18 Working of Depository system A PROJECT REPORT On Working of Depository system A project Report submitted in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION TO SRI SAI COLLEGE OF ENGINEERING AND TECHNOLOGY PUNJAB TECHNICAL UNIVERSITY JALANDHAR BY
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18
Working of Depository system
A PROJECT REPORTOn Working of
Depository systemA project Report submitted in partial fulfillment of the requirements
for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION TO
SRI SAI COLLEGE OF ENGINEERING ANDTECHNOLOGY
PUNJAB TECHNICAL UNIVERSITY
JALANDHAR
BY
SUSHIL KUMAR
ROLL NO.80503317057
Under the guidance of
Mr. PUNEET SHARMA (H.O.D)
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Working of Depository system
TO WHOMSOEVER IT MAY CONCERN
This is to certify that the project report titled “Working of depositort system” carried out
by Mr.sushil kumar, S/o Shri. Rndhir singh (Father’s Name) has been accomplished under my
guidance & supervision as a duly registered MBA student of the Sri sai college of engineering
and technology, Badhani. This project is being submitted by him in the partial fulfillment of the
requirements for the award of the Master of Business Administration from Sri sai college of
engineering and technology.
His project work represents his original work and is worthy of consideration for the award of the
degree of Master of Business Administration.
___________________________________(Name & Signature of the Faculty Advisor)
Title: Working of depository system
Date: ______________________________
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Working of Depository system
ACKNOWLEDGEMENT
I would like to express my appreciation and gratitude to various people who have shared
their valuable time and made possible this project ,through their direct indirect cooperation .
My honorable Sir Mr. Puneet Sharma (HOD) and Miss Ripsy mahajan (Project in-
charge), for allowing me to work on this project and provide necessary help.
I thank my respected faculties, dear friend & colleagues, who help me in every possible
ways , support me and encouraged me to explore new dimensions.
SUSHIL KUMAR
MBA 4nd Semester
ROLL NO: 80503317057
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Working of Depository system
INDEX
S.NO.
PARTICULARS PAGE NO.
1. Certificate 05
2. Declaration 06
3. Preface 07
4. Introduction
Depository
Deposiory system
Leagal framework of DS
Functions of DS
Benefits of DS
Safety feature in the DS
Difference b/w Bank and Depository
Some important process in DS
08
09
13
14
19 21 22 35
36
5. National securitirs depository system
About NSDL
Management of NSDL
Fee structure of NSDL
Technology and connectivity in NSDL
Common software use in NSDL
42-50
43
45
47
48
50
6. Central securitirs depository system
About CSDL
Shareholders of CSDL
Board of diectors and management
Fee structure of CSDL
51-55
52
53
54
55
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Working of Depository system
7. Research methodology
Objectives of the study
Types of research
Methods of data collection
Tools of analysis
Research design
56-58
57
57
58
58
58
8. Data analysis and interpretation 59-65
9. Observations 66
10. Suggestions 68
11. Limitations 69
12. Conclusion 70
13. Biblography 71
14. Orignal synopsis 72
15. Questioneerie 74
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Working of Depository system
CERTIFICATE
This to certify that SUSHIL KUMAR ,M.B.A 4 Semester ,S.S.C.E.T Badhani
(Pathankot) under P.T.U Jalandhar has done project on “Working of depositary system’’ and has
successfully completed his project on my guideline.
It is only for academic purpose and is a bonfires work done by researcher .
Project Guide
Mr. Puneet Sharma
Faculty
S.S.C.E.T
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Working of Depository system
DECLARATION
I am Sushil Kumar do here by declare that the project work entitle on the “Working of
depositary system’’ is the original work done by me.
This project report presented as a partial fulfillment requirement for the degree of Master
of Business administration.
Sushil kumar
MBA 4nd semester
S.S.C.E.T
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Working of Depository system
PREFACE
The successful completion of this project was a unique experience for me because by
visiting many place and interacting various person, I achieved a better knowledge about this
system. The experience which I gained by doing this project was essential at this turning point of
my carrier this project is being submitted which content detailed analysis of the research under
taken by me.
The research provides an opportunity to the student to devote his/her skills knowledge
and competencies required during the technical session.
The research is on the topic “Working of Depositary system”
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Working of Depository system
INTRODUCTION
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Working of Depository system
INTODUCTION
One of the biggest problem faced by the indian capital market has been the manual
and paper based settlement system. Under this system, the clearing and settlement of transaction
take place only with the use of paper work. The system of physical delivery of scrip’s poses
many problems for the purchaser as well as the seller in the form of delayed settlements, long
settlement periods, high level of failed trade, high cost of transaction, bad deliveries etc. In many
cases transfer process takes much longer time then two month as stipulated in section 113 of
companies Act, 1956 or section 22 A of the securities Contracts (Regulations) Act, 1956.
