INDIAN FINANCIAL SYSTEM(IFS)

PROJECT WORK

A report on depositories

By:

MADHAVARAPU VISHWAS
(21FMUCHH010317)
 ACKNOWLEDGEMENT

I would thank IBS, Hyderabad for giving me an opportunity to

commence this project in the first instance, to explore various aspects
of the topic relating to the project.I am deeply indebted to my faculty
Prof.Abdul Rishad for his guidance, stimulating suggestions and
encouragement in all the stages of the project.
TABLE OF CONTENTS
Introduction

A  depository refers to a facility in which some thing is deposited for storage or safeguarding or

an organization that accepts foreign money deposits from customers which includes a financial
institution or a savings association. A depository can be an organisation, financial institution,
or group that holds securities and assists inside the trading of securities. A
depository provides security and liquidity within the market, makes use of money deposited for
safekeeping to lend to others, invests in other securities, and gives a budget switch system. A
depository should return the deposit within the same situation upon request.

In India, a Depository player (DP) is defined as an Agent of the depository. They are the

intermediaries among the depository and the traders. the connection between the DPs and the
depository is ruled by way of an agreement made between the 2 beneath the Depositories Act. In
a strictly legal feel, a DP is an entity who is registered as such with SEBI below the
sub segment 1A of segment 12 of the SEBI Act. As in keeping with the provisions of this Act, a
DP can provide depository-related offerings only after acquiring a certificate of registration from
SEBI. As of 2012, there were 288 DPs of NSDL and 563 DPs of CDSL registered with SEBI.

SEBI (D&P) guidelines, 1996 prescribe a minimum net  worth of Rs. 50 lakh for stockbrokers,
R&T dealers and non-banking finance agencies (NBFC), for granting them a certificates of
registration to behave as DPs. If a stockbroker seeks to act as a DP in more than one depository,
he need to observe the specified internet worth criterion separately for each such depository.
No minimal net well worth criterion has been prescribed for different categories of
DPs; however, depositories can repair a higher internet worth criterion for their DPs.
BASICS OF DEPOSITORY

A custodian  is an institution or some type of organization that  holds securities in De-Mat format

traded among stocks,bonds mutual funds, derivatives, F&O and commodities.Intermediaries
transact securities with custodians on behalf of their clients. These intermediaries are called
depository participant (DP). Basically he has two types of depots in India. One is National
Securities Depository Limited (NSDL) and the other is Central Depository Service Limited
(CDSL). . Each depository participant needs to be register under this depository before it began
all its operation or exchange inside the marketplace
HOW DOES A DEPOSITORY OPERATE

Depository interacts with its clients / investors through its marketers, referred to

as Depository members commonly referred to as DPs. For any investor / purchaser, to avail
the services supplied by using the Depository, has to open Depository account, called Demat
A/c, with any of the DPs.

DEMAT ACCOUNT OPENING

A demat account is opened at the equal lines as that of a bank Account. Prescribed Account
organising bureaucracy are available with the DP, desires to be filled in. fashionable Agreements
are to be signed with the aid of the patron and the DP, which details the rights and
responsibilities of every events. at the side of the form the customer requires to attach
photographs of Account holder, Attested copies of evidence of residence and evidence of identity
desires to be submitted together with the account beginning form. In case of corporate
customers, extra attachments required are - proper copy of the resolution for Demat a/c opening
along side signatories to operate the account and proper replica of the Memorandum and Articles
of affiliation is to be attached

PROCEDURE REQUIRED TO OPERATE DEMAT ACCOUNT

Following documents are required as in line with SEBI even as beginning the account. utility
shape, deal with evidence, pan card, and bank statement. The purpose of obtaining those
documents is to ensure the right information about the investor is acquired. those files want to be
submitted to the DP. There are no stringent regulations to be accompanied while ultimate the
account however there's a system this is anticipated to be accompanied from SEBI.

 Verifying the account holder is obligatory.

 Demat account needs to be connected to the PAN card as in line with KYC rules.

 No minimal quantity is important to keep the Demat account

 The account holder has to pay annual charges as well as a percentage of investors
trading as mandatory brokerage charges. 


SE

RVICES PROVIDED BY DEPOSITORY

 Dematerialisation (typically known as demat) is converting physical certificates of

Securities to electronic form

 Rematerialisation, called remat, is reverse of demat, i.e. getting physical certificates from

the electronic securities

 switch of securities, change of beneficial possession

 agreement of trades performed on exchange connected to the Depository

 Pledging and Unpledging of Securities for loan against stocks

 Company action benefits without delay switch to the Demat and bank account

of customer
TRANSFER OF SHARES BETWEEN DEPOSITORY PARTICIPANTS

To transfer shares, an investor has to fill considered one of two styles of depository guidance
slip. the first test made is whether each demat money owed are on the same depository. There are
depositories: principal Depository service and country wide Securities Depository. If both demat
accounts are not on the equal depository, then an inter-depository slip must be filled and
submitted. for example:

 If there may be one demat account with the crucial Depository provider and the

other demat account with the national Depository carrier, then an inter-depository slip is
needed.

