Depository Services

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Depository Services

Depository
            In the traditional mode of purchase and sale of securities, there is physical movement of securities, which invariably proved to be a long drawn ordered for an investor. Many problems are encountered in the market both by the individual and the institutional investors because of these physical movements like:
·         Time consuming process of transfer of shares.
·         Heavy paper work
·         Risk due to transition like loss of certificates etc.
·         Forgery, theft, mutilation etc.
Depository provides an answer to these problems. Depositories provide an electronic transfer of securities. It provides scipless transfer of ownership, maintaining beneficial holdings on behalf of individual investors, providing Dematerialisation and rematerilisation, extending pledge and hypothecation facilities and thereby regulating stock lending operations, inter-depository transfers in a multi depository environment.
NSDL
            National Securities Depository Ltd is an organization promoted by the Industrial Development Bank of India, The Unit Trust of India and National Stock Exchange of India Ltd. to provide electronic depository facilities for securities traded in the equity and debt market. NSDL was registered by SEBI on June 7, 1996.
Functioning:
·         NSDL enables surrender and withdrawal of securities to and from the depository.
·         Enables investors’ holdings in the electronic form.
·         Effects settlement of securities traded on exchanges.
·         Carries out settlement of trader that has not been done on the Stock Exchanges.
            NSDL – Depository Participant can be a public financial institution, bank, custodian, registered stock broker or a NBFC subject to the approval from the Depository Company and SEBI.

Dematerialisation
                        Dematerialisation is a process in which physical certificate of an investor are taken back by the company. Here, the registrar destroys the shares and equivalent number of shares is credited in the electronic holdings of the investor. This is done at the request of the investor. The process involved in dematerialisation is as follows;
  1. Surrendering of certificates to the Depository Participants (DP) for demat.
  2. NSDL is informed by the DP through electronic connectivity.
  3. Original Share Certificates will be submitted to the Registrar by the DP.
  4. The request for dematerialisation from NSDL goes to the Registrar.
  5. The Registrar credits an equivalent number of shares in electronic form in the account of the investor and informs NSDL.
  6. NSDL updates its own account and the DP will be informed.
  7. The depository agent credits it in the name or account of the investor and the same is informed to the investor.



NSDL
Depository Participant
               6
 


               2
 


Registrar
Investor
                    5             4                                3                             1            7



                                  

Rematerialisation
            Sometimes, the investor may like to convert his electronic holdings of shares back into physical share certificate; the process involved will be called as rematerialisation. The investor has to make a request to the DP for rematerialisation, who then put forward the request to NSDL after verifying whether the investor is having necessary security balance. NSDL in turn will intimate the Registrar who prints the certificate and dispatch the same to the investor. The certificate has new range of certificate numbers and new folio number. The process involved in rematerialisation is as follows:
  1. Investor request DP for rematerialisation
  2. DP informs it to NSDL
  3. NSDL intimate it to the Registrar
  4. Registrar of the company prints the certificate with new numbers and informs NSDL.
  5. NSDL adjust its account and passes on the details to the DP
  6. The certificate are dispatched to the investor










NSDL
Depository Participant
                        5
 


                        2
 


Registrar
Investor

                    4             3                                                                                1            

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