Moreover, a large number of transactions end up as bad deliveries due to faulty compliance of
paper work, mismatch of signatures on transfer deeds with specimen record of the issuer or other
procedural reasons. Besides, theft, forgery, multination of certificates and other irregularities
have also become rampant.
However, as a consequence of implementation of reforms measures, the Indian
capital market has shown rapid growth in the recent past with foreign investors, more stock
exchanges and increased market intermediaries. The old manual system of settlement and
transfer has almost failed to handle the growing volume of paper that has loaded the market.
Thus, to eliminate paperwork, facilitate scrip less trading and electronic book entry of the
transfer of securities, shorten settlement periods, and to improve liquidity in the stock market, it
was found necessary to replace the old system of transfer and settlement with the new and
modern system of depositories. Accordingly the government of India enacted the depositories
Act in 1996 for the orderly growth and development of the Indian capital market.
It is a system whereby the transfer and settlement of scrip’s take place not through
the traditional method of transfer deeds and physical delivery of scrip’s but through the modern
system of effecting transfer of ownership of securities by means of book entry on the ledgers or
the depositary without the physical movement of scrip’s. The new system, thus , eliminates paper
work, facilities automatic and transparent trading in scrip’s, shortens the settlement period and
ultimately contributes to the liquidity of investment in securities. The system is also known as
‘scriples trading system’.
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Working of Depository system
There are essentially four player in the depository system:
The Depositary participant
The Beneficial owner/investor
The issuer
The depositary
A depositary is a firm wherein the securities of an investor are held in electonic
form in the same way a bank holds money. It crries out the transactions of securities by means of
book entry, without any physical movement of securities. The depositary based settelment
system is also called ‘book entry transfer settelment’. The depositary acts as a defecto owner of
the securities lodged with it forn the limited purpose of transfer of ownership. It functions as a
custodian of securities of its clients. The name of the depositary appears in the records. With
increase in the number of transactions in the stock market, it had become difficult for the
investors to hold share certificates and debt instruments in bulk. But now, depositary institutions
handle this job. At present there are two depositories in india.
Number of Depositories in India
National securities depositary Ltd. (NSDL)
Central depositary services (india) Ltd. (CDSL)
NSDL was formed and registered under the companies’ act 1956 during December 1995 and
commenced operations during november1996. NSDL was promoted by Industrial Development
Bank of India (IDBI)-the largest development bank in India, Unit trust of India (UTI)-the largest
mutual fund in India and National stock exchange (NSE)-the largest stock exchange in India.
Some of the prominent banks in the country also have a stake in NSDL.
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Working of Depository systemCentral Depository services (India) limited which commenced operations during February
1999.CSDL was promoted by stock exchange, Mumbai in association with Bank of Baroda,
Bank of India, State Bank of India and HDFC Bank.
DEPOSITARY
SYSTEM
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WHAT IS DEPOSITORY
Electronic revolution has brought about a number of changes in the functioning of Indian
capital market. The most revolutionary change that was brought in the entire history of the Indian
market is the introduction of depository.
The century old Indian market has been vibrant all along but its paper- based settlement
of trades caused problems like bad delivery, delayed transfers etc., until the enhancement of
depository act in 1996. The depository model in India is a competitive multi depository system in
India the system of dematerialization is followed, wherein the securities will be cancelled as
against the system of immobilization in which the securities are kept in custody.A depository is
an organization where the securities of an investor are held in electronic form and carries out the
securities transaction by book entry.
A depository is a file or set of files in which data is stored for the purpose of safekeeping
or identity authentication. A common example is the set of personal data files at a credit
reporting agency such as Equifax. Another example is the data contained at a state motor vehicle
department. In a biometric security system, a depository contains data about people's physical
characteristics such as iris prints and finger images.
Additional information may be added, including facial characteristics, voice prints, and
hand prints. When a person's identity must be verified, one or more biometric samples is taken in
real time, and this data is compared with the data in the depository. In general information
storage applications, a depository is a physical site where data is kept in the form of hard copies,
magnetic disks, magnetic tapes, compact disks (CDs), and similar media. A good example is the
safe deposit vault in a financial institution. An ideal depository is secure, in the sense that only
authorized persons or institutions can gain access to the data it contains. However, experience
has shown that many depositories, no matter how secure they claim to be, can be compromised
Working of Depository systemsecurities. Dematerialisation is the process of converting securities held in physical form into
holdings in book entry form.
