A project report on customer satisfaction towards depository participants at karvy mba


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A project report on customer satisfaction towards depository participants at karvy mba

  1. 1. A Study of Respondent Satisfaction towards Depository Participants at Karvy EXECUTIVE SUMMARY Karvy, the FINAPOLIS Ltd. is a stock Broking Company that deals in shares.Apart from security broking Karvy is in to Demat services, Mutual fund andInsurance services. It offers a wide range of financial services in order to meetdifferent individuals financial planning. The project emphasizes on “Customer satisfaction towards depositoryparticipants”Objectives of the Study: • To know the function of DP. • To know the percentage of have satisfied the service of DP. • To know how demat account is helping in the trading • To know the exception of the customer. • To know the loops and draw backs of DP.Research Methodology: Data source: Primary Data: Through Questionnaire Secondary Data: Karvy’s Record & Report, Magazine & Websites. Sample size: 100 customers of Karvy Stock Broking Ltd. Area Covered for research: Only Dharwad KARVY customers.Babasabpatilfreepptmba.com Page 1
  2. 2. A Study of Respondent Satisfaction towards Depository Participants at KarvySampling Procedure: Random sampling method from available database. In thepresent scenario the service industry has given an utmost importance of doing aparticular task at a fastest time in order to satisfy the customer and to attract newcustomer. In this project we can find out the customer of Karvy Consultant havesatisfied with demat service and this DP is overcoming the disadvantages of thephysical trading of the securities in the stock exchange.Babasabpatilfreepptmba.com Page 2
  3. 3. A Study of Respondent Satisfaction towards Depository Participants at Karvy FINDINGS:1) I have carried out this exercise on Dematerlisation. So in my studies I have tried tosee whether the customer have satisfied the service given by depository participants.2) I have also seen that awareness of KARVY service given by Karvy finicalconsultant is from friends.3) It is also seen that more than 84% of the respondent have satisfied with the serviceof demat.4) It is also seen that more than 55% to 60% of the respondent has satisfied with theservice of Freezing/ Defreezing and loan against share. Also 40% respondents are notaware about these services.5) Also found that nearly 2% of the respondents are dissatisfied with bill Acceptance.6) 5% improper format of Holding/Transaction statement and 4% Frequentlyreminders are given to karvy consultant ltd., for update the information AreDissatisfied.7). 38% of respondent feel tariff structure of Karvy Stock Broking Ltd charged is highand very high.8) Also found that 53% respondent have satisfied 80% of the service9). 35% of respondent prefer Karvy Stock Broking Ltd DP to Other Dp becauseOf Quality service And, 40% for safety service.Babasabpatilfreepptmba.com Page 3
  4. 4. A Study of Respondent Satisfaction towards Depository Participants at Karvy INTRODUCTION India has two hundred years old tradition in Securities. Infact that first Indiastock exchange established in Bombay is the oldest in Asia. The earliest securitydealings were Transactions in loan securities of East India Company, the dominantinstitution of those days. Corporate Shares came into the picture by 1830’s andassumed significance with the Companies Act of 1956. In 1887 the broker communitygave birth to the “Native share and stock brokers Association” which is now known asthe Bombay Stock Exchange. The Indian Capital grew at a very moderate rate from 1951 to 1980. Howeverit registered an impressive growth in 1980s. the process of liberalization and thetransparency in operation has raised the interest of foreign investors in India. Till1978 there were only 8 recognized exchanges in India. Initially the exchange operatedon an outcry system i.e. manual system of trading Due to increase in the tradingvolumes, the number of issuer increased substantially, and the birth of NSES highlytransparent automated system come into existence Even then there was an increase inpaper work causing a gridlock at every stage in the stock market This delays theclearance and settlement of traders, registration of securities in the shareholder nameand due this it increased the back office paper work intermediaries These outdatedsystems have increased settlement risks and have rendered the implementation of adelivery of a versus payment system impossible. National Stock Exchange of IndiaLimited to provide electronic depository facilities for securities traded in the equityand the debt market. NSDL commenced its operations in the year 1996 and is the firstdepository in India.Babasabpatilfreepptmba.com Page 4
  5. 5. A Study of Respondent Satisfaction towards Depository Participants at Karvy DESIGN OF THE STUDYTile of the project: “Service Analysis & Customer satisfaction towards Depositary participants”.Statement of the Problem: KARVY STOCK BROKING Ltd is providing the Dematservice. Hence in this report an attempt is made to know the present customersatisfaction towards depository participants.RESEARCH OBJECTIVES: • To know the function of DP. • To know the percentage of have satisfied the service of DP. • To know how demat account is helping in the trading • To know the exception of the customer. • To know the loops and draw backs of DP. .Babasabpatilfreepptmba.com Page 5
