PROJECT REPORT AT STOCK HOLDING CORPORATION OF INDIA LIMITED ON “A Descriptive Analysis of Depository Participant With Reference to Stock Holding Corporation of India Ltd” A project Report submitted towards the partial fulfillment of the requirements of The two years full-time Post Graduate Diploma in Management. Submitted by: Sunil Prabhakar
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PROJECT REPORT
AT
STOCK HOLDING CORPORATION OF INDIA LIMITED
ON
“A Descriptive Analysis of Depository Participant With Reference to Stock Holding Corporation of India Ltd”
A project Report submitted towards the partial fulfillment of the requirements of
The two years full-time Post Graduate Diploma in Management.
Submitted by: Sunil Prabhakar
Post Graduate Diploma in Manager (Banking& Financial services)
Roll No.:2k91/BFS/51
(2009-11 Batch)
ASIA-PACIFIC INSTITUTE OF MANAGEMENT
3 & 4, Institutional Area, Jasola, New Delhi-110025
DECLARATION
I, Sunil Prabhakar studying in Asia Pacific Institute Of Management Delhi do hereby
declare that this Project relating to Stock Holding Corporation of India Ltd (SHCIL)
and the title “A Descriptive analysis of the depository participant with Reference to
SHCIL” has been prepared by me after undergoing the prescribed industrial survey as
part of the requirement of the PGDM program of AIMA. My guide for the training was
Mr. Vijay Garg (Branch manager) and Mentor Prof AK Sinha I, further declare that this
project work is the outcome of my efforts and not a replica of any other report/work
submitted to any university or boards. I also declare the same report has not been
submitted to any other University or Board for the award of any other degree or
diploma.
Name of student: Sunil PrabhakarPlace: New Delhi Reg. No – 2K91/BFS/51
ACKNOWLEDGEMENT
An exchange of ideas generates a new object to work in a better way. Apart from the
ability labor and time devotion, guidance and co-operation are two pillars for the success
of a project. Whenever a person is helped or co-operated by others, his heart is bound to
pay gratitude to others.
A satiation and pleasure that accompany the successful completion of task would be
incomplete without the mention of the people who have made it possible and whose
consent guidance and encouragement served as a guiding light for the completion of the
study.
I express my sincere gratitude to Dr. D.K. Banerjeee, Director, AIM, for providing me
an opportunity to undergo summer training. And also for those who have guided and
inspired me in completing this study. I would like to express my deep sense of gratitude
to Prof. AK Sinha for giving me support and helping me during my project study.
I would like to express my gratitude to my project guide Mr. Vijay Garg for his constant
encouragement and guidance without the task would not have been completed.
Last but not the least I would like to thank my parent and friends for their support and
suggestions.
THANKYOU ALL
SUNIL PRABHAKAR
CONTENTS
Chapter No. Contents Page
Chapter I At a Glance 1-2
Chapter II Introduction 3-6
Background
Purpose
Objective
Limitations of the study
Plan analysis
Chapter III Industry Profile 7-21
Chapter IV Company profile 22-27
Chapter V Products and Services 28-72
Chapter VI SWOT Analysis 73-75
Chapter VII Methodology 76-77
Chapter VIII Analysis & interpretation 78-96
Chapter IX Summary of findings 97-99
Recommendations & Conclusion 100-102
Bibliography 103-104
Annexure 105-108
CONTENTS OF THE GRAPHS
Serial
Number
Title Page
Number
Table 1 Age group of respondents 79
Table 2 No. of shareholders trading in SHCIL 80
Table 3 No. of years the respondents holding the shares
in SHICL
81
Table 4 How safe the securities are in opting the demat 82
Table 5 Most preferred DP product 83
Table 6 Selection of the source in which information
is available
84
Table 7 Selection of Stock Exchange by the shareholders
and brokers.
85
Table 8 Attribute of services available at SHCIL 86
Table 9 Selection of investment avenues. 87
Table 10 Tailor-made services 88
Table 11 Value-added services available to the clients
at SHCIL
89
Table 12 Satisfaction in terms of Infrastructure, software
of the organization.
