by SEBI in January,
2003. The exchange apprises the investors about DOs & DONs to be
observed while dealing in securities market. Till date, exchange has organized
more than 200 workshops in the region mentioned above.

(III) Website of the exchange: www.lse.co.in
17

The
Exchange has its own website with the domain name www.lse.co.in.This
websites provides valuable information about the latest market commentary,
research report about companies, daily status of international markets, a
separate module for internet trading, information about listed companies and
brokers and sub brokers of the exchange and its subsidiary. The website also
contains any useful links on portfolio management, investor education,
frequently asked questions about various topics relating to primary and
secondary market, information about mutual funds, financials of the company
including quarterly results, share prices, profit & loss account, balance sheet
and many more. The website also contains daily technical charts of various
scripts being traded in BSE & NSE.

EDUCATIONAL INITIATIVE OF EXCHANGE
LSE has carved
out its unique position among the stock exchanges of the country for the knowledge
management. It has set up an education and training cell and the same has emerged as a
leading facility in the various financial services in India, the exchange has been
conducting a unique certification programmed in capital market in association with center
for industry institute partnership programmed Punjab university, Chandigarh for the last
three year. This programmed has widened the horizons of participants vis--vis capital
market operations as practical skill based knowledge is provided by stock brokers, stock
exchange officials, professor of finance and business management and above all business
professions working in different areas of capital market. They have completed series of
batches of this programme and They now want to scale up this programme and are
planning to launch various other programme on areas Relating to securities market.
They have edge over others as far as education and training in financial services is
concerned due to following factors:
a. Directly connected with the industry as regional stock exchange.
b. Connected with large base of investors as they use the stock exchange as a trading
platform for their liquidity needs.
c. Presence in the region of Punjab, Himachal Pradesh, Jammu & Kashmir and
Chandigarh through our branches network and the area being under the
jurisdiction of our exchange.
d. Already running certification programmes in capital market successfully.
e. Continuously holding investor awareness programme for investors and investor
groups through association with brokers, sub-brokers, colleges, universities and
consumer groups.
18


Introduction
The advent of online 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. The earlier
settlement system on Indian stock exchanges was very inefficient as it was unable to take
care of the transfer of securities in a quick/speedy manner. Since, the securities were in
the form of physical certificates; their quick movement was again difficult. This led to
settlement delays, theft, forgery, mutilation and bad deliveries and also to added costs. To
wipeout these problems, the Depositories Act 1996 was passed. It was formed with the
purpose of ensuring free transferability of securities with speed, accuracy & security.
SEBI notified Regulations in order to provide the regulatory framework for the
depositories. Depositories gave a new dimension and a new scope for conducting
transactions in capital market- primary as well as secondary, in a more efficient and
effective manner, in a paperless form on an electronic book entry basis. It provided
electronic solution to the aforementioned problems of bad deliveries and long settlement
cycle.
A Depository is an organization where the securities of share holders are held in the
electronic format the request of the share holder through the medium of a depository
participant. In September, 1995 the Government have accepted in principle the proposed
19

law for settling up of depositories and of a central depository for immobilization of
physical certificates. The central depository is to be set up as trust to hold the physical
custody of shared and effect transfers by book entries without the need to deal and
transfer the physical certificates between parties. This is to be sponsored by public
financial institutions and banks and will have a minimum net worth of Rs. 50-100 crores
as proposed by the SEBI. This central depository can be connected to a number of share
depositories for effecting transfer in book entries. The guidelines and regulations in
aspect of the operations of depository participants will help smooth operations among
participants and their operations with the central depository. A national securities
depository corporation was set up in November, 1996.
History
The first depository was set up way back in 1947 in Germany. In India it is a
relatively new concept introduced in 1996 with the enactment of Depositories Act 1996.
Their operations are carried out in accordance with regulations made by SEBI, bye-laws
and rules of Depositories Act and SEBI (Depositories and Participants) Regulations Act
1996
What is a Depository ?
A depository is an organisation which holds securities
(like shares, debentures, bonds, government securities, mutual fund units etc.) of
investors in electronic form at the request of the investors through a registered Depository
Participant. It also provides services related to transactions in securities.
LEGAL FRAMEWORK OF

The operations of the depositories
are primarily governed by the Depositories Act, 1996, Securities and Exchange Board of
India (Depositories & Participants) Regulations, 1996, Bye- Laws approved by SEBI, and
Business Rules framed in accordance with the Regulations and Bye-Laws.
20

The Depositories Act passed by Parliament received the President's assent on
August 10, 1996. It was notified in a Gazette on August 12 of the same year. The Act
enables the setting up of multiple depositories in the country. This was to see that there is
competition in the service and there is more than one depository in operation. At present,
two depositories are registered with SEBI - The National Securities Depository Limited
(NSDL) and Central Depository Services (India) Limited (CDSL).
Only a company registered under the Companies Act, 1956 and sponsored by the
specified category of institutions can set up a depository in India. Before commencing
operations, depositories should obtain a certificate of registration and a certificate of
commencement of business from SEBI.
The rights and obligations of depositories, depository participants, issuers and beneficial
owners are spelt out clearly in the Depositories Act 1996. So the depository business in
India is regulated by-
The depositories Act, 1996
The SEBI (Depositories and Participants) Regulations, 1996
Bye-laws of Depository
Business rules of Depository
Apart from the above, Depositories are also governed by certain provisions of:-
The Companies Act, 1956
The Indian Stamp Act, 1899
Securities and Exchange Board of India Act, 1992
Securities Contracts (Regulation) Act, 1956
Income Tax Act, 1961
Bankers Books Evidence Act, 1891
ELIGIBILTY CRITERIA FOR DEPOSITORY
The following entities are
eligible for becoming depository in accordance with Regulation 19 of the SEBI
(Depositories and Participants) Regulations, 1996 :

