Depository System (1)

8/3/2019 Depository System (1)

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DEPOSITORY SYSTEM IN

INDIA

PRESENTED BY

T.NAVIN(10M027)SAIPRASHANTI(10M090)

RITIKA (10M076)

R.SANTOSH (10M086)



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

DEPOSITORY SYSTEM



What Is Scrip Based System? Scrip based system of securities transactions

involves enormous paper work involvingcertificates and transfer deeds.

Simply, securities are held in physical form.



Feature of scrip based system:

1. There is physical movement of securitiescertificates along with transfer deeds.

2. Registration with the company.



Problems with scrip based

system:

1. Time consuming (processing time by co.)

2. Bad deliveries due to signature difference

3. Mistakes in completion of transfer deeds

4. Tearing and mutilation of certificates5. Fake certificates

6. Cost of transfer : stamp duty

7. 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 Tradingsystem.



Features of Depository system

In the depository system, securities are held indepository accounts, which is more or less similar toholding funds in bank accounts.

Transfer of ownership of securities is done throughsimple 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 totransacting 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 theelectronic form and enables securities

transactions to be processed by book entry by aDepository Participant (DP), who as an agent ofthe depository, offers depository services toinvestors



Features of depository system in

India

1. In the depository system, the apex body is theDepository..

2. A depository can be compared with a bank3. Depository services through depository

participants.

4. Fungibility5. 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 companiesAct, 1956, and

Which has got a Certificate of Registration from theSEBI.



Depositories in India

The depository model adopted in India provides for acompetitive multi-depository system. There can be

various entities providing depository services. Suchsystem 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. Industrial Development Bank of India Limited(IDBI)

2. Unit Trust of India(UTI)

3. 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 CorporationLimited

Deutsche Bank

Dena Bank

Canara Bank

Union Bank of India



CENTRAL DEPOSITORYSERVICES (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 AssociationLimited

Others



A Bank-Depository Analogy

Bank Depository1.Holds funds in an account

on behalf of a customer

1.Holds securities in an

account on behalf of an

investor.2.Transfer funds between

accounts on the instruction

of the account holder.

2.Transfer securities between

accounts on the instruction

of the account holder.

3.Physical handling of funds

is avoided.

3.Physical handling of

securities is avoided.

4.Provides safe custody of

fund

4.Provides safe custody of

securities.



Who Is Depository Participant:

A Depository Participant (DP) is an agent of thedepository through which it interfaces with an investor.

A DP can offer depository services only after it getsproper 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 thefollowing 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

REGISTERED

OWNER

BENEFICIAL

OWNER

In the depository system, the ownership of securitiesdematerialized is bifurcated in to:



Who is registered owner

The registered owner is that person whosename is registered in the register of membersof the company (issuer)

For the securities dematerialized,NSDL/CDSL is the Registered Owner in thebooks 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 thesecurity.

It means voting right, dividend right, bonus share

right , right share right etc are all exercised by theBeneficial owner.



Benefits of depository system/holding

securities in dematerialized form

Depository system provides benefits to:

The investors, and

The issuers.



Benefits to investors:

1. The transactions in electronic mode eliminated the risk andproblems of delays.

2. The risk of bad deliveries is totally eliminated

3. 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.

4. It totally eliminates the risk associated with fraudulent

interception of certificates in postages or transits..5. Transfer of ownership of securities is immediate in case of

depository mode.

6. The investment, automatically, becomes more liquid.

contd.



Contd.

7. The problem of odd lot is also eliminated, as thedepository mode does not have any concept of market lot.

8. Holding investments in equity and debt in a singleaccount.

9. Change in address recorded with DP gets registered withall companies in which investor holds securitieselectronically eliminating the need to correspond with each

of them separately.

10. Transmission of securities is done by DP eliminatingcorrespondence with companies.

11. Nomination facility.



Benefits to the issuing company:

1. The company saves a lot of paper work whichotherwise is required in the physical mode.

2. The company saves a postal cost for the dispatchof right shares, bonus shares or share certificatesafter affecting the transfer.

3. By offering depository services to its

shareholders, a company may send a positivesign to its shareholders about its concern for theirwelfare.

4. Depository services adds liquidity to the security

thus fund raising capacity of the company.

H i f D i



How can services of Depositoryavailed by an investor?

ACCOUNT OPENING:

1. In order to avail of depository facilities, an investor has to open

a beneficiary account with a depository participant of hischoice.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 fundsacross 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 adepository system and the account is known as'beneficiary account'.

P d f O i A



Procedure of Opening An

Account:

Investor will choose a DP for the purposes ofopening beneficiary account. The choice of theinvestor 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.

https://nsdl.co.in/joining/downloadables/annex-j.pdf









Contd.

For the purpose of verification, investor has tosubmit the following documents along with theprescribed account opening form.

1. Proof of Identity(POI) (voter card, pan card, drivinglicense etc.)

2. Proof of Address (POA) (ration card, ank passbook copy voter id card etc.)

3. Passport-size photograph



Contd.

Copy of PAN card

The DP will also provide a copy of the DP-Client

agreement.

WHY DEMAT ACCOUNT WITH



WHY DEMAT ACCOUNT WITH

CDSL

1) ConvenienceA) Wide DP Network

B) On-line DP Services

C) Wide Spectrum of Securities Available forDemat

D) Competitive Fees Structure

E) Internet Access

WHY A DEMAT ACCOUNT



WHY A DEMAT ACCOUNTWITH CDSL

2) DependabilityA) 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



WHY A DEMAT ACCOUNTWITH CDSL

3) SecurityA) Computer Systems

B) Unique BO Account Number

C) Data SecurityD) Claims on DP

E) Insurance Cover



TODAY CDSL

1) Securities available for demat Equity2) Securities available for demat Number of

Depository Participants

3) Demat Custody Number of securities in million

Depository System (1)

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