90
Table 13 Effectiveness of the DP services compared to
Other financial institutions.
91
Table 14 Interest rates in terms of loan against demat
Held in DP.
92
Table 15 Safety & security of the demat account. 93
Table 16 Service charges charged by SHCIL 94
Table 17 Effectiveness in settling the stock 95
Table 18 On-line trading. 96
Stock Holding Corporation of India Limited
At a Glance
1
Stock Holding Corporation of India Limited
Executive Summary
The study is about describing the different services and products offered at SHCIL.
Project mainly deals with how the resources of the organization are used in their day-
to-day activities. For a finance manager it will be of great help to know how to
properly utilize the resources of the organization. It is not only the theory, which will
help in the corporate world, but also how things happen practically. Here there is an
opportunity to learn how the things happen practically. Every day the various
activities happening in the department are observed and understood carefully.
The study initially concentrated on obtaining the information from the investors on
various parameters. As it is a finance project mainly data was be available internally.
After finishing this task, the actual analysis of the project has been started where
certain important calculations has been done. This helped to come out with some
conclusions. Also the data pertaining to some Demat Section Managers has been
taken and analyzed which made to arrive at some interim conclusions as a part of
project.
Stock holding has various financial Products and Services to be offered to the clients
but problem lies in the low promotional activities undertaken by it, due to which
though it has the services not offered by other DP's it fails in captivating customers.
Another problem faced by it is technology; systems at stock holding are not
technologically upgraded: it follows old technology and modes of making entries of
payments into systems. Due to system error payments to franchisees are not made on
time, which in turn affects their business relationship. Since stock holding is into DP's
business from long time it still follows old methods of operations. Thus, I got
interested to conduct study on the Depository Services under the title “Descriptive
analysis of Depository Participants with reference to Stock Holding Corporation of
India limited”.
2
Stock Holding Corporation of India Limited
Introduction
Background
Depository
3
Stock Holding Corporation of India Limited
A depository is a facility for holding securities, which enables securities transactions
to be processed by book entry. To achieve this purpose, the depository may
immobilize the securities or dematerialise them (so that they exist only as electronic
records).' India has chosen the dematerialisation route. In India, a depository is an
organization, which holds the beneficial owner's securities in electronic form, through
a registered Depository Participant (DP). A depository functions somewhat similar to
a commercial bank. To avail of the services offered by a depository, the investor has
to open an account with it through a registered DP.
Depository Participant
A Depository Participant (DP) is an agent of the depository who is authorized to offer
depository services to investors. Financial institutions, banks, custodians and
stockbrokers complying with the requirements prescribed by SEBI/ Depositories can
be registered as DP.
Benefits of Depository
Bad delivery eliminated
Immediate transfer of shares
No stamp duty on such transfers
Elimination of risks that are normally associated in dealing with Physical
certificates - loss / theft / mutilation due to careless handling / forgery / etc
Reduced transaction cost
Services provided by Depository
Dematerialisation (usually known as demat) is converting physical certificates
to electronic form
Rematerialisation, known as remat, is reverse of demat, i.e. getting physical
certificates from the electronic securities
Transfer of securities, change of beneficial ownership
Settlement of trades done on exchange connected to the Depository
Pledge / Hypothecation of demat shares, viz. Loan against shares
Electronic credit in public offering of the Companies
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Stock Holding Corporation of India Limited
Non - Cash corporate benefits, viz. Bonus / Rights - direct credit into
electronic form
No. of Depository in the country
National Securities Depository Ltd.
Central Depository Services Ltd.
Research Title
A Descriptive Analysis of Depository Participants in Delhi with reference to India’s
Largest DP “Stock Holding Corporation Of India Ltd.”
Purpose
The past few years have seen a phenomenal growth in the capital market leading to an
explosion in transaction holding despite the transparency offered by NSE and BSE,
the primitive settlement and transfer process kept the biggest chunk of the market
risk- bad delivery, delayed transfer, fake certificates, loss and theft etc, unresolved.