A public financial institution as defined in section 4A of the company act, 1956.
A bank included in the second schedule to the RBI act, 1934.
A foreign bank operating in India with the approval of the RBI.
A Recognized Stock Exchange.
An institution engaged in providing financial services where not less than 75% of
the equity is held jointly or severally by the institution.
A custodian of the securities by government of India.
21

A foreign financial services institution approved by Government of India.
Records to be maintained by Depository

Every depository is required to maintain the
following records and documents. These have to be preserved for a minimum period of
five years.
1. Records of securities dematerialised and rematerialised.
2. The names of the transferor, transferee, and the dates of transfer of securities.
3. A register and an index of beneficial owners.
4. Details of the holdings of the securities of beneficial owners as at the end of each day.
5. Records of instructions received from, and sent to, participants, issuers, issuers' agents
and beneficial owners.
6. Records of approval, notice, entry and cancellation of pledge or hypothecation.
7. Details of participants.
8. Details of securities declared to be eligible for dematerialisation in the depository.
9. Such other records as may be specified by SEBI for carrying on the activities as a
depository.

BENEFITS OF DEPOSITORY
Elimination of all risks associated with physical certificates such as loss of share
certificate, Fake securities, Etc.
Elimination of bad delivery.
Faster settlement cycles i.e. immediate transfer and registration of securities.
Low transaction cost for purchase and sale of securities compared to physical
mode.
Increase liquidity of securities
22

Reduction of paper work
Allotment of IPO, Bonus, Rights shares etc. in electronic form
Wavier of stamp duty on transfer of securities
Intimation like change of address, bank mandate, nomination, request of
transmission, required to be given only to Depository Participant (DP)
Irrespective of the number of companies in which shares held.
Enables the surrender and withdrawal of securities to and from the depository
(dematerialisation and rematerialisation).
Carries out settlement of trades not done on the stock exchange (off-market
trades).
Depositories in India

There are two depositories in India :

A. The National Securities Depository Limited [NSDL]



B. Central Depository for Securities Limited [CDSL]



23



National Securities Depository Limited is the first depository
to be set-up in India. It was incorporated on December 12, 1995. The Industrial
Development Bank of India (IDBI) - the largest development bank in India, Unit Trust of
India (UTI) - the largest Indian mutual fund and the National Stock Exchange (NSE) - the
largest stock exchange in India, sponsored the setting up of NSDL and subscribed to the
initial capital. NSDL commenced operations on November 8, 1996. The aim is to provide
facilities for holding and handling securities in electronic form.
Ownership
NSDL is a public limited company incorporated under the Companies Act, 1956.
NSDL had a paidup equity capital of Rs. 105 crore. The paid up capital has been reduced
to Rs. 80 crore since NSDL has bought back its shares of the face value of Rs. 25 crore in
the year 2000. However, its net worth is above the Rs. 100 crore, as required by SEBI
regulations.
The following organisations are shareholders of NSDL as on March 31, 2005.
1. Industrial Development Bank of India
2. Administrator of the Specified Undertaking of the Unit Trust of India - DRF
3. National Stock Exchange
4. State Bank of India
5. Oriental Bank of Commerce
6. Citibank N.A.
7. Standard Chartered Bank
8. HDFC Bank Limited
9. The Hongkong and Shanghai Banking Corporation Limited
10. Deutsche Bank A.G.
24

11. Dena Bank
12. Canara Bank
Management of NSDL

NSDL is a public limited company managed by a professional Board of
Directors. The day-today operations are conducted by the Chairman & Managing
Director (CMD). To assist the CMD in his functions, the Board appoints an Executive
Committee (EC) of not more than 15 members. The eligibility criteria and period of
nomination, etc. are governed by the Bye-Laws of NSDL in this regard.
Bye-Laws of NSDL

Bye-Laws of National Securities Depository Limited have been framed under
powers conferred under section 26 of the Depositories Act, 1996 and approved by
Securities and Exchange Board of India. The Bye-Laws contain fourteen chapters and
pertain to the areas listed below :
1. Short title and commencement
2. Definitions
3. Board of Directors
4. Executive Committee
5. Business Rules
6. Participants
7. Safeguards to protect interest of clients and participants.
8. Securities
9. Accounts/transactions by book entry
10. Reconciliation, accounts and audit
11. Disciplinary action
25

12. Appeals
13. Conciliation
14. Arbitration
Business Rules of NSDL

Amendments to NSDL Business Rules require the approval of NSDL Executive
Committee and filing of the same with SEBI at least a day before the effective date for
the amendments.
NSDL Charges

DP Transaction
Credit charges Nil
Debit charges
0.05% (minimum Rs.15 & maximum Rs.100) per
debit transaction
Other charges
Pledge creation Rs. 50
Pledge closure Nil
Dematerialization
Per certificate Rs. 15
Postal charges per request Rs. 40
Rematerialization
Per certificate Rs. 15
Postal charges per request Rs. 40
Rejection/failure per entry Rs. 50

26


Central Depository Services (India)
Limited
A Depository facilitates holding of securities in the electronic form and enables
securities transactions to be processed by book entry by a Depository Participant (DP),
who as an agent of the depository, offers depository services to investors. According to
SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible
to act as DPs. The investor who is known as beneficial owner (BO) has to open a demat
account through any DP for dematerialisation of his holdings and transferring securities.
The balances in the investors account recorded and maintained with CDSL can be
obtained through the DP. The DP is required to provide the investor, at regular intervals,
a statement of account which gives the details of the securities holdings and transactions.
The depository system has effectively eliminated paper-based certificates which were
prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient
and instantaneous transfer of securities.
CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with
leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank,
Standard Chartered Bank, Union Bank of India and Centurion Bank.
CDSL was set up with the objective of providing convenient, dependable and
secure depository services at affordable cost to all market participants. Some of the
important milestones of CDSL system are :
27