 Now that the perfect depository coaching slip has

been decided, statistics relating the switch transaction has to be entered: scrip name,
INE number, quantity in words and figures.

 ultimately, the investor ought to post that depository education slip to the broking with

signatures.

 The transfer broking shall take delivery of that depository preparation slip

in reproduction and renowned its receipt on replica copy.
REGULATORY ENVIRONMENT

LEGAL FRAMEWORK

As a part of its on-going market reforms, the authorities of India promulgated the Depositories

Ordinance in September 1995. primarily based in this ordinance, Securities and exchange Board
of India (SEBI) notified its Depositories and members regulations in may additionally 1996. The
enactment of the Depositories Act the subsequent August paved the manner for
the launch of country wide Securities Depository constrained  in November 1996.The
Depositories Act has supplied dematerialisation path to book entry based totally transfer of
securities and settlement of securities alternate.

In exercising of the rights conferred by using the Depositories Act, NSDL framed its ByeLaws
and business guidelines. The ByeLaws are accepted with the aid of SEBI. while the
ByeLaws define the scope of the functioning of NSDL and its enterprise partners;
the business guidelines define the operational techniques to be accompanied by way of NSDL
and its `enterprise companions.
DEPOSITORIES ACT 1996

The Depositories Act, 1996 was enacted to offer for regulation of depositories in securities and
for matters linked therewith or incidental thereto. It came into force from 20th September, 1995.

The terms used in Depositories act 1996 are as follows:-

 beneficial owner approach a person whose name is recorded as such with a depository.

 Depository” way a organization, formed and registered under the agencies Act, 1956 and
which has been granted a certificates of registration below sub-section (1A) of phase 12
of the SEBI Act, 1992.

 (three) “company” means any man or woman making an issue of securities.

 (four) “player” method someone registered as such under sub-segment (1A)

of segment 12 of the SEBI Act, 1992.
DEPOSITORY IN THE COUNTRY

In India we have two types of depository which are operational

NSDL

NSDL, one of the most important Depositories inside the global, installed in August 1996 has set

up a state of art infrastructure that handles maximum trendy the securities held and settled in
dematerialized form in the Indian capital market. although India had
a vibrant capital marketplace which is more than a century antique, the paper-
based agreement modern trades caused great troubles like horrific shipping and delayed transfer l
atest identify, and so on. The enactment latest Depositories Act in August 1996 paved
the manner for established order modern-day NSDL.

The use of modern and flexible generation systems, NSDL works

to guide the investors and agents within the capital market brand new the united states.
NSDL pursuits at ensuring the protection and soundness trendy Indian marketplaces with the aid
of developing settlement answers that boom efficiency, reduce risk and reduce charges. At
NSDL, we play a central role in growing products and services in order to hold to nurture
the growing needs present day the financial services industry. in the depository device, securities
are held in depository bills, that's greater or less just like holding finances in financial
institution bills. transfer today's possession trendy securities is finished via easy account
transfers. This method does away with all of the risks and hassles generally associated
with paperwork. consequently, the fee state-of-the-art transacting in a
depository environment is significantly decrease in comparison to transacting in certificate.

COMPANY STRUCTURE

NSDL Group comprises National Securities Depository Limited (NSDL), NSDL Database
Management Limited (NDML) and NSDL Payments Bank Limited respectively. NDML and
NSDL Payments Bank are two subsidiary companies of National Security Depository Limited
(abbreviated as NSDL). It provides services related to demat of securities, transfer and settlement
of securities in Indian Securities Market.

NSDL FACTS AND FIGURES

NSDL has more than 2.80 Crore demat accounts as on June 30, 2022. The market share of NSDL
in value of demat assets is more than 89%. NSDL demat accountholders are present in more than
99% of pin codes in India and 189 countries across the globe.[ It contributes to majority of the
settlement in the Indian securities markets and has more than 89% share in the total value of
assets held in demat form in India.
 CDSL

Central Depository services Ltd. (CDSL), the first listed Indian central securities depository,
became based in 1999.

The main feature of CDSL facilitates maintaining and transacting in securities inside

the digital form and enables settlement of trades on stock exchanges.

CDSL allows preserving and transacting in securities within

the digital shape and facilitates settlement of trades carried
out on stock exchanges. these securities encompass equities, debentures,
bonds, change traded finances (ETFs), devices of
mutual budget, devices of alternate funding finances (AIFs), certificate of deposit
(CDs), industrial papers (CPs), government Securities (GSecs), and so forth.