  6. 6. A Study of Respondent Satisfaction towards Depository Participants at Karvy METHODS AND METHODOLOGYSampling Design:  Sampling since segment wise investors in KARVY STOCK BROKING Ltd were available the overall customers were considered for the study. Hundred Percent coveraged. Hence random sampling survey method was adopted for the purpose of the study.  Sampling Size: A sample of 100 was chosen for the purpose of the study. Sample consisted of small investor, large investors and traders of KARVY STOCK BROKING Ltd.  Sampling Procedure: From large number of customer of KARVY STOCK BROKING Ltd. Were randomly selected from the available customer database.  Field Study: Directly approached respondents.DATA COLLECTION METHOD:1. PRIMARY DATA: For a study of this nature primary data is collected through Questionnaire.2. SECONDARY DATA: This is been is collected through Karvy’s Record & Report, Magazine & Websites.MEASUREMENT TECHNIQUE: For this purpose measurement technique used for survey is questionnaire to collect information from the respondentANALYTICAL TECHNIQUE: Statistical technique used for measuring the response is in terms of percentage.Babasabpatilfreepptmba.com Page 6
  7. 7. A Study of Respondent Satisfaction towards Depository Participants at Karvy LIMITATION OF STUDY • Since Sample size is only 100 all Hundred customers are approached . • Since segment wise investor is available in KARVY STOCK BROKING Ltd. Overall concept is taken for the study. • Information is partly based on secondary data and hence the authenticity of the study can be visualized and is measurable. • Level of accuracy of the results of research is restricted to the accuracy level with which the customers have given their answers and the accuracy level of the answers cannot be predicted. BACKGROUND Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice,flows freely towards attaining diverse goals of the customer through varied services.Creating a plethora of opportunities for the customer by opening up investment vistasbacked by research-based advisory services. Here, growth knows no limits andsuccess recognizes no boundaries. Helping the customer create waves in his portfolioand empowering the investor completely is the ultimate goal. KARVY, is a premier integrated financial services provider, and rankedamong the top five in the country in all its business segments, services over 16 millionindividual investors in various capacities, and provides investor services to over 300corporate, comprising the who is who of Corporate India. KARVY covers the entirespectrum of financial services such as Stock broking, Depository Participants,Distribution of financial products - mutual funds, bonds, fixed deposit, equities,Babasabpatilfreepptmba.com Page 7
  8. 8. A Study of Respondent Satisfaction towards Depository Participants at KarvyInsurance Broking, Commodities Broking, Personal Finance Advisory Services,Merchant Banking & Corporate Finance, placement of equity, IPOs, among others.Karvy has a professional management team and ranks among the best in technology,operations and research of various industrial segments. The birth of Karvy was on a modest scale in 1981. It began with the visionand enterprise of a small group of practicing Chartered Accountants who founded theflagship company…Karvy Consultants Limited. We started with consulting andfinancial accounting automation, and carved inroads into the field of registry andshare accounting by 1985. Since then, we have utilized our experience and superlativeexpertise to go from strength to strength…to better our services, to provide new ones,to innovate, diversify and in the process, evolved Karvy as one of India’s premierintegrated financial service enterprise. Thus over the last 20 years Karvy has traveled the success route, towardsbuilding a reputation as an integrated financial services provider, offering a widespectrum of services. And we have made this journey by taking the route of qualityservice, path breaking innovations in service, versatility in service and finally…totality in service. Our highly qualified manpower, cutting-edge technology, comprehensiveinfrastructure and total customer-focus has secured for us the position of an emergingfinancial services giant enjoying the confidence and support of an enviable clienteleacross diverse fields in the financial world. Over the years we have ensured that the trust of our customers is our biggestreturns. Factors such as our success in the Electronic custody business has helpedBabasabpatilfreepptmba.com Page 8
  9. 9. A Study of Respondent Satisfaction towards Depository Participants at Karvybuild on our tradition of trust even more. Consequentially our retail client baseexpanded very fast. Our values and vision of attaining total competence in ourservicing has served as the building block for creating a great financial enterprise,which stands solid on our fortresses of financial strength - our various companies. With the experience of years of holistic financial servicing behind us and yearsof complete expertise in the industry to look forward to, we have now emerged as apremier integrated financial services provider. And today, we can look with pride at the fruits of our mastery and experience– comprehensive financial services that are competently segregated to service andmanage a diverse range of customer requirements. GROUP OF COMPANIES KARVY SECURITY LTD • Deals in distribution of various investment products, viz, equities, Mutual fund, bounds debenture fixed deposits, insurance policies & other financial products • Member –Hyderabad stock Exchange (HSF)Babasabpatilfreepptmba.com Page 9