1. CDSL received the certificate of commencement of business from SEBI in
February 1999.
2. Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the
operations of CDSL on july 15, 1999.
3. Settlement of trades in the Demat mode through BOI Shareholding Limited,
the clearing house of BSE, started in july 1999.
4. All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi stock Exchange, The Stock Exchange Ahmedabad, etc have
established connectivity with CDSL.
5. As at the end of Dec 2007, over 5000 issuers have admitted their securities
(equities, bonds, debentures, commercial paper), units of mutual funds,
certificates of deposits etc. into the CDSL system.
CDSL Charges

DP Transaction
Credit charges
Nil

0.05% (Minimum Rs. & Maximum Rs.
100) per debit transaction
OR
Rs. 600 per annum to be charged
upfront(no charges for debit transaction)
Other charges
Pledge creation RS. 25
Pledge closure RS. 25
Dematerialization

Per certificate RS. 15
Postal charges per
request
RS. 40
Rematerialization

Per certificate RS. 15
28

Postal charges per request
RS. 40
Rejection/failure per entry
RS. 50

Facilities offered by NSDL and CDSL
Dematerialisation i.e. converting physical certificates into their electronic form.
Rematerialisation i.e. converting securities in Demat form into Physical
certificates
Electronic settlement of trades in stock exchanges connected to depositories.
Pledging/hypothecation of the dematerialized securities against loan
Electronic credit of securities allotted in public, rights, bonus issue.
Nomination facility for Demat account.
Freezing of De-mat accounts to avoid debits from the account
Services related to change of address, nomination, mandate, transmission, etc.
Other facilities such as holding debt instruments in the same demat account.
Availing stock lending/borrowing facility, etc.

Depository System is a boon to Capital Market
Depositories gave a new dimension for conducting transactions in the capital market-
primary as well as secondary in a more efficient and effective manner and in a paperless
form. There are several major players in the primary market. These include the merchant
bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and
individual investors. In the secondary market, there are the stock exchanges, stock
brokers (who are members of the stock exchanges), the mutual funds, financial
institutions, foreign institutional investors (FIIs), and individual investors. Registrars and
Transfer Agents, Custodians and Depositories are capital market intermediaries that
provide important infrastructure services for both primary and secondary markets. In the
depository system the ownership and transfer of securities takes place by mean of
electronic book entries.
29

The Main Depository Players
a) Depository (new NSDL and CDSL)
b) Depository participant
c) Issuer companies/Registrars of transfer agent (RTA)
d) Clearing corporations
e) Stock bokers/ stock exchange
f) Investor
DEPOSITORY PARTICIPANTS


Depository Participant just as a brokers act an agent
of the investor at the stock exchange; a Depository Participant (DP) is the representative
(agent) of the investor in the depository system providing the link between the company
and investor through the Depository. The depository participant maintains securities
account balances and intimate the status of holding to the account holder from time to
time. According to the SEBI guidelines, financial institutions like banks, custodians,
stockbrokers etc. can become participants in the Depository.
A DP is one with whom an investor
needs to open an account to deal in shares in electronic form. While the depository can
compare to bank with which an account can be opened. The main characteristics and role
of depository participant are as under:
Acts as an Agent of Depository
Customer interface of Depository
Functions like Securities Bank
30

Account opening
Facilities dematerialization
Instant transfer on pay-out
Credits to investor in IPO, rights, bonus
Settles trades in electronic segment
Facilitates pledge or hypothecation of securities held in demat account

Criteria of eligibility of depository participants
SEBI regulations have selected various categories of market participants who are
eligible to become depository participants. These categories already have a well-
established customer interface network and are, therefore, the ideal choice to become the
agents of depository. These categories are:
Public Financial Institutions
Scheduled Banks
RBI approved foreign banks operating in India
State Financial Corporations
Certified custodian of securities
Clearing corporations of stock exchanges
Registered stock brokers
Non-Banking Financial Companies
Registrars and transfer agents
The regulations specify certain net worth requirements for certain categories. Also NBFC
allowed to hold securities on their own behalf only and not clients.

Issuing company and Registrar & Transfer agent

The issuing company is that organization which issues the securities. The issuing
company sends a list of the shareholders to the depositories. An Issuer of share is the
company which had launched its shares in the market via IPO.Registrar and Transfer
Agents(RTA) are appointed by Issuer companies to act on their behalf.R&T Agents form
an important link between the investors and issuers in the securities market. A company,
whose securities are issued and traded in the market, is known as the Issuer. The R&T
31

Agent is appointed by the Issuer to act on its behalf to service the investors in respect of
all corporate actions like sending out notices and other communications to the investors
as well as dispatch of dividends and other non-cash benefits. R&T Agents perform an
equally important role in the depository system as well... RTA is a trust company, bank
or similar financial institution assigned by a corporation to maintain records of investors
and account balances and transactions, to cancel and issue certificates, to process investor
mailings and to deal with any associated problems.
Clearing corporations

Clearing corporation is an entity who takes the responsibility of every trade, which is
being dealt on the floor of stock exchange. It acts as a central mechanism for
consolidating and settling transactions instead of the member firms settling each trade
individually amongst themselves. The members of Clearing Corporation are called as
clearing members.

Stock brokers/ stock exchange

Stockbrokers are the intermediaries who are allowed to trade in securities on the
exchange of which they are members. They buy and sell on their own behalf as well as on
behalf of their clients. Traditionally in India, partnership firms with unlimited liabilities
and individually owned firms provided brokerage services. There were, therefore,
restrictions on the amount of funds they could raise by way of debt. With increasing
volumes in trading as well as in the number of small investors, lack of adequate
capitalisation of these firms exposed investors to the risks of these firms going bust and
the investors would have no recourse to recovering their dues.
Stock Exchange (SE) is an organised market for dealings in securities commonly referred
as secondary market. One of its main functions is price discovery i.e to cause prices to
reflect currently available information about a security.