Account Transfer: The depository gives effects to all transfers resulting from the
settlement of trades and other transactions between various beneficial owners by recording
entries in the accounts of such beneficial owners.
Transfer and Registration: A transfer is the legal change of ownership of a security in the
records of the issuer. For effecting a transfer, certain legal steps have to be taken like
endorsement, execution of a transfer instrument and payment of stamp duty. The depository
accelerates the transfer process by registering the ownership of shares in the name of the
depository. Under a depository system, transfer of security occurs merely by passing book
entries in the records of the depositories, on the instructions of the beneficial owners.
Corporate Actions: A depository may handle corporate actions in two ways. In the first
case, it merely provides information to the issuer about the persons entitled to receive corporate
benefits. In the other case, depository itself takes the responsibility of distribution of corporate
benefits.
Pledge and Hypothecation: The securities held with NSDL may be used as collateral to
secure loans and other credits by the clients. In a manual environment, borrowers are required to
deliver pledged securities in physical form to the lender or its custodian. These securities are
verified for authenticity and often need to be transferred in the name of lender. This has a time
and money cost by way of transfer fees or stamp duty. If the borrower wants to substitute the
pledged securities, these steps have to be repeated. Use of depository services for pledging/
hypothecating the securities makes the process very simple and cost effective. The securities
pledged/hypothecated are transferred to a segregated or collateral account through book entries
in the records of the depository.
Linkages with Clearing System: Whether it is a separate clearing corporation attached to
a stock exchange or a clearing house (department) of a stock exchange, the clearing system
performs the functions of ascertaining the pay-in (sell) or pay-out (buy) of brokers who have
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 the
depository. To achieve this, depositories and the clearing system should be electronically linked.
Having understood the depository system, let us now look at the organisation and functions of
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Working of Depository systemNational Securities Depository Limited (NSDL).
BENEFITS OF DEPOSITORY SYSYEM
No risks associated with physical certificates such as loss of share certificate, Fake
securities, Etc.
No bad delivery.
Faster settlement cycles.
Low transaction cost for purchase and sale of securities compared to physical mode.
Increase liquidity of securities
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.
Facilities offered by depository system
Dematerialisation
Rematerialisation
Electronic settlement of trades in stock exchanges connected to depositories.
Pledging/hypothecation of dematerialized securities.
Electronic credit of securities allotted in public, rights, bonus issue.
Nomination facility.
Freezing of De-mat accounts, so that the debits from the dematerialization are not
permitted.
Services related to change of address, nomination, mandate, transmission, etc.
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Working of Depository system Other services viz.holding debt instruments in the same demat account.
Availing stock lending/borrowing facility, etc.
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.
Beneficiary account
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Working of Depository systemA beneficiary account is an account opened by the investor or a broker with a DP of his choice,
to hold shares in dematerialized form and undertake scrip less trading.
Investor contacting the depository
The investor must open a demat account with a Depository Participant. Opening a demat account
with a DP is similar to opening an account with bank. The selection of DP is to be done by the
investor based on fee payable, proximity, service levels, etc.
Documents required for opening demat account
For demat account opening the following documents are required to be given-
Demat account opening form duly filled.
Address proof.
Photograph
Identity proof
Other formalities in Demat account opening
Once a demat account is opened, the investor must sign an agreement with the DP. The
investor will be allotted an account no. known as client identity. The client identity number along
with the DP identity number forms a unique combination. Both these numbers should be quoted
in all the future dealing with Depositories /DP /RTA /Company. However in case of CDSL there
is no DP identity and the 16-digit Client identity itself is a unique number. The investor must
collect forms like dematerialization request form (DRF), Delivery instruction slips etc.
Certain points to be considered while opening Demat account
Demat account cannot be opened in the name of the partnership firms, as a partnership
firm is not a legal entity. However, a demat account can be opened in the name of the partners.
Demat account cannot be opened in the name of the HUF. It has to be opened in the name of the
Karta of the HUF.
In the case of a minor, the depository account should be opened in the name of the minor
and the guardian’s name should be mentioned. The guardian will sign as signatory on behalf of
the minor.
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Working of Depository systemInvestor can open any number of DP accounts with any number of DP’s. However, investor
has to incur cost for each of such account.Investor must open different Demat accounts for shares
held in different combination of names. Alternatively investor can submit the certificate for
Demat along with transposition form.