The Depositories is the answer to such risk and problems.
Introduction of the depositories has paved the way for instituting an infrastructure for
eliminating these risks and increasing the efficiency of the system. The purpose of this
study is to provide information to both the organization and the investors/savers,
providing to the former present state and future prospect and to the later differences
among the services provided by the various depository participants.
This Analysis will help to have a better understanding about where SHCIL stands in
the market today and also to compare various DPs on certain parameters.
Objectives
The main objectives of the project undertaken are-
To understand the attitude and perception of investors/savers towards the DPs.
To ascertain SHCIL’s position in the competitive market.
To collect the data on various parameters
Tariff
Service
Reach(No. of branches)
Promoters
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Stock Holding Corporation of India Limited
Product
To develop and analyze strategies of SHCIL to help improve its market
share.
To offer suggestions based upon the findings.
Limitations of the study
The study is limited only to SHCIL, HO Nehru Place New Delhi.
There was a constraint of time.
The entire study is based on the information provided by the various
respondents at SHCIL.
For the purpose of collecting vital information, Manager of the organization
is only contacted & interviewed. Since he is an individual, his biases may
have creped into the data given.
The policy of the company does not allow getting all the information.
PLAN ANALYSIS
The collected data will be analyzed with the help of parametric techniques such as
percentages, correlation, regression, co-efficient of variation and the like. Wherever
necessary tables charts, graphs, diagrams are used.
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Stock Holding Corporation of India Limited
INDUSTRY PROFILE
INDUSTRY PROFILE
FINANCIAL MARKET
Globalization of the financial market has led to a manifold increase in the investment.
New markets have been opened: new instruments have been developed: and new
services have been launched. Besides, a number of opportunities and challenges have
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Stock Holding Corporation of India Limited
also been thrown open. Stock Holding Corporation of India Limited. (SHCIL), the
premier custodian of Indian capital market providing services of international
standards, is geared up to reposition itself in the changed scenario. With world —
acclaimed automation and a team of committed professionals, SHCIL is confident of
scaling new heights. Combining its financial strength and technical expertise to serve
the clients better, wherever and whenever it is needed, SHCIL envisages acting as a
partner one can trust. The corporation has restructured and geared itself to serve the
growing needs of individual investors in the paperless environment. The organization
in its willingness to provide its state of art of financial services in securities industries
to the various segments of the investors has expanded itself to more than 100 cities
across the country. SHC desires to give investors the time and attention in monitoring
the performance of their securities consistently. All aimed at providing the investor
with optimum financial gain.
India has a well established capital market mechanism where in effective and efficient
transfer of money capital or financial resources from the investing class to the
entrepreneur class in the private and the public sector of the economy occur. Indian
capital market has a long history of organized trading which started with the
transaction in the loan stocks of the East India Company; from that time it has
undergone drastic changes to meet the requirements of the globalization. The Indian
capital market had been dormant in the 70’s and 80’s has witnessed unprecedented
boom during the recent years. There has been a shift of house hold savings from
physical assets to financial assets, particularly the risk bearing securities such as
shares and debentures. Capital market structure has also undergone sea Changes with
number of financial services and banking companies, private limited companies
coming into the scene which made the competition in the market stiffer.
CAPITAL MARKET
The capital market consists of primary market and secondary market segments. The
primary market deals with the issue of new instruments by the corporate sector such
as equity shares, preference shares and debentures. The public sector consisting of
central and state governments, various public sector industrial units (PSUs), statutory
and other authorities such as state electricity boards and port trust also issue bonds.
The primary market in which public issue of securities is made through a prospectus
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Stock Holding Corporation of India Limited
is a retail market and there is no physical location. Direct mailing, advertisements and
brokers reach the investors. Screen based trading eliminates the need of trading floor.