Investor

He is a person who wants to deal in shares and whose name is recorded with a depository.
The investor is the real owner of the shares who has lodged them with the depository
through book entry till the day he sells them.
32

DIFFERENCE BETWEEN BANK AND
DEPOSITORY

BANK DEPOSITORY
Allocates account number.
Holds funds in accounts
Minimum balance required.

Functions through branches.

Issues account statement & pass
book.

Charges commission/ service
charges.





Provides interest to the account
holders.

Assist in transfers without
having to handle money
Allocates client ID number.
Holds securities in accounts.
Normally no minimum balance
required.
Functions through depository
participants.
Issues account statement i.e.
statement of holding and statement
of transactions.
Depository Participant charges:
o Account opening and
closing fee
o Demat and Remat fee
o Transaction fee (buy, sell,
off market)
o Custody charges
In future, through stock lending, it
will be possible to earn income on
Depository Account.
Assist in transfer of ownership
without having to handle securities

33

Important Function in depository system
ACCOUNT OPENING
Opening a depository account is as simple as opening
a bank account. You can open a depository account with any DP convenient to you.
There is no restriction on the number of depository accounts a person can open. However,
if your existing physical shares are in joint names, you have to open the account in the
same order of names before you submit your share certificates for demat.
DEMATERIALIZATION
Dematerialisation and trading in the demat mode
is the safer and faster alternative to the physical existence of securities. Demat as a
parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper
work. This system works through depository participants (DPs) who offer demat services
and the securities are held in the electronic form for the investor directly by the
Depository.

Steps involved in dematerialization:

1. Investor must submit request form and share certificate to DP.
2. DP will check whether security is available for Demat. Investor must deface the
share certificate by stamping surrendered for dematerialization and DP
will punch two holes on the name of the company and will draw two parallel
lines across the face of the certificate.
3. DP enters the Demat request in their system to be sent to the depository. DP
dispatches the physical certificates along with the DRF to the RTA/ Company.
4. Depository records the details of the system and forwards the request to Registrar
and transfer agent or issuer i.e. the company whose shares are sought to be
dematerialized.
34

5. RTA Company on receiving the physical documents verifies request and check
them. Once the RTA/Company finds that shares are in order, dematerialization of
the concerned securities is electronically confirmed to the depository
6. Depository credits the dematerialized securities to the beneficiary account of the
investor and intimates the DP electronically. The DP issues a statement of
transaction to the client.

Physical Securities Electronic Form.



Pre-requisites:
Demat Account with any DP of the Depository.
ISIN for the securities available with the Depository.
Investor should be registered holder for the securities in the books of the company.
35

REMATERIALIZATION
Remat means converting electronic form into
physical form. During a rematerialization process, the request goes from the DP to the
R&T agent via NSDL OR CDSL. The R&T agent, after processing the request, will print
and dispatch the share certificate directly to you. No transfer duty will be charged to you
when you rematerialize your shares. You have the option of rematerializing your total
holdings or part of it. In addition to this, you have the option to get the certificates in
market lot.
Rematerialisation process
1. Investor makes a request for rematerialisation to the DP.
2. DP inform the Depository about the request.
3. Depository confirms the request to the registrar of the issuer company
4. Registrar updates accounts and prints certificates for the investor.
5. Accounts are updated by the depository and details are provided to the DP.
6. Investor receives the certificates from the registrar

Electronic Form Physical Securities


36

Initial public offers
An initial public stock offering (IPO) referred to simply
as an "offering" or "flotation," is when a company (called the issuer) issues common
stock or shares to the public for the first time. They are often issued by smaller, younger
companies seeking capital to expand, but can also be done by large privately owned
companies looking to become publicly traded.
In an IPO the issuer may obtain the assistance of an underwriting firm, which
helps it determine what type of security to issue (common or preffed), best offering price
and time to bring it to market.
An IPO can be a risky investment. For the individual investor, it is tough to predict what
the stock or shares will do on its initial day of trading and in the near future since there is
often little historical data with which to analyze the company. Also, most IPOs are of
companies going through a transitory growth period, and they are therefore subject to
additional uncertainty regarding their future value.
The first sale of stock by a private company to the public. IPOs are often issued
by smaller, younger companies seeking the capital to expand, but can also be done by
large privately owned companies looking to become publicly traded. In an IPO, the issuer
obtains the assistance of an underwriting firm, which helps it determine what type of
security to issue (common or preferred), the best offering price and the time to bring it to
market.Also referred to as a "public offering".
IPOs can be a risky investment. For the individual investor, it is tough to predict
what the stock will do on its initial day of trading and in the near future because there is
often little historical data with which to analyze the company. Also, most IPOs are of
companies going through a transitory growth period, which are subject to additional
uncertainty regarding their future values.

Initial public offers process:
37



TRADING & SETTLEMENTS
At present, the facility of trading and
settlement in dematerialised shares is available in The Stock Exchange, Mumbai (BSE),
National Stock Exchange (NSE), Bangalore Stock Exchange (BSE), The Calcutta Stock
Exchange Ltd (CSE), The Delhi Stock Exchange Association Ltd (DSE), Ludhiana Stock
Exchange (LSE) and the Over The Counter Exchange of India (OTCEI).
These Stock
Exchanges have distinct trading segments viz. the unified (physical) and depository
(dematerialised). In the unified segment, investor has the option of delivering physical or
dematerialised shares. However, with effect from 4th January, 1999 shares included in
the list of select list of companies (including of RELIANCE ENERGY) can be delivered
only in the dematerialised form in all stock exchanges linked to NSDL. The other stock
exchanges, at present, have only the physical segment. However, in times to come, other
stock exchanges too may be providing depository segments.
The settlement of trades done in
the exclusive dematerialised segments at BSE, DSE, NSE, BSE, CSE, DSE and OTCEI
38

follow the rolling settlement concept, where trade done on each day is settled after a fixed
number of days. Right now, the dematerialized segments follow T+5 rolling settlement,
which means that trades are settled on the fifth working day from the date of the trade.
Transfer of securities in/ out of the Demat A/c can arise in the following instances:
For execution of Off Market Transactions.
For settling On Market Transactions.
For Inter depository transactions.

