DEPOSITORY SYSTEM IN INDIA

PRESENTED BY T.NAVIN(10M027) SAIPRASHANTI(10M090) RITIKA (10M076) R.SANTOSH (10M086)

DEPOSITORY SYSTEM

This system came in to force with effect from September 20, 1995.

What Is Scrip Based System?

Scrip based system of securities

involves enormous paper certificates and transfer deeds. Simply, securities are held in physical form.

transactions work involving

Feature of scrip based system:

1.

There is physical movement of certificates along with transfer deeds. Registration with the company.

securities

2.

Problems with scrip based system:

1.

2.
3. 4.

5.
6. 7.

Time consuming (processing time by co.) Bad deliveries due to signature difference Mistakes in completion of transfer deeds Tearing and mutilation of certificates Fake certificates Cost of transfer : stamp duty Postal delays and charges etc.

What is depository system

A system in which securities of an investor are

held by depository on behalf, and at the request, of an investor in an Electronic Form. This system is also know as Scrip Less Trading system.

Features of Depository system

In the depository system, securities are held in

depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.

Whole system of Depository

Constituents of depository system

There are basically four participant: The Depository The Depository Participant The Issuing Company The Investor

Who is depository?
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

Features of depository system in India

1. 2. 3. 4. 5.

In the depository system, the apex body is the Depository.. A depository can be compared with a bank Depository services through depository participants. Fungibility Registered Owner/ Beneficial Owner (two types of owner)

Who can be a depository:

Depository Act, 1996 provides that Depository means: A company formed and registered under the companies Act, 1956, and Which has got a Certificate of Registration from the SEBI.

Depositories in India
The depository model adopted in India provides for a

competitive multi-depository system. There can be various entities providing depository services. Such system is known as Multi-Depository System. At present two Depositories are registered with SEBI.

NATIONAL SECURITIES DEPOSITORIES LIMITED

NSDL is

the first and largest depository in India, and established in August 1996 It has 267 depository Participants (as on 13.12.08) Address:
Trade World, a Wing, 4th &5th Floors Kamala Mills Compound Lower Parel Mumbai 400013 website: nsdl.co.in

PROMOTERS OF NSDL
1. 2. 3.

Industrial Development Bank of India Limited(IDBI) Unit Trust of India(UTI) National Stock Exchange of India Limited(NSE)

SHAREHOLDERS OF NSDL
State Bank of India Oriental Bank of Commerce Citibank Standard Chartered Bank

HDFC Bank Limited

The Hongkong and Shanghai Banking Corporation

Limited Deutsche Bank Dena Bank Canara Bank Union Bank of India

CENTRAL DEPOSITORY SERVICES (INDIA) LIMITED

This is the second depository in India. This was formed and registered in 1999. It has 455 DPs as on 4.08.08 Address:

Phiroz Jeejeebhoy Towers 16th Floor, Dalal Street Mumbai website: www.cdslindia.com

PROMOTERS OF CDSL
Bombay Stock Exchange Limited Bank of India, Bank of Baroda, State Bank of India and

HDFC Bank

SHAREHOLDERS OF CDSL
Standard Chartered Bank
Centurion Bank of Punjab Ltd Canara Bank

Union Bank of India

Bank of Maharashtra Jammu and Kashmir Bank Limited The Calcutta Stock Exchange Association

Limited Others

A Bank-Depository Analogy
Bank
1.Holds funds in an account on behalf of a customer 2.Transfer funds between accounts on the instruction of the account holder. 3.Physical handling of funds is avoided. 4.Provides safe custody of fund

Depository
1.Holds securities in an account on behalf of an investor. 2.Transfer securities between accounts on the instruction of the account holder. 3.Physical handling of securities is avoided. 4.Provides safe custody of securities.

Who Is Depository Participant:

A Depository Participant (DP) is an agent of the

depository through which it interfaces with an investor. A DP can offer depository services only after it gets proper registration from SEBI. A DP is just like a Branch of a Bank.

Who can be Depository Participant?