The secondary market or stock exchange where existing securities are traded is an
auction arena. Since 1995, trading in securities is screen based. Screen based trading
has also made an appearance in India. The secondary markets consist of 23 stock
exchanges including the NSE and OTCE and Inter Connected Stock Exchanges of
India ltd. The secondary market provides a trading place for the securities already
issued to be bought and sold. It also provides liquidity to the initial buyers in the
primary market to re-offer the securities to any interested buyer at a price, if mutually
accepted. An active secondary market actually promotes the growth of the primary
market and capital formation because investors in the primary market are assured of a
continuous market and they can liquidate their investments in the stock exchange.
DEPOSITORY
Depository is an organization where the securities of a share holder are kept in the
electronic form at the request of the shareholder through a medium of a depository
participant (DP). The principal function of a depository is to dematerialise securities
and enable their transactions in book form electronically.
In India, the Depository Act defines a depository to mean “A company formed and
registered under the companies act, 1956 and which has been granted a certificate of
registration under sub-section (la) of section 12 of the Securities and Exchange Board
of India (SEBI) act, 1992”.
Legal Framework of Depositories:
The depositories act of 1996 provides for regulation of depositories in securities and
for matter there with or incidental there to and came into from 2O” of September,
1995.
SEBI formulated the Depositories and participants regulations act, 1996 to oversee the
matter regarding admission and working of depositories and its participant. The
depositories act passed by parliament received the presidents assent on august 1, 1996
enables the setting up of multiple depositories in the country. Only a company
registered under the Companies Act Of 1956 and sponsored by the specified
9
Stock Holding Corporation of India Limited
categories of institution can setup depositories in India. The depository offers services
relating to holding of securities and facility processing of transactions in such
securities in book entry form. The transactions handed by depositories include
settlement of market trades, settlement of off trades, Securities lending and
borrowing, pledge and hypothecations.
Eligibility Criteria For a Depository:
Any of the following may be a depository:
1. A public financial institution as defined in section 4a of the Companies Act Of
1956.
2. A bank included in the second schedule to the RBI Act, 1934.
3. A foreign bank operating in India with the approval of the RBI.
4. Recognized stock exchanges.
5. An institution engaged in providing financial services where not less than 75% of
the equity is held jointly or severally by these institutions.
6. A custodian of securities approved by government of India.
7. A foreign financial services institutions approved by government of India.
The promoters of depository are also known as its sponsor. A depository company
must have a minimum worth of Rs. 100 Cr. The sponsor of the depository has to hold
at least 51% of capital of the depository company.
Agreement between Depository and Issuers:
If either the issuer (a company which has issued securities) or the investor opts to hold
his securities in demat form, the issuer enters into an agreement with the depository to
enable the investors to dematerialize their securities. Where an issuer has appointed a
registrar to the issue and Registrar and Transfer (R&T) agent, the case may be for the
securities declared for dematerialization
Rights and Obligations of Depositories:
1. Every depository should have adequate mechanisms for reviewing monitoring and
evaluating the controls, systems, procedures and safeguards.
2. Annual inspections of the procedures and same should be reported to SEBI.
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Stock Holding Corporation of India Limited
3. To ensure that the integrity of automatic data processor systems is maintained to
safeguard information.
4. Adequate measures including insurances, to protect the interests of the beneficial
owners against any risk.
Functions of Depository:
Dematerlisation
One of the primary functions of depository is to eliminate or minimize the movement
of physical securities in the market. This is done through converting securities held in
physical form in to holdings in to back entry form.
Accounts Transfer
The depository gives effects to all transfers resulting from the settlement of trade and
other transaction between various beneficial owners by recording entries in the
accounts of such beneficial owners.
Transfer and registration
A transfer is a legal change of ownership of a security in the records of the issuer.
Transfer of securities under demat occurs merely by passing book entries in the
records of the depositories, on the instructions of beneficial owners.
Pledge and hypothecation
Depositories allow the securities placed with them to be used as collateral to secure
loans and other credits. The securities pledged are transferred to a segregated or
collateral account through book entries in the records of the depository.