A) Off Market Transactions
Transaction done on person to person basis without going through stock exchange
mechanism.
Pre-requisites:
Transfer of securities from one BO A/c to another BO A/c.
Both A/cs are with same Depository though with different
DPs.
Neither buyers A/c nor sellers A/c is with clearing house/clearing corporation.

Off market transaction process

39

B) On Market Transaction
Trades done by investors through stock exchange
mechanism and settled using same stock exchange mechanism.
seller as well as buyer account is with CH/CC

C) Inter Depository Transactions.

SEBI (Depository and participants) Regulations, 1996 requires depositories to be
inter connected.
Securities available for dematerialization on both depositories.
Debit/ credit instructions have to given on inter-depository delivery or receipts
forms to the DPs of seller and the buyer.
These instructions are exchanged online for each day between the depositories.

Current Scenario
SEBI has since introduced T+2 rolling settlements from April 1,
2003. T+2 settlement cycle means that the final settlement of transactions done on T, i.e.,
trade day by exchange of monies and securities between the buyers and sellers
respectively occurs on second business day after the trade day excluding Saturdays,
Sundays, bank holidays and exchange holidays.

DAY ACTIVITY

T Trading and daily downloading of statements showing details of transactions and
margins at the end of each trading day.
T+1 Confirmation of 6A/7A data by the custodians up to a specified deadline time.
Downloading of securities and funds obligation statements by members.
T+2 Pay-in of funds and securities and pay-out of funds and securities by pre specified
deadline times. The members are required to submit the pay-in instructions for funds and
securities to banks and depositories respectively.
T+3 Auction for shortages in delivery of securities.
T+4 Auction pay-in and pay-out of funds and securities.

CORPORATE ACTIONS
When any corporate event such as rights or
bonus or dividend is announced for a particular security, NSDL will give the details of all
40

the clients having electronic holdings in that security as of the record date to the registrar
or share transfer agent. The registrar will then calculate the corporate benefits due to all
the shareholders. The disbursement of cash benefits such as dividend/interest will be
done by the registrar whereas NSDL will do the distribution of securities entitlements
(Rights or Bonus) based on the information provided by the registrar to all those clients
who have opted for electronic allotment.

NOMINATION
The investors have an option of nominating persons who
would be entitled to receive shares outstanding in their names in the event of their death.
While opening the account with the DP, the investor is required to fill up an application
form for operating the Account , wherein the investor has an option to fill in the names of
their nominees. Shareholders have an option to hold securities in joint names with or
without nomination or in single name with nomination which is optional. Such a facility
has been recently introduced under the Companies (Amendment) Ordinance, 1998 for
shares held in physical form. As far as concerned the nominee entered by the investor
while opening the demat account will be the beneficiary and shall be deemed to be the
member of the Company.
ACCOUNT TRANSFER INSTRUCTIONS
An account holder can transfer his
account from one DP to another DP account in the prescribed format given by the SEBI.

INTERDEPOSITORY INSTRUCTIONS
There are two depository i.e.,
NSDL and CSDL. For e.g. if my depository account is with NSDL, can I receive my
securities from an account holder having account with some other depository in India.

FREEZING OF AN ACCOUNT
A client may wish to freeze its
account by deactivating it. The participant has a facility in the DPM to freeze an account.
The account is frozen for any transaction thereafter until it is reactivated on a request
from the client. An account may be frozen for debits or for both debits and credits
41

depending on the choice of the account holder, but any benefit arising, due to corporate
actions is credited to the account just like any other account.
Procedure for freezing an account:
The client submits a request form to the participant in the prescribed form for freezing its
account.
On receipt of the request form, the participant verifies whether the form is duly
filled or not & then issue signed & stamped acknowledgement slip to the client.
The participant compares the signature of the client on the form with that of
available in its records.
If the request form is in order the participant changes the status of the clients
account from ACTIVE to SUSPENDED FOR DEBIT or SUSPENDED FOR
ALL depending on the choice of the client from the date mentioned by the client
on the form. The participant enters the reasons for change in status.
The participant then intimates to the client about the change in status.

UNFREEZING OF AN ACCOUNT
A client whose account
is frozen may request to unfreeze it. The Participant has the facility in the DPM to
unfreeze an account. The account is reactivated and transactions are allowed on the
account thereafter.
Procedure for unfreezing an account:
The client submits a request to the participant in the prescribed form for
unfreezing his account.
On receipt of the request form, the participant verifies whether the form is duly
filled or not. Then it issues a signed and stamped acknowledged slip to the client.
The participant compares the signature of the client on the form with that of
available in its records.
If the request form is in order, the Participant changes the status of the clients
account to ACTIVE on the date mentioned by the client on the form. The
participant enters the reason for change in the status.
The participant intimates the client about the change in status.

42

A depository account holder (beneficiary account) may freeze
securities lying in the account for as long as the account holder wants it. By freezing the
account holder can prevent unexpected debits or credits or both, creeping into its account.
The following types of freeze facility available in the NSDL the system may BE availed
of by submitting freeze instructions to the DP in a prescribed form. Defreezing is vice
versa to freeze.

ACCOUNT CLOSING
An account holder can close his account by
just filling the closing form, which is available with the entire depository participant

TRANSMISSION
Transmission of securities due to death, lunacy,
bankruptcy, and insolvency or by any other lawful means other than transfer is also
possible in the depository system. In the case of transmission, the claimant will have to
fill in a transmission request form, (which is available with the DP) supported by valid
documents. The DP, after ensuring that the application is genuine, will transfer securities
to the account of the claimant. For this, the claimant must have a depository account. The
major advantage in transmission of dematerialized holdings is that the transmission
formalities for all securities held with a DP can be completed in one go, unlike in
the case of share certificates, where the claimant will have to interact with each issuing
company or its R&T Agent. In case where the deceased was one of the joint holders in
the Client account, the surviving client(s) shall be the person(s) recognized by depository
as having title to the securities held in that joint Client account.