  10. 10. A Study of Respondent Satisfaction towards Depository Participants at Karvy KARVY STOCK BROKING LTD. • Deals in buying & selling equity shares & debenture &on the national stock exchange (NSE), the Hyderabad stock exchange & over the counter exchange of India (OTCEI) • Member-national stock exchange (NSE) KARVY CONSULTANTS LTD • Transfer agency services for corporate & mutual funds • Registrar for IPObook building • Depositary participant services • Registered with both NSDL/CDSL • It enable services –MT/call center /data classification • Karvy .com comprehensive financial advisory site KARVY INVESTER SERVICES LTD. • Deals in issue management, investor banking & merchant banking of fixed income & other financial products. • Trading through BSE DEPOSITARY SEVICES • Registered as DP both with NSDL & CDSL • Serving over 2 lac investors • Online connectivity at Hyderabad, Lucknow &Bangalore • Ranked among the top 5 DPS in the countryBabasabpatilfreepptmba.com Page 10
  11. 11. A Study of Respondent Satisfaction towards Depository Participants at Karvy • High synergy with registry & broking activities for higher services levels to the customer information • Web based customer information • Provision of service in over 75 locations IT SERVICES GROUP 1. Medical transcription • First strategic initiative into global processing • Among the top MT companies in India 2.E-BUSINESS GROUP • Strategic intent: to develop a comprehensive financial services portal which includes • Investor servicing: mutual funds, corporate shareholders & depository clients. • Distribution of financial products • Net trading • Insurance distribution 1. Call center 2. Started with a 30 agent e-call centerBabasabpatilfreepptmba.com Page 11
  12. 12. A Study of Respondent Satisfaction towards Depository Participants at Karvy MISSION Our mission is to be a leading, preferred service provider to our customers,and we aim to achieve this leadership position by building an innovative, enterprisingand technology driven organization which will set the highest standards of service andbusiness ethics. QUALITY POLICY To achieve and retain leadership, Karvy shall aim foe complete customerssatisfaction, by combining its human and Technological resources, to provide superiorquality financial Services. In the process, Karvy will strive to exceed Customer’sexpectations. QUALITY OBJECTIVES As per the Quality Policy, Karvy will: 1. Build in- house process that will ensure transparent and harmonious relationship with its clients and investors to provide high quality of services. 2. Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers. 3. Provide high quality of work life for all its employees and equip them with adequate knowledge &skills so as to respond to customer’s need. 4. Continue to uphold the values of honesty & integrity and strive to establish unparalleled standards in business ethics. 5. Use state –of – the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients.Babasabpatilfreepptmba.com Page 12
  13. 13. A Study of Respondent Satisfaction towards Depository Participants at Karvy 6. Strive to be a reliable source of value-added financial products and services and constantly guide the individuals and institutions in making a judicious choice of it. Strive to keep all stake- holders (shareholders, clients, investors and regulatory authorities) proud and satisfied. Achievements  Among the top 5 stock brokers in India (4% of NSE volumes)  Indias No. 1 Registrar & Securities Transfer Agents  Among the to top 3 Depository Participants  Largest Network of Branches & Business Associates  ISO 9002 certified operations by DNV  Among top 10 Investment bankers  Largest Distributor of Financial Products  Adjudged as one of the top 50 IT uses in India by MIS Asia  Full Fledged IT driven operationsBabasabpatilfreepptmba.com Page 13
  14. 14. A Study of Respondent Satisfaction towards Depository Participants at Karvy MILESTONEBabasabpatilfreepptmba.com Page 14
  15. 15. A Study of Respondent Satisfaction towards Depository Participants at Karvy ORGANIZATION CHART Managing Director Chief Managing DirectorVice-President Vice-President Vice-President Vice- President Karvy Karvy Karvy Karvy Securities Stock Broking Consultants Investors Services Ltd. Ltd. Ltd. Ltd. Deputy Deputy Deputy Deputy General General General General Manager Manager Manager Manager Senior Senior Senior Senior Manager Manager Manager Manager Branch Manager N number of Team Leaders N number of Executives INTRODUCTION Babasabpatilfreepptmba.com Page 15