Linkages with clearing system
The clearing system performs the functions of ascertaining the pay-in (sell) or pay
(buy) of brokers who leave traded on the stock-exchange. Actual delivery of securities
to the clearing system from the selling brokers and delivery of securities from the
clearing system to the buying broker is done by depository. To achieve this,
depositories and the clearing system are linked electronically.
To handle the securities in electronic as per the Depositories Act 1996, two
depositories are registered with SEBI. They are: National Securities Depository
Limited (NSDL), Central Depository Services (India) Limited (CDSL).
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Stock Holding Corporation of India Limited
DEPOSITORY PARTICIPANTS
Depository participants (DPS) are described as an agent of the depository. They are
the intermediaries between the depository and the investors. The relationship between
the DP’s and the depository is governed by an arrangement made between the two
under the depositories act. In a strictly legal sense a OP is an entity who is registered
as such with SEBI under the provisions of the SEBI Act. As per the provisions of this
act a OP can offer depository services only after obtaining a certificate of registration
from SEBI.
Eligibility Criteria For Depository Participant
A public financial institution as defined in sections of the companies act.
A bank included for the time being in the second schedule to the RBI.
A foreign bank operating in India with the approval of RBI.
A state financial corporation established under the provisions of section 3 of
the state financial corporations act, 1951.
An institution engaged in providing financial services promoted jointly or
severally by any of the institutions mentioned above.
A custodian of securities who has been granted a certificate of registration by
SEBI.
A clearing corporations or a clearinghouse of stock exchange.
A stock broker who has been granted a certificate of registration by SEBI.
A non-banking finance company..
A person desirous of becoming a DP of NSDL should make an application to SEBI
through NSDL. NSDL evaluates and sends to SEW within 30 with recommendations.
If all the conditions are met SEBI grants the registration certificate to the applicant.
SEBI prescribes a minimum net worth of Rs.5OIakh for stock brokers, R&T agents
and non-banking finance companies (NBFCs) for granting them a certificate &
registration to act as a DR. A certificate of registration is valid for a period of 5 years.
It may be renewed after 5 years.
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Stock Holding Corporation of India Limited
Rights and Obligations of Depository Participant
1. Agreement with beneficial owners:
The OP must enter into an agreement with a beneficial owner before acting as a DR
on his behalf. A DR while conducting business with a client, acts as an agent of
NSDL and is liable to the clients for all the acts and deeds performed by him.
2. Separate accounts:
The DP shall open a separate account in the name of each beneficial owner’s account
only on receipt of instructions from beneficial owner.
3. Statement of account:
The OP should provide statements of accounts to the beneficial owner as laid in the
agreement with the beneficial owner. It should be done fortnightly if any transactions
are made and at least quarterly if no transactions are done, It can be provided through
internet.
4. Transfer or withdrawal by beneficial owner:
The DP should allow a beneficial owner to withdraw or transfer securities from its
accounts in such manner as specified in the agreement with beneficial owner.
5. Connectivity:
The DP should maintain continuous electronic communication with each P0SItory in
which it is participant.
6. Monitoring, reviewing & evaluating internet systems & controls: DP should have
an adequate mechanism for the purposes of reviewing monitoring and evaluating its
internal accounting controls and systems. It has to get an audit done on quarterly
basis.
7. Reconciliation:
The DP shot reconcile its records with every depository in which it is participant on a
daily basis. The NSDL system is designed to do this automatically every day at the
end of the day (EOD).
8. Returns:
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Stock Holding Corporation of India Limited
The DP should submit periodic returns to SEBI and to every depository in which it is
a participant.
9. DP to indemnify depository:
A DP has to indemnify the depository, its officers and employees for all costs, fees,
expenses, liabilities, taxes, actual losses and damages of any nature what so ever
suffered like failure to comply with laws, failure to deliver eligible securities etc.
10. Prohibition of Assignment:
No DP can assign or delegate its functions as a participant to any other person without
prior approval of NSDL.