PLEDGING
The Depositories Act permits the creation of pledge against
securities. Securities held in depository mode can be pledged against a loan or credit or
such other facility availed by beneficial owner of such securities.

Procedure:

1. Pledgor gives a pledge creation request to DP who enters it in the system.
2. The request reaches the pledgees DP through the NSDL system. Pledgee is intimated
by his DP.
3. Pledgee gibes a pledge creation confirmation to his DP who enters it in the system.
4..Securities are transferred from free balances head to pledged balances head.
5. Loan is given by pledgee to pledgor outside the NSDL system
43



SUSPENSION OF AN ACCOUNT
A Participant has the
facility in the DPM to suspend a clients account in case it receives a directive order to
the effect from NSDL, Income tax or Judicial authorities.
No transactions are allowed on the account, but benefits arising due to corporate
action are credited to the suspended account just as in any other account. The
client cannot move the frozen holdings out of the account. The Participant
intimates the client about the suspension of his accounts.
Procedure for Suspending an Account:
On receipt of directive/order for suspending of a client account, the Participant
has to change the clients account status in the DPM from ACTIVE to
SUSPEND FOR DEMAT or SUSPEND FOR ALL. It records the reason for
the status change as directive/order of the concerned authority.
The Participant intimates the client about the suspension of his account. In case of
clearing members client, the participant intimates the clearing corporation also
about the suspension.
Procedure for Revoking Suspension of an Account:
The status would be changed to ACTIVE on receipt of a directive to revoke
such suspension from NSDL or authorities mentioned above. The participant
records the reason for the status change as a directive from the concerned
authority.
The Participant intimates the client about the revoking of the suspension.


SCOPE OF DEPOSITORY

1. Depositories gave a new dimension for conducting transactions in the capital
market.
2. It is used for dematerialization & rematerialization.
3. Pledging or hypothecation of the dematerialized securities against loan.
4. Receipt of non- cash corporate benefits such as bonus, in electronic form.
44

5. Assisting in repurchase / redemption of mutual fund units.
6. Effective transmission of securities.
7. It scope also in freezing of Demat account to avoid debits from the account.

Safety features in the depository system

To ensure safety to the investors the following measures exist-
Strict norms for becoming depository participant- Net worth criteria, SEBI
approval etc. is mandatory.
DP cannot effect ant debit or credit in the demat account of the investor without
the valid authorization of the investor.
Regulation reconciliation between DP and the depositories.
Periodic inspection by Depositories of the office of the DP and Registrar.
All investors have a right to receive their statements of accounts periodically from
the DP.
In the depository system, 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.
Compulsory internal audit of operations of DP by practicing company secretary of
the chartered accountant every quarter.
Various procedures for backup and safe keeping of data at all the levels.
SEBI has made compulsory trading of shares of all the companies listed in Stock
Exchange in demat form w.e.f 2 January 2002. Hence, if the investor wants to trade in
respect of the companies, which have established connectivity with NSDL & CDSL, he
may have to open a beneficiary account.


45

OBJECTIVES OF THE STUDY

At Present the Indian stock exchanges are following
screen based trading and electronic settlement system. But investors scattered at various
distant places from trading and settlement place. So there are some problems arising in
the settlement and transfer system. Thus, there is a need to evaluate the effectiveness of
Indian Depository system.

The Main objectives of the study are :

To evaluate the performance of the Depository system in India with reference to
NSDL & CDSL.
To study the Organizational frame work, Operational policies, Problems and
Prospects and financial performance of NSDL & CDSL.
To present legislative measures of dematerialization and to understand the present
status of dematerialization in India.
To analyze services rendered and quality among the DPs and opinions of
investors with regard to the functioning of NSDL.
To identify the Investors expectations from the DP companies and to exhibit the
Investors perceptions on the services offered by the DP companies .
To make appropriate and relevant recommendations to the management of the
organization under study.
To study the securities in market & overall functioning of depository
To know the difference between NSDL and CDSL
To examine the satisfaction level of investors by the services provided by NSDL
& CDSL
To know about the benefits yielded to brokers
To study about the types of accounts that can be opened in depository
46

RESEARCH METHDOLOGY
Although India adopted multi-depository system
model to provide competitive and healthy depository system for surpass services to
Investors. There is a chance to various entities to enter into Depository system but only
two organizations National Securities Depository Ltd (NSDL) and Central Depository
Services Ltd (CDSL) are providing depository services presently.

1) Research plan :
To meet the objectives of the studies undertaken, the descriptive
respondents were adopted
2) Data sources :
The data has been collected from the following sources:-
a)Primary data
b)Secondary data

A) Primary data :

In this study questionnaire &personal interview methods have been
used for receiving primary data.
B) Secondary data :

Secondary data is collected from the website of NSDL
(www.nsdl.co.in) and CDSL (www.cdsl.ac.in), website of Indian central depository
system (CDS), published reports of NSDL and Govt. of India, Depository Act-1996,
SEBI Act-1992, and Capital Market Services, published books and printed material on
financial services or Intermediaries.

3) Sampling Plan
Sampling units it consist of investors, brokers etc
Sampling size: 50 respondents were selected
47

ANALYSIS AND INTERPRETATION
Q.1 Are you aware of the services of Depository?
A) yes B) No



Interpretation:-
The above table shows the opinion of the investors about the Depository services. 90% of
the respondents are aware of the Depository services but only 10% are not aware about
the Depository services. So the majority of the investors are aware of the Depository
Services.