Minimum balance of securitiesn required to be maintained in Demat account
There is no minimum balance required to be maintained in a Demat account and an
investor can even maintain nil balance.
Other steps the investor should take
The investor should inform his DP of any change in his address, bank account,
nomination, etc. immediately upon change thereof.
Charges for Demat account opening and other depository trading
The depository does not charge any fee directly from the investors. The depository
charges only the DP’s. However, the DP is free to charge its clients for the services offered. The
charges of DP’s also vary.
Stock exchanges connected to the Depositories for Demat trading
At present the following 10 stock exchanges are connected to the Depositories-
National Stock Exchange
The Stock Exchange Mumbai
Calcutta Stock Exchange
Delhi Stock Exchange
Ludhiana Stock Exchange
Bang lore Stock Exchange
Over the counter stock exchange of India
Madras Stock Exchange
Inter connected Stock Exchange
Ahmedabad Stock Exchange.
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Working of Depository system
Market trade and off market trade
Trade done and settled through a stock exchange and clearing corporation is market trade.
Trade done privately without the involvement of the Stock Broker of Stock Exchange is off
market trade.
Buying and selling of shares by the investor
The investor can buy and sell shares only through a stockbroker and not through a DP.
DP helps in delivering the shares against a sale transaction or receiving the shares for a purchase
transaction.
Corporate benefits
Corporate benefit is a corporate event. It can be cash corporate benefit like dividend,
interest, etc.or non-cash corporate benefits like rights, bonus etc.
When any corporate event such as right or bonus or dividend is announced for a
particular security, depository will give the details of all clients having electronic holdings in that
security as of the record date to the RTA/Company will then calculate the corporate benefits due
to all the shareholders. The disbursements of cash benefits such as dividend/interests will be
done by the RTA/Company directly to the shareholders. Non-cash benefits will be distributed
through depository by crediting the entitled quantity of shares into shareholders demat account.
Direct credit of shares in electronic form:
In the public/Right issue application form of depository eligible companies, there will be
a provision for the investor to indicate the manner in which he wants the securities allotted to
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Working of Depository systemhim. Even in the case of bonus issue the investor is given an option for getting the shares allotted
in physical or electric form. The investor must mention his client ID. Number and DP ID No.
Advantage of getting allotment in electronic form:
SEBI has announced that the shares of all the companies going in for public issue will
have to be compulsorily settled in demat form by all investors. It is, therefore,
advantageous for an investor to prefer the allotment in demat form, so that the shares
have higher liquidity.
In case of Discrepancies in corporate benefits the investor can approach his DP who in
turn will contact the RTA/Company for clarifications regarding allotment of securities.
Clearing members, Clearing corporations and other intermediaries cannot have voting
rights in respects of the shares held in pool account. Further the clearing member or
cleaning corporation is also responsible for distribution of bonus, right and other
corporate benefits lying in his account to the investor.
Menaing of Transfer, Transmission and Transposition
Transfer
Depository is electronically linked to depository participants, issuer company or Registrar &
transfer agent and the clearing corporation/ clearing house of the stock exchange. This is done in
order to facilitate settlement of trades and to perform a daily, reconciliation of all the account
balances held with depository. Thus, an integrated system is set up for maintenance of investor
accounts.
Transmission
In the case of transmission, the claimant will have to fill a transmission request form,
supported by documents like death certificates, etc. The DP, after ensuring that the application is
genuine, will transfer securities to the demat account of the claimant. For this purpose claimant
must have a depository account. The major advantage in transmission of dematerialized holdings
is the transmission formalities for all securities held with the DP can be completed in one go,
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Working of Depository systemunlike in the case of share certificate, where the claimant will have to interact with each
RTA/Company.
Transposition
In case of transportation-cum-dematerialization, the investor can get the securities
dematerialized in the same account if the names appearing on the certificate match with the
names in which the demat account has been opened but are in a different order, by
submitting the security certificate along with the transportation form and the
Dematerialisation request form”(DRF) to the DP.
Pledging
Pledging of dematerialized securities:
Pledging dematerialized securities is easier and more advantageous as compared to
pledging physical securities. The procedure as follows
Both borrower (pledger) as well as the lender (pledgee) must have depository account.
The pledger must initiate the pledge by submitting to his DP the details of the securities
to be pledged in a standard format.
The pledge should confirm the request through his DP.
Once this is done the securities are pledged. All financial transactions between the pledger and
the pledgee are handled outside the depository system.