11. Insurance:
DP’s should take appropriate insurance cover to insure against losses arising from any
possible business risk and system failure.
12. Record of services:
The DP should maintain and preserve the documents for all transactions for a
minimum period of 5 years.
13. DP to ensure integrity and back-up of data:
Where DP’s maintain electronic records, they should ensure the integrity of the data
processing system. All necessary precautions should be taken to ensure that the
records are not lost, destroyed or tampered with sufficient back-up of records should
be taken and made available at all times at different places. SEBI at any time may
cancel the registration of DP if they are not in complying with the rules laid by the
depositories act. Like guilty of fraud, repeated defaults. DR may sometimes choose to
terminate its participation in the depository by giving notice of less than 30 days.
GOVERNING BODIES OF DEPOSITORY PARTICIPANT
National Securities Depository Limited (NSDL)
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, UTI the largest Indian mutual fund and
the National Stock Exchange in India sponsored the setting up of NSDL and
14
Stock Holding Corporation of India Limited
subscribed to the initial capital. NSDL commenced operations on November 8, 1996.
Following organizations are share holders of NSDL as on march 31, 2001:
a) INDUSTRIAL DEVELOPMENT BANK OF INDIA
b) UNITED TRUST OF INDIA
c) NATIONAL STOCK EXCHANGE
d) STATE BANK OF INDIA
e) GLOBAL TRUST BANK
f) CITIBANK
g) STANDARD CHARTED BANK
h) HDFC BANK
i) HSBC
j) DEUTSCHE BANK
k) DENA BANK
l) CANARA BANK
Ownership:
NSDL is a public limited company incorporated under the companies act, 1956.
NSDL had a paid up equity capital of Rs.10 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.4.2 crore in the year 2000. However, its network is above Rs.100 crore as required
by SEBI regulations. -
Management of NSDL:
NSDL is managed by professional board of director. The managing director conducts
the day to day operations. To assist the MD in his functions, the board appoints an
executive committee of not more than 16 members. The eligibility criteria and period
of nomination of the members of EC etc. are governed by the bye-laws of NSDL in
this regard.
Bye-laws of NSDL:
The bye-laws approved by SEBI which contain 14 chapters they are:
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Stock Holding Corporation of India Limited
a) Short title and commencement
b) Definitions
c) Board of directors
d) Executive committee
e) Business rules
f) Participates
g) Safeguards to protect interest of clients and participants
h) Securities
i) Accounts by book entry
j) Reconciliation accounts and audit
k) Disciplinary action appeal
l) Appeals
m) Conciliation
n) Arbitration
Function of NSDL:
NSDL performs the following functions through Depository participants (DP)
Enables the surrender and withdrawal of securities to and from the depository
(dematerialisation and rematerialisation).
Maintains investor holdings in the electronic form.
Effects settlement of trades not done on the stock-exchange (off-market
trades).
Transfer of securities.
Pledging I hypothecation of companies or corporates.
Receipt of non-cash corporate benefits like bonus rights r electronic form.
Stock lending and borrowing.
The investors interact with a depository participant (DP) of NSDL. A DP can be a
bank, financial institution, a custodian or a broker. Just as one opens a bank account to
16
Stock Holding Corporation of India Limited
avail of the services of a bank, an investor has to open an account with a DP in order
to avail of the depository facilities.
Central Depository Services Of India Limited (CDSL)
Central depository services of India ltd were the second depository to be granted the
commencement certificate by SEBI on 8 February 1999, inaugurated on 15 July 1999.
It is promoted by the Bombay stock exchange, in association of bank of India.
Both NSDL and CDSL interface with investors through their service providers known
as DP. The depository is interconnected. It is possible to transfer shares from one
depository to another.
CDSL was promoted by The Stock Exchange, Mumbai (BSE) jointly with leading
banks such as State Bank of India, Bank of India, and 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:
. CDSL received the certificate of commencement of business from SEBI in February
1999.
• Honorable union finance minister, Shri Yashwanth Sinha flagged off the operations
of CDSL on July 15 1999.