  16. 16. A Study of Respondent Satisfaction towards Depository Participants at Karvy Dematerialization or "Demat" is a process whereby your securities like shares,debentures etc, are converted into electronic data and stored in computers by aDepository. Securities registered in your name are surrendered to depositoryparticipant (DP) and these are sent to the respective companies who will cancel themafter "Dematerialization" and credit your depository account with the DP. Thesecurities on Dematerialization appear as balances in your depository account. Thesebalances are transferable like physical shares. If at a later date, you wish to have these"Demat" securities converted back into paper certificates, the Depose Depositoryfunctions like a securities bank, where the dematerialized physical securities aretraded and held in custody. This facilitates faster, risk free and low cost settlement. In order to dematerialize certificates; an investor will have to first open anaccount with a DP & then request for the dematerialization of certificate by filling upa dematerialization request form (DRF), which is available with DP & submitting thesame along with the physical certificates. The investor has to ensure that before thecertificate are handled over to the DP For demat, they are defaced by marking“Surrendered for dematerialisation” on the face of the certificates. Depository ismuch like a bank and perform many activities that are similar to a bank. Just as one opens a bank account in order to avail of the services of a bank, aninvestor opens a depository account with a depository participant in order to avail ofdepository facilities.Babasabpatilfreepptmba.com Page 16
  17. 17. A Study of Respondent Satisfaction towards Depository Participants at Karvy Following table compares the two. Bank Depository Holds funds in accounts Holds securities in account Transfers funds between accounts Transfers securities between accounts Transfers without handling money Transfers without handling securities Safekeeping of money Safekeeping of securities Transacting the depository way has several advantages over the traditional systemof transacting using share certificates. Some of the benefits are: • Trading in demat segment completely eliminates the risk of bad deliveries, which in turn eliminates all cost and wastage of time associated with follow up for rectification. This reduction in risk associated with bad delivery has lead to reduction in brokerage to the extent of 0.5% by quite a few brokerage firms. • In case of transfer of electronic shares, you save 0.5% in stamp duty. • You also avoid the cost of courier/ notarization/ the need for further follow-up with your broker for shares returned for company objection • In case the certificates are lost in transit or when the share certificates become mutilated or misplaced, to obtain duplicate certificates, you may have to spend at least Rs500 for indemnity bond, newspaper advertisement etc, which can be completely eliminated in the demat form. • You can also receive your bonuses and rights into your depository account as a direct credit, thus eliminating risk of loss in transit. • You can also expect a lower interest charge for loans taken against demat shares as compared to the interest for loan against physical shares. This couldBabasabpatilfreepptmba.com Page 17
  18. 18. A Study of Respondent Satisfaction towards Depository Participants at Karvy result in a saving of about 0.25% to 1.5%. Some banks have already announced this. • RBI has increased the limit of loans against dematerialized securities as collateral to Rs2mn per borrower as against Rs1mn per borrower in case of loans against physical securities. • RBI has also reduced the minimum margin to 25% for loans against dematerialized securities as against 50% for loans against physical securities.In short the advantages of opening a demat account are  Shorter settlements thereby enhancing liquidity  No stamp duties on transfer of securities held in demat form.  Elimination of risk associated with physical certificated such as bad delivery, fake securities.  Reduction in handling large volume of paper;  Nomination facility  Transmission of securities (such as shares, debentures, bonds and units) is done by DP eliminating the need to correspond with each company separately.  Change of name, address, dividend mandate, registration of power of attorney, transmission etc. can be effected across companies held in demat form by a single instruction to the DP Though under the Depositories Act, 1996, there is no compulsion and theinvestor can hold shares either in physical or in dematerialized form. But according toSebi’s directive certain shares have to be traded compulsorily in dematerialized formBabasabpatilfreepptmba.com Page 18
  19. 19. A Study of Respondent Satisfaction towards Depository Participants at Karvywhere the seller cannot sell in physical form. However, after he has bought the sharesthe investor can ask for rematerialization of the shares. The Depository Account must be opened with a Depository Participant. NSDLinterfaces with investor trough Depository Participants (DPS). A list of names andaddresses of all Authorized DP’s is available with the NSDL and CDSL and one canmeet any of these DP’s place and make a choice at your based on your comfort andconvenience. Opening a depository account is as simple as opening a bank account.One can open a depository account with any DP. To open a Depository Account, you have to submit the duly filled in AccountOpening form along with the following documents: • Fill up the account opening form, which is available with the DP. • Residential Proof - Copy of Ration Card, Passport, Driving License, Telephone Bill, Electricity Bill or Rental Agreement. • Sign the DP-client agreement, which defines the rights and duties of the DP and the person wishing to open the account. • Receive your client account number