Procedure for the closure of pledge
After the borrower has repaid the loan, the borrower can request for a closure of pledge by
instructing his DP in a prescribed format. The lender on receiving the repayment will instruct his
DP confirmed the closure of the pledge.
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Working of Depository system
Change of securities offered in a pledgeIf the pledger (lender) agrees, the investor may change the securities offered in a pledge.
Nomination
Shares held in physical as well as electronic form can be nominated. Nomination can be
made only by individuals holding beneficiary accounts on their own behalf either singly or
jointly. On individuals, society, trust, body corporate ,partnership firm, Karta or Hindu undivided
Family, holder of power of attorney cannot nominate.
Nomination is permitted for accounts with joint holder, but in case of death of any of the
joint holder, the securities will be transmitted to the surviving holder(s) only in the event of death
of all the joint holders, the securities will be transmitted to the nominee.
Only an individual can be a nominee. A nominee shall not be a society, trust, body
corporate, partnership firm, karta of Hindu undivided Family or a power of attorney holder.
A minor cannot nominate either directly or through its guardian.
A minor can be a nominee. In such a case, the guardian will sign on behalf of the
nominee and in addition to the name and photograph of the nominee, the name, address and the
photograph of the guardian must be given.Separate nomination cannot be made for each security.
Nomination can be made Demat account wise and not security wise.
The investor must fill in and submit to his DP the nomination form. The account holder,
Nominee and two witnesses must sign this form and the name; address and photograph of the
nominee must be submitted.
The nomination can be changed anytime by the account holder by filling up the revised
nomination form and submitting it to the DP. The account holder, Nominee and two witnesses
must sign this form and the name; address and photograph of the nominee must be submitted. In
case of joint holders, all joint holders must sign.
Demat of debt instrument
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Working of Depository system Debt instrument can also be held in demat form. Instruments like bond, debentures,
commercial papers, certificates of deposit, etc. irrespective whether these instruments are
listed/unlisted/privately placed or even issued to a single holder can be dematerialized.
Commercial paper can also be kept in demat form. As per RBI Monetary and credit policy –
banks, Financial Institutions, primary Dealers and satellite dealers are directed to convert their
outstanding investment in commercial papers in script form, into Demat form. The above entities
have also been directed to make fresh investment in commercial paper only in demat form.
Bonds and debentures can also kept in demat form. In its midterm review of the monetary
and credit policy RBI has mentioned that banks and financial institutions shall make investment
in debentures and bonds only in demat form. Any new instrument can be issued directly in
dematerialized form without recourse to printing of either letter of allotment or certificates.
Securities will be directly credit into the demat accounts of the investor by the depositories on
receipt of allotment details from RTA/Company.
The investor need not open separate demat account for demat of debt instrument.
The procedure of dematerialization of debt instrument is same as that carried out for
equity shares. In order to dematerialized his/her certificates; an investor will have to first open a
demat account with a DP and the a request for the dematerialization of certificates by filling up a
dematerialization request form (DRF), which is available with DP and submitting the same along
with the physical certificates. The investor has to ensure that before the certificates are handed
over to the DP for demat, he marks “Surrendered for Dematerialization” on the face of the
certificates.
Account opening
Demat/Remat
Account Maintenance
Custody
Transaction, etc.
Knowing of securities balance in demat account
The investor is provided with a transaction statement by his DP at regular intervals. Based on
that the investor will know his security balances.
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Working of Depository system
Receiving Transaction statement by investor
The DP will send a transaction statement once in a quarter if there is no transaction during the
quarter. If there are any transactions DP will send the statements within fifteen days of the
transaction.
Freezing of demat account
The depository system provides the facility to freeze the demat account for any debits or for both
debits and credits. In an account, which is “free zed of debits”, no debits will be permitted from
the account, till the time it is defreeze. This is in additional security feature of the investors.
Standing instruction to DP
The investor can give one time standing instruction to his DP to receive all the credits coming to
his depository account automatically. However, the investor cannot give standing instruction for
any debits in his account.
Access of investor accounts by all DP’s
A DP cannot access the investors account of any other DP.The DP can access only those
investors accounts serviced by them.
Furnishing of bank account particulars in DP
Details of bank account of the client, including the 9-digit code number of the bank and branch
appearing on the MICR cheque issued by the bank have to be given to the DP at the time of
account opening. Companies use this information for printing them on dividend/interest warrants
etc., to prevent its misuse. In case the client wishes to change this bank account details, he can do
so by submitting the change in writing to the DP.