• Settlement of trades in the demat mode through BOl shareholding limited, the
clearing house of BSE started in July 1999.
• All leading stock exchanges like national stock exchange, Calcutta stock exchange,
Delhi stock exchange, stock exchange Ahmedabad, etc have established Connectivity
with CDSL.
• At the end of December, 2007, over 5000 issuers have admitted their securities
(equities, bonds, debentures, and commercial papers), units of mutual funds,
certificate of deposits, etc. into the CDSL system.
BENEFITS AND SAFETY OF DEPOSITORY SYSTEM
17
Stock Holding Corporation of India Limited
In the depository system the ownership and transfer of securities take place by means
of electronic book entries. At the outset, this system capital market of the dangers
related to handling of paper. The benefits that are accrued by this system are:
> Elimination of bad deliveries:
Once the holdings of investors are dematerialized, the question of bad deliveries
doesn’t arise because both transfer deed and share certificate are eliminated in
depository system.
> Elimination of all risks associated with physical certificate:
Dealing fl physical securities have the associated risks of loss of certificates during
movements to and from the registrars. These expose the investor to cost of obtaining
duplicate certificates, advertisement etc., such problems don’t arise in the depository
environment.
> No stamp duty:
No stamp duty for transfer of equity instruments and units of mutual funds in this
system.
> Immediate transfer and registration of certificate:
Once the securities are credited, to the investors account on payout, he becomes the
legal owner of the securities.
> Faster settlement cycle:
The exclusive demat segment follow rolling settlement of T+2 days which enables
faster turnover of stock and enhance liquidity with the investor.
> Buyer is secured:
In physical environment, the buyer is not secured since the shares purchased may not
be transferred. This is not the case with depository system.
> Faster disbursement of non-cash corporate benefits:
NSDL provides for direct credit of non-cash corporate entitlements like rights, bonus
etc., to an investors account ensuring faster disbursement.
> Reduction in rate of interest on loan:
Some banks provide these benefits against pledge of departmentalized securities.
18
Stock Holding Corporation of India Limited
> Increase in maximum limit of advances:
This increases from Rs.l0 lakh to Rs.20 Lakh per borrower. There is also a reduction
in minimum margin from 50% to 25% by banks to advances against demat securities.
> Reduction in brokerage:
Brokers may provide a reduction in the brokerage of 0.25% to 0.5% for trading in
dematerialised securities as it reduces their back office cost of handling paper.
> Reduction in handling huge volumes of paper:
In the physical environment every entity involved in purchase or sale of securities was
to handle paper and pass on the paper to the next entity. But in the depository system
only the delivery instruction to be given by the client is in the form of paper.
> Periodic status reports:
DP’s need to provide periodic reports to investors on their holding and transactions.
> Dematerialized securities can be delivered in the physical segment:
From April 1998 this facility is available at stock-exchange where trading in
dematerialized securities is allowed. But physical securities are not allowed to be
delivered in the dematerialized segment, making dematerialized stocks held with the
investors more liquid than physical stocks.
>Elimination of problems related to change of address of investors, transmission etc:
Investors have to inform the change of address to the OF which will be reflected in
the database of all the companies where the investor is a registered holder of
securities.
> Elimination of problems related to nominations:
An account holder can get securities in all companies transmitted transferred to his
account by completing formalities with a single entity.
> Elimination of problems related to selling securities on behalf of a minor:
A natural guardian is not required to take court approval for selling demat securities
on behalf of a minor.
> Convenient consideration of account:
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Stock Holding Corporation of India Limited
To multiple accounts opened by investors, all accounts can be consolidated into one
account by giving instructions to DP.
> Convenient portfolio monitoring:
Client can monitor portfolio by checking a single statement of holding/transactions
> Increased volumes:
Due to case in transaction and related costs, many players have entered/increased their
transaction, which increases liquidity.
> Newer services:
Opportunities like pledge / hypothecation and stock lending are given specifically by
depository system.