Q.2 How do you come to know about Demat?
A) Brokers B) Friends
C) Newspaper D) Others

90%
10%
Yes
No
24%
56%
12%
8%


Brokers
Friends
Newspaper
Others
48

Interpretation:-
The above data represents that 56% of the respondents came to know about the demat
from their friends, 24% from the brokers and 12% from newspaper. So, most of the
investors are aware of it from their friends.
Q.3 In which Depository do you hold an account?
A) LSE B) India Bulls
C) Karvy D) Master Trust
E) Others

Interpretation:-
From the above table it has been observed that about 30% of the respondents hold their
Depository account in LSE, 20% in Indian Bulls, 24% in karvyi, 16% in Master Trust and
10% of the respondents hold their Depository account in others.

Q.4 What is your opinion about the Depository System?
A) Excellent B) Very Good
C) Good D) Average
LSE India Bulls Karvy Master Trust Others
30%
20%
24%
16%
10%
49




Interpretation:-
The above table enlists the investors opinion about the Depository. 40% of the
respondents commented that the Depository organization is excellent and another 30%
gave their opinion as very good. 18% of the respondents claimed the Depository system
as good and another 12% respondents gave their opinion as average.

Q.5 Since how long have you been operating Demat?
A) Less than 1 years B) 1-2 years
C) 2-3 years D) More than 3years


40%
30%
18%
12%
Excellent
Very Good
Good
Average
Less than 1 years 1-2 years 2-3 years More than 3years
20%
16%
28%
36%
50

Interpretation:-
It is clear from the above data that 30% of the investors are operating their demat for
more than 3 years, 28% b/w 2-3 years, 20% less than 1 year and 16% are operating b/w
1-2 years. The majority investors are operating their demat for more than 3 years.

Q.6 Are the Depository participants service center are assessable to the
common investors?
A) yes B) No


Interpretation:-
The above table shows the accessibility of the depository services center to the common
investor. 84% of the total respondents disclosed the essay accessibility of depository
participants service center to the common investor and only 16% has negative opinion.
So it can be concluded that majority of the participants are positive with accept of
accessibility of the depository service centers.

Q.7 Do you receive regular statements about your Demat account?
A) yes B) No

84%
16%
Yes No
80%
20%
Yes No
51

Interpretation:-
The above table shows that 80% out of the total respondents receive regular statement
about their demat account and only 20% of the respondents did not receive regular
statement about their demat account. So, majority of the investors are aware of it.

Q.8 Are you satisfied with the existing fee structure of Depository
system?
A) yes B) No



Interpretation:-
The above data shows the opinion of the investors on the existing fee structure of
Depository. 60% of the respondents declared their favourism towards the present fee
structure and 40% of the respondents turned negatively. So, the majority investors have
positive opinion.

Q.9 Did you know that how to open a Demat account?
A) yes B) No

0%
50%
100%
Yes
No
60%
40%
52



Interpretation:-
The table represents that 84% of the investors are aware of the procedure of the demat
account and only 16% of the total investors dont know about the demat procedure.
Therefore, majority investors are aware of the procedure of demat.

Q.10 What is your opinion on the security of the new transferring and
settlement system?
A) Positive B) Negative


Interpretation:-
The above table shows the opinion on the security of new transfer and settlement system.
It can be clearly inference that 84% respondents unanimously voted positively in favour
of the new transfer and settlement system, which can be termed as the total positive
approach.

Yes
84%
No
16%
Positive
86%
Negative
14%
53

Q.11 Are you aware about capital markets?
A) yes B) No

Interpretation:-
The above data depicts that about 76% of the total respondents are aware of capital
market and only 24% of the investors are not aware of capital market.

Q.12 What is your usual mode of trading?
A) Online Trading B) Trading through Brokers
C) Both

Interpretation:-
The above data represents that 60% of the total respondents usually prefers trading
through brokers, 16% prefers online trading and 24% respondents prefers both. So, the
majority investors prefers trading through brokers and the brokers charge commission
from such investors.

Yes
No
38
12
16%
60%
24%
Online Trading
Trading through Brokers
Both
54

Q.13 What are the most frequent defaults in the service of the DP?
A) Insufficient information B) Enquiry problems
C) Delay in statement delivery D) Delay in transactions

Interpretation:-
The above diagram shows that 46% of the total investors think that there is enquiry
problem in the services of DP, 32% think it provide insufficient information, 12%
investors say that there is delay in statement delivery & 10% says there is delay in
transactions.
Q.14 Are you aware of the working of CDSL and NSDL?
A) yes B) No

32%
46%
12%
10%
Insufficient information
Enquiry problems
Delay in statement delivery
Delay in transactions
0%
50%
100%
Yes No
60%
40%
55


Interpretation:-
The above figure depicts that 60% of the total investors are aware of the working of
NSDL and CDSL but 40% of the investors dont know that how NSDL & CDSL perform
its work.

Q.15 According to you which one is the most important factor for a
trading company to enhance the loyalty and customers?
A) Provide maximum profit B) Provide tips from time to time
C) No hidden charges D) Other factors



Interpretation:-
The above data represents that 40% of the total investors think that Profit maximization
is the most important factor for the company to enhance loyality & customers, 30%
thinks that company should provide time to time tips to the customers, 20% says there
should not be any hidden charges charged by the company and 10% goes for other than
the above factors.
40%
30%
20%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Provide maximum
profit
Provide tips from
time to time
No hidden charges Other factors
56

FINDINGS

Majority of the investors are aware of the services provided by the Depository
system.
Most of the respondents are aware of the basic functions of DEMAT A/C (like
procedure of account opening, transaction statement of DEMAT Account,
nomination facility, Re-materialization of DEMAT Securities etc.) but most of
them do not have any knowledge about NSDL, CDSL and Depositaries Act 1996.
There are more number of male respondents as compare to female respondents.
The investors are satisfied with the fee structure of Depository System.
Investors believes that Demat form is better than the physical form of shares.
Mostly investors wants to get regular statements of their Demat account.
Investors are aware of the Capital market. They required full information about
the plans before investment.
Investors invest large amount of their income in order to earn maximum profits
but mostly investors believes that it is very risky to invest in the stock market


LIMITATIONS OF THE STUDY

The study suffered from certain limitations which are as under:-
Whole area is not covered in this project so only 50 respondents are representative
for complete area.