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Working of Depository system
Procedure of closure of demat account
An investor can close a demat account by giving an application in prescribed form. In
case there is any balance in the demat account sought to be closed, the following steps are
necessary-
1. Rematerialisation of all securities standing to the credit of the demat account at the time
of making the application for the closure.
2. Transferring the balance to the credit of another demat account , with the same
participant or with a different participant.
Dematerialization
Dematerialization is the process of conversion of shares or other securities held in physical form
into electronic form.
Whom to approach
The investor must approach hid DP for Dematerialization
The shares that an investor can dematerialize
The investor can demat the shares of any company that has established connectivity with NSDL
or CDSL
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.
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Working of Depository system3. 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.
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.
Signing of the demat request form in case of joint holders
All joint holders should sign the DRF.
Company identification number for demat purposes
Once the company is admitted in the depository system, the depository allots an ISIN. This
number is unique for each security of the company that is admitted in the depository.
Mentioning of the ISIN in the DRF
The ISIN should be mentioned in the DRF.This to certain extent ensures that the security
mentioned in the DRF is the one which the investor intends to dematerialize.
Distinguishing between partly paid-up share and fully paid up shares in the depository
Parties paid up shares and fully paid up shares are identified by separate ISIN’s (International
security identification number). These are also traded separately at the stock exchanges. The
company issues call notices to the beneficial holders of partly paid up securities in the electronic
form. The details of such beneficial holders will be provided to the RTA/company will
automatically convert the partly paid up shares to fully paid shares.
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Working of Depository system
Rematerialisation
Rematerialisation is conversion of electronic holdings into physical certificate form.
Steps involved for Rematerialisation
The investor must fill up a remat form (RRF) and give it to the DP. The DP will forward the
request depository after verifying that the shareholder has necessary balances. Depository in turn
will intimate the RTA/Company will print the certificate and dispatch the same to the investor.
Electronic settlement of the Trades
Procedure for selling dematerialization securities in the stock exchanges is similar to the
procedure for selling physical securities Instead of delivering physical securities to the broker,
the investor must instruct his/her DP to debit his/her demat account with the number of securities
sold by him/her and credit broker’s clearing account.
Procedure for selling securities is given below:
Investor sells securities in any of the stock exchange linked to depository through a
broker.
Investor gives instruction to DP to debit his account and credit the brokers (clearing
account pool) account.
Before the pay-in-day. Investor’s broker transfers the securities to clearing
corporation.
The broker receives payment from the stock exchange (Clearing Corporation).
The investor receives payment from the broker for the sale in the same manner
payment is received for a sale in the physical mode.
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Working of Depository system
Procedure for purchase of dematerialized shares
The procedure or buying dematerialized securities in stock exchanges is similar to
the procedure for buying physical securities. Investor may give a one time standing
instruction to receive credits into his /her account or may give separate instruction each time
in he prescribed format.
The transaction relating to purchase of securities are summarized below.
Investor purchases securities in any of the stock exchanges connected to depository
through a broker.
Broker receives payment from investor’s.
Broker arranges payment to clearing corporation.
Broker receives credit of securities in clearing account on the payout day.
Broker gives instruction to DP to debit clearing account and credit client’s account.
Investor receives shares in his account.
The investor should ensure that the broker transfer the securities purchased to his
account, before the book closure. If the securities remain in the clearing account of the
broker, the company may give corporate benefits to the broker. Therefore, the investor has to
collect benefits from the broker.
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Working of Depository system
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.
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.
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Working of Depository system
Some important Processes in depositary system
Dematerialization Rematerialization Initial public offers Trading & settlements.
On Market transactions Off market transactions Inter Depository transactions
Dematerialization Process
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.
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Working of Depository system
Rematerialization
Rematerialization or remat is a compiler optimization which saves time by recomputing a value
instead of loading it from memory. It is typically tightly integrated with register allocation,
where it is used as an alternative to spilling registers to memory. It was conceived by Preston
Briggs, Keith D. Cooper, and Linda Torczon in 1992.Rematerialization works by keeping track
of the expression used to compute each variable, using the concept of available expressions.
Sometimes the variables used to compute a value are modified, and so can no longer be used to
rematerialize that value. The expression is then said to no longer be available. Other criteria must
also be fulfilled, for example a maximum complexity on the expression used to rematerialize the
value; it would do no good to rematerialize a value using a complex computation that takes more
time than a load. Usally the expression must also have no effects.
Mr. Bharat Sheth Vice President.Accounts & Administration
Mr. Sunil Alvares Vice President.Business Development
Mr. Ramkumar K. Vice President.Operations
Mr. Jignesh Gandhi Vice President.New Projects
Mr. Satish Budhakar Vice President.Legal & Company Secretary
FEE STRUCTURE OF CDSLCDSL fees structure to its depository participants is as follows:
SR.NO. Details of Charges CDSL
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Working of Depository system1 Account Opening Charges NIL
2 Account Maintenance Charges NIL for individualsRs.500/- p.a. to Corporates
3 Transaction Charges Market & Off-Market
Rs.6/- **
4 Transaction Charges Clearing Member Accounts
Flat charge of Rs.500/- per month on CM accounts for pay-in and pay-outs received from CH
5 Custody Charges NIL
6 Demat Charges NIL
7 Remat Charges Rs.10/- per 100 securities or part quantity orRs. 10/- per cert. whichever is higher.
8 Pledge/Hypothecation Charges Pledge acceptance - Rs.12/- per request.Unpledge acceptance - Rs.12/- per request.
Pledge Invocation Acceptance -Nil
9 Internet Facility 'easi' Rs.20,000/- one time for registration
10 Internet Facility 'easiest' Rs.30,000/- one time for registration Rs.1,150/-p.a.for renewal of digital signature
Monthly charges for DPs or its branches w.e.f. 1st May, 2006For Main DPs: Rs.3,000/- per month or the amount of the actual bill for a given month whichever is higher.
For DP-Branches: Rs.2,000/- per month or the amount of the actual bill for a given month whichever is higher.
Fees for Clearing Members CDSL collects only Rs. 500/ - per month from its DPs for a CM except for CM Investors Securities Account.
The following tariff structure will be effective from Wednesday, April 01, 2009.
Monthly Transaction bill amount(@Rs.6/-per transaction)
(in Rs.)
Rate perDebit Transaction
(in Rs.)
More than Rs.15 lakhs 4.75
More than Rs.4 lakhs and upto Rs.15 lakhs 5.00
More than Rs.1 lakh and upto Rs.4 lakhs 5.50
Upto Rs.1 lakh 6.00
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Working of Depository system
RESEARCH
METHODOLOGY
RESEARCH METHODOLOGY
18
Working of Depository systemResearch Methodology refers to search of knowledge .one can also define reseach
methodology as a scientific and systematic search for required information on aspecific topic.
The word research methodology comes from the word “advance learner ‘s dictionary
meaning of research as a careful investigation or inquiry especially through research for new
facts in my branch of knowledge for example some author have define research methodology as
systemstized effort to gain new knowledge.
OBJECTIVES OF THE STUDY
To understand the basic term and process in depositary system.
Get specific knowledge about NSDL and CSDL and its investor pattners.
Provide aducate and desirable information for the readers.
To find out that factors or speculations those are responsible for creating a negative
image of DS in the mind of investor.
Getiting the information about the awareness of depository system.
Find out the satisfactory level of the investors regarding this system.
TYPES OF RESEARCH
ANALYTICAL RESEARCH: It has to used facts or information already available and analyze
these to make a critical evaluation of material.
SAMPLE SIZE: Considering the constraints it was decided to conduct the study based on
sample size of 50 people in specific age groups.
METHODS OF DATA COLLECTION
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Working of Depository systemIn the project work Primary data secondary data (both) sources of data has been used: .
PRIMARY SOURCE: I have gathered information about our project from the interaction with
the customers of our company i.e. Reliance Money. The sampling method used was basically
convenience sampling and most of the calls made were cold calls made on the generated
database of recipients of other companies.
SECONDARY DATA: The secondary data, I have collected from the various websites of
reliance money, various journals, magazines etc.
TOOL OF ANALYSIS
In the project work quantitative technique & percentage method has been used.
RESEARCH DESIGN
For the proper analysis of data simple quantitative technique such as percentage were
used. It help in marketing more accurate generalization From the data available .The data which
was collected from a sample of population was assumed to be representing entire population was
interested .
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Working of Depository system
DATA ANALYSIS AND
INTERPRETATION
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Working of Depository system
Ques. 1) Are you know about Depository system?
A) Yes 47B) No 03
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Working of Depository system
Ques. 2) Have you sufficient knowledge and awareness about NSDL or CSDL?A) YesB) NoC) To Some extend
A) Yes 12
B) NO 15
C) To some extent 23
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Working of Depository system
Ques. 3) Are you satisfy with fee structure of depository system?A) YesB) NoC) To Some extent
A) Yes 17
B) No 27
C) To some extends 06
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Working of Depository system
Ques. 4) By which depository company you make trading?A) SharekhanB) IndiabullsC) RelianceD) ICICI direct.comE) Other
A) Sharekhan 07
B) Indiabulls 11
C) Reliance 14
D) ICICI direct.com 08
E) Other 10
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Working of Depository system
Ques. 5) If your selected trading company increase there annual charges will you go with it?