Many safety measures like investor grievances, insurances cover, computer and
communication infrastructure, periodic review, certificate of registration were made
necessary to protect investors.
20
Stock Holding Corporation of India Limited
Company profile
COMPANY PROFILE
21
Stock Holding Corporation of India Limited
STOCK HOLDING CORPORATION OF INDIA LIMITED
1.1 Introduction to the company:
Flagged off at the initiative of the Government of India, SHCIL enjoys an enviable
parentage that very few organizations can boast of, including leading Indian Financial
Institutions and the Insurance majors. It has been jointly promoted by IDBI, ICICI,
IFCI, IIBI, UTI, LIC, and GIC and its subsidiaries.
It is headed by luminaries from its promoter institutions who constitute its Board of
Directors and take policy decisions pertinent to the affairs of the corporation. A senior
management team that reports to the Managing Director and the CEO aids, assists and
strategies business lines for the Corporation.
The primary focus of the corporation was specific – to set up custodial services of
international standards in India and in the process to manage the entire array of post
trade activities of Financial Institutions and Foreign Institutional Investors with
dedicated client relationship teams and state-of-the-art reporting systems.
The corporation quickly garnered nearly 70% market share of the domestic custodial
business and the financial figures shot up impressively for the first decade of its
existence.
With sustained market leadership, the biggest investing body of the country in its
client list, SHCIL ensures that its technology support not only holds enormous
databases together but also makes sense and service out of it too.
The Smithsonian Institute’s Award for “Innovative Use of Technology in the Field
of Finance” in1996 and “Computer Society of India Award” were affirmations of its
efforts, long before information technology started leapfrogging across the country.
SHCIL has also received “No Action Letter” from Securities Exchange Commission
(SEC) of USA, which renders it an eligible institution to hold assets of US-based
funds.
1.2 Vision of the Company:
“To become one stop shop for all financial services”.
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Stock Holding Corporation of India Limited
This vision of the company is slowly being achieved with the foray of the company
into new financial services and products into its portfolio the latest to be the Insurance
product, which would be soon distributed.
1.3 Mission of the Company:
“To spread Quality Service through the innovative use of technology”.
1.4 Objectives of the Company:
To retain the No. 1 position in the DP industry by being ahead of all other DP
service providers with the innovative use of technology.
To provide justified service to every rupee the client pays.
To ensure security and convenience of transaction to its clients at reasonable
price.
To channel technology to make convenient products for financial market that
give quantum benefits to investors, corporate houses and brokers.
To reach 37 million Internet users in the years to come with e-commerce
projection scaling USD 1.7 billion.
To move with speed and ease, diversifying into new areas, considerably on
others and sharpening its focus and paradigms.
To increase its customer base, this at present is 7 lakh.
To evolve a new strategy to emerge as a broad based financial powerhouse in
the years to come.
To find ways to make information and reporting system more effective for the
institutional clients.
To expand to the South-East Asia, with the aim of becoming the leader.
1.5 Basic facts about SHCIL
SHCIL is India’s largest depository participant.
SHCIL has around 20% market share i.e. over 8 lakhs demat accounts.
SHCIL has approx, 50% market share of delivery- based transaction which amount to
1.33 crore transaction.
1. Short title and commencement
2. Definitions
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Stock Holding Corporation of India Limited
3. Board of directors
4. Executive committee
5. Business rules
6. Participates
7. Safeguards to protect interest of clients and participants
8. Securities
9. Accounts/transactions by book entry
10. Reconciliation, accounts and audit
Our Values
Safety and Efficiency of operations is a hallmark of SHCIL
Professionalism and Integrity
Customer First
Relationship Building
Commitment to Quality irrespective of asset size
HIERARCHICAL STRUCTURE OF SHCIL
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BOARD OF DIRECTORS
MANAGING DIRECTOR & CEO
JOINT MANAGING DIRECTOR
Sr V P ( BUS. DEV) Sr VP (FINANCE) VPs (FUNCTIONAL)