CDSL is currently the largest depository in India in terms of quantity of demat money

owed opened. On February 28, 2022, CDSL have become the primary depository in India
to open 60-million energetic demat money owed. The Depository holds assets well
worth INR 37.2 trillion as on March 31, 2022 and over 580
depository participants are related to CDSL.

SERVICES OFFERED

 Dematerialisation, Account maintenance, rematerialisation, margin pledge, and Corporate

Action.

OTHER SERVICES:

 easi - a web-based totally facility which permits BOs to reveal their CDSL demat account

at an area and time in their deciding on.
 simplest- is a web-based totally facility that lets in BOs
to publish debit commands via the net, for that reason obviating the need of touring their
DP places of work to put up preparation slips.
 smart - clever enables BOs registered for this facility to receive SMS signals in case of
any debits or credits related to corporate movements or any alternate in
demographic info of their debts.
 e-balloting - an internet-primarily based system through which shareholders can login
and check in their votes on company resolutions.
The gadget approaches and facts vote automatically, which helps quicker processing
of vote casting effects.
 eKYC - An Aadhaar primarily based eKYC provider that gives an on the spot, electronic,
non-repudiable evidence of identification and evidence of address along with date
of delivery and gender.
FEATURES

 FUNGABILITY-Fungibility method an asset can be interchanged with every

other asset of a similar type. The dematerialized securities are not identified
via proportion certificates numbers. for this reason all securities which might
be within the equal magnificence may be interchanged.

 BENEFECIAL OWNER AND REGISTERED-There are styles of ownership of

securities. One is a registered owner and the alternative is a beneficial owner.
For all the dematerialized securities, NSDL is the
registered proprietor however ownership rights, responsibilities and liabilities are
with useful proprietors.

 TRANSFER OF SHARES-AThe transfer takes place freely through the digital

device and dispenses the procedural formalities associated with office work.

 NO STAMP DUTY- For the switch of bodily stocks, then the

stamp responsibility of 0.5% is payable in the marketplace value of
the shares. however, there is no such responsibility at the electronic shape.

 NO RISK -physical certificates have troubles like loss in

transit, theft, horrific deliveries, and many others. there may
be hardly any danger concerned inside the digital system in
comparison to bodily certificate.
OBJECTIVES

 It removes the occurrences of forgery, replica percentage certificate, and terrible

deliveries.

 this could increase the liquidity of securities through making a way for easy switch.

 also, it can avoid the postpone brought about in the transfer of securities.

 furthermore, it reduces the cost of a transaction for the investors.

 It enables withdrawal and surrender from the securities with incredible ease.

 It also keeps a perfect file of the holdings for an investor. that is due to the fact all the
info are saved in digital shape.

 This also presents infrastructure for services in capital markets.

 by way of complying to worldwide requirements, it does entice foreign investors.

IMPACT OF TECHNOLOGY ON DEPOSITORIES

A depository is an institution that assists and allows storing and trading of securities in
dematerialized shape. India is a rustic with a multi-depository machine, made out of two
predominant depositories, this is, countrywide Securities Depository Ltd. (NSDL) and
important Depository services (India) Ltd. (CDSL). The development of era has paved
the manner for the revolutionary improvement of the depository gadget in India. the
present study focused on discussing and analyzing the dual elements of the digitalization
progress of Indian depositories given that its incorporation. first of all, in phrases of e-
offerings introduced with the aid of the depositories after which in phrases of increase of
demat securities, demat cost of traded securities, organizations stay on any depository,
DPs stay, the quantity of DP places, and quantity of investor bills with DPs. The
outcomes showed that the adoption of the trendy technology at nascent ranges helped
depositories achieve out of the ordinary increase charges through the years. The presence
of a multi-depository device and lots of depository members elevated the accessibility for
the traders and healthful competition inside the capital market. numerous digital offerings
provided by means of the depositories have fixed the capital marketplace improvement
and patron pleasure. Improvization, innovation, and powerful implementation of rules
have led to the amazing progress of digitalization of depositories in India.
CONCLUSION

The blessings are paperless buying and selling and transfer of stocks via the usage of technology,

the transfer is immediate, the investor is relieved
of problems with physical certificates like horrific delivery, fake certificate, removal of physical 
bureaucracy, further removal of stamp responsibility, time and value gets saved in
posting certificates, investors are relieved of troubles like lack of certificate, and many
others. but, there are dangers too. the key market gamers like stockbrokers want to be monitored
as they have the functionality of market manipulation. some more than one felony frameworks
and acts want to be adhered to. also at exclusive degrees inside the technique of
Dematerialization, various agreements are entered. This makes the manner complex. however,
the advantages of dematerialization outweigh the dangers. SEBI emphasizes the
level of advancement.
REFERENCES

1.WIKIPEDIA

2.INVESTOPEDIA

3.NSDL.COM

4.CSDL.COM

5.MBAKNOL.COM