A) Yes B) NoC) If charges are reasonable
A) Yes 02
B) No 29
C) If charges are
reasonable
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Working of Depository system
Ques.6) 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 time to time
C) No hidden charges
D) Other factors
A) Provide maximum profit 17
B) Provide tips time to time 08
C) No hidden charges 18
D) Other factors 07
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Working of Depository system
OBSERVATION
To study the above Doughnut, Graph and pie charts I observe that the
most of the people of pathankot have knowledge about depository system but
they have not a proper and basic knowledge about this vast concept only limited
information is there.
According to data analysis result represent below.
After analysis of first one question it clear that only 03 (6%) respondents are not
introduce with term depository system but majority is goes with yes option 47
(94%) .
Data of second question is shows that only 12 respondents have a sufficient
knowledge about CSDL and NSDL it means most of respondent have a no or only
little bit knowledge about these two terms data says that 15 respondents go with
no and 23 go with to some extent.
With observation of third question we find out that the most of the public of
pathankot are not satisfy with present fee structure of depository system.Data
represents that 27 respondents are not satisfy whereas 17 are satisfy and 06 are
satisfy only some extents.
The observation of this question explain that the sharekhan trading company is
not popular in pathankot area because only o7 respondents are make trading with
it, After that ICICI direct.com comes and get 08 votes, reliance get maximum
votes 14 and 10 respondents making trading with other companies. In this
question its clear that Reliance is popular trading company in pathankot area.
Fifth one question is basically include in this questioner for knowing the loyalty
of public, regarding its trading company. According to data 29 respondents are
not switchover to other company while its present trading company increase its
annual fee. It means peoples are satisfy with its trading company and loyal about
it.
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Working of Depository system Last question of my questioner is very essential for find the factor which are
directly influence the amount and loyalty of the customer. Data shows that most
of peoples (18) realized that hidden charges are very default factor in decreasing
the number of customers and its loyalty. Whereas 17 respondents are says that
Maximum profits are the main factor, 08 go with time to time tips and only 07
respondents select other factors option.
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Working of Depository system
SUGGESTION
RECOMMENDATIONS & SUGGESTIONS
Regular statements of holdings should be made available at regular intervals.
The statement of holdings should be provided with the sale and purchase of the
shares.
Awareness of functioning of this system should be spread to the public through
advertisement.
Clear picture of the deductions made by depository participant or the charges
levied on the customers should be provided in black and white.
Proper feedback should be taken into consideration. For e.g. calls should be made
when the account is opened.
Bank should expand its network by opening its more branches and franchise and
there should be easy accessibility of services rendered by a this system.
The processing of the demat account opening should be made fast.
Aggressive efforts should be made by sales team to tap the potential customers
and to increase the customer base.
The bank should launch more welfare schemes from time to time.
The e-broking service should be introduced.
Customers should be made aware about the services like phone banking, net
banking, bill pay, dematerialization etc. an instruction manual telling about how
to use their services can also be given to the customer to make these advanced
services more popular.
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Working of Depository system
LIMITATION
Whole area is not covered in this project so only 50 respondents are representative for
complete area its not ideal data.
The study is limited to the different schemes available under the Demat account selected.
The lack of information sources for the analysis part is also a limitation of this study.
Less awreness about this system in public is very critical block in this study.
In this sytem vast financial terms are comes in this system but peoples are not introduce
with it so peoples are only limited knoweldge about this system and not get sufficent
profit from this system.
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Working of Depository system
CONCLUSION
To conclude, it can be said that the research findings clearly reveal the goodwill and
reputation of depository system among the customers. But there is a need to strengthen this
depository system by spreading awareness about the services offered by NSDL, CSDL and its
trading companies through advertisement and by expanding the more branches of this system all
over the country and also by tapping the potential customers through innovative means.
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Working of Depository system
BIBLIOGRAPHY
Websites
www.reliamcemoney.com
www.icicidirect.com
www.sharekhan.com
www.indiabulls.com
www.moneycontrol.com
www.rediff.com
Referred books
1. Financial institutions and markets-L.M.Bhale
2. Investment management-V.K.Bhalla
3. Research methodology-Mohit gupta,Navdeep Aggarwal
4. Financial services- Shashi k. gupta, Nisha aggarwal