The overall sample was restricted to respondents of Ludhiana.
It was difficult to convince the investors that information provided by them was to
be used for study purpose only.

57

SUGGESTIONS AND RECOMMENDATIONS
Since dematerialization has a great bearing on the creation and protection of
wealth and investment earnings of an investor, DPs must increase their efforts in
promoting enhanced services in general, and in those involving security and
safety in particular.
To encourage the existing and prospective shareholders, all efforts should be
made to ensure good returns, in addition to providing greater security and safety.
Since the investors expect better service form depository participants, it should
provide them value-added services.
The processing of the DEMAT account opening should be made fast and non-
tedious.
The DEMAT a/c holder should be given basic information about NSDL, CDSL
and Depositaries Act 1996.
Clear picture of the deductions made by depository participant or the charges
levied on the customers should be provided in black and white.
Bank should expand its network by opening its more branches and franchise and
there should be easy accessibility of services rendered by this system.
The processing of the demat account opening should be made fast.

CONCLUSION
To conclude, it can be said that the demat account
opening is same as bank account, i.e, single or joint accounts or with nominee. The
growth rates of demat account holder in increasing over years. The Indian system of
capital market is a two tire system. Indian government allows holding securities in any
form i.e either in physical securities or in demat form. The transaction of securities is
completely done through electronic form. Investors are not aware of the services offered
by depositories. Most of the speculators do no utilize demat account in day-to-day online
trading. They trade through broker pool account. Dematerialization process can be done
through online trading by utilizing computers.
58

Annexure
QUESTIONNAIRE

SEEK YOUR VALUABLE TIME FOR OUR RESEARCH WORK

Respected Sir / Madam,
We are student of MBA of BABA FARID GROUP OF INSTITUTIONS, DEON
(BTI). We are conducting a survey on the Depository System. Your free and frank
opinion would be very valuable in conducting the survey. Please answer the
following questions with a () in the appropriate boxes:

Name..
Gender- Male____ / Female______ E Mail ID: ______________________
Age group: Below 18 years ____, 18-25 ____, 25-35 _____, 35-45 _____, Above 45
years ____
Educational qualification:
Undergraduate ___, Graduate ___, Post Graduate ____, Any other, please specify
______________
Occupational status: Student __, Businessman ___, Employee ___, Housewife ____

Q.1 Are you aware of the services of Depository?
A) yes B) No
Q.2 How do you come to know about Demat?
A) Brokers B) Friends
C) Newspaper D) Others
Q.3 In which Depository do you hold an account?
A) LSE B) India Bulls
C) Karvy D) Master Trust
E) Others
59

Q.4 What is your opinion about the Depository System?
A) Excellent B) Very Good
C) Good D) Average
Q.5 Since how long have you been operating Demat?
A) Less than 1 years B) 1-2 years
C) 2-3 years D) More than 3years
Q.6 Are the Depository participants service center are assessable to the common
investors?
A) yes B) No
Q.7 Do you receive regular statements about your Demat account?
A) yes B) No
Q.8 Are you satisfied with the existing fee structure of Depository system?
A) yes B) No
Q.9 Did you know that how to open a Demat account?
A) yes B) No
Q.10 What is your opinion on the security of the new transferring and settlement
system?
A) Positive B) Negative
Q.11 Are you aware about capital markets?
A) yes B) No
Q.12 What is your usual mode of trading?
A)Online Trading B) Trading through Brokers
C) Both
Q.13 What are the most frequent defaults in the service of the DP?
A) Insufficient information B) Enquiry problems
C) Delay in statement delivery D) Delay in transactions
Q.14 Are you aware of the working of CDSL and NSDL?
A) yes B) No
60

Q.15 According to you which one is the most important factor for a trading
company to enhance the loyalty and customers?
A) Provide maximum profit B) Provide tips from time to time
C) No hidden charges D) Other factors

THANKS A LOT FOR YOUR PRECIOUS INPUTS AND VALUABLE TIME














61

Application form for opening an account(for individual
only)

62


63


64


65

Application form for opening an account (for
corporate/clearing member only)

66


67


68




69

Application form for closing an account

70

BIBLIOGRAPHY
References:
1. Prof. sultan Singh & Sakshi Goyal, (2011), Analysis of factors affecting the
decision making of the investors in depository system available at
http:/www.skirec.com/42/1.abstract
2. Narendra Jadhav, (2007), Development of securities market - the Indian
experience , available at
http://dnarendrajadhav.info/drnjadhav_web_files/published%20papers/develo
pment%20of%20securities%20market%20by%20narendra%20jadhav.pdf

Websites:
www.nsdl.co.in
www.cdsl.co.in
www.investorwords.com/1431/depository.html
www.lse.co.in
www.lse.co.in/LSESL_New/depository.aspx
www.bseindia.com
www.nse.india.com

Books:
Malhotra, N.K Marketing Research Person Publication 6
th
edition (2010), New
Delhi, Topic- factor analysis Page no.(587-601), Exploratory research design page
no: (97-121)
Dematerialisation in the Indian Capital Market By P.V Nishanth
Security analysis and portfolio management By Prasanna Chandra
Securities Laws and Compliances By Institute of Company Secretaries of India
Financial institutions and markets-L.M.Bhale
Investment management-V.K.Bhalla
Research methodology-Mohit gupta,Navdeep Aggarwal
Financial services- Shashi k. gupta, Nisha aggarwal