In terms of the Depositories Act, 1996, SEBI (Depositories & Participants) Regulations,1996, only the following entities are eligible to become a Depository Participant: Financial Institutions, Banks, including approved foreign bank Custodians, Stockbrokers, A clearing corporation or a clearing house of a stock exchange A non-banking finance company, A registrar to an issue or share transfer agent

Types of ownership
In the depository system, the ownership of securities dematerialized is bifurcated in to:

REGISTERED OWNER

BENEFICIAL OWNER

Who is registered owner

The registered owner is that person whose

name is registered in the register of members of the company (issuer) For the securities dematerialized, NSDL/CDSL is the Registered Owner in the books of the issuer. But Registered Owner does not enjoy any right and liability attached with the security.

Who is the Beneficial owner

Beneficial owner is that person who enjoys all

rights, duties, and liabilities attached with the security. It means voting right, dividend right, bonus share right , right share right etc are all exercised by the Beneficial owner.

Benefits of depository system/holding securities in dematerialized form

Depository system provides benefits to: The investors, and The issuers.

Benefits to investors:
1.
2. 3.

4.

5.
6.

The transactions in electronic mode eliminated the risk and problems of delays. The risk of bad deliveries is totally eliminated There is no requisite of filling up the transfer deeds, payment of transfer stamp duty and a lot of other paper work at the end of the investor. It totally eliminates the risk associated with fraudulent interception of certificates in postages or transits.. Transfer of ownership of securities is immediate in case of depository mode. The investment, automatically, becomes more liquid. contd.

Contd.
The problem of odd lot is also eliminated, as the depository mode does not have any concept of market lot. 8. Holding investments in equity and debt in a single account. 9. Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately. 10. Transmission of securities is done by DP eliminating correspondence with companies. 11. Nomination facility.
7.

Benefits to the issuing company:

1. 2.

3.

4.

The company saves a lot of paper work which otherwise is required in the physical mode. The company saves a postal cost for the dispatch of right shares, bonus shares or share certificates after affecting the transfer. By offering depository services to its shareholders, a company may send a positive sign to its shareholders about its concern for their welfare. Depository services adds liquidity to the security thus fund raising capacity of the company.

How can services of Depository availed by an investor?

1.

ACCOUNT OPENING:
In order to avail of depository facilities, an investor has to open a beneficiary account with a depository participant of his choice.This is similar to opening a bank account to use the banking services. Just as one can hold funds in a bank account and transfer funds across accounts without actually handling cash;one can hold securities in a depository account and transfer securities across depository accounts without actually handling share certificates.

contd.

Contd.
The account holder is called 'beneficial owner' in a

depository system and the account is known as 'beneficiary account'.

Procedure of Opening An Account:

Investor will choose a DP for the purposes of

opening beneficiary account. The choice of the investor may be based on convenience, comfort, services offered, cost or any other reason.
The

investor will obtain the relevant account opening form from the chosen DP. contd.

Contd.

For the purpose of verification, investor has to submit the following documents along with the prescribed account opening form.
Proof of Identity(POI) (voter card, pan card, driving license etc.) Proof of Address (POA) (ration card, ank pass book copy voter id card etc.) Passport-size photograph

1. 2. 3.

Contd.
Copy of PAN card The DP will also provide a copy of the DP-Client

agreement.

WHY DEMAT ACCOUNT WITH CDSL

1) Convenience A) Wide DP Network B) On-line DP Services C) Wide Spectrum of Securities Available for Demat D) Competitive Fees Structure E) Internet Access

WHY A DEMAT ACCOUNT WITH CDSL

2) Dependability A) On-line Information to Users B) Convenient to DPs C) Contingency Arrangements D) Meeting User's Requirements E) Audit and Inspection F) Dormant Account Monitoring G) Helpdesk

WHY A DEMAT ACCOUNT WITH CDSL

3) Security A) Computer Systems B) Unique BO Account Number C) Data Security D) Claims on DP E) Insurance Cover

TODAY CDSL
1) Securities available for demat Equity

2) Securities available for demat Number of

Depository Participants 3) Demat Custody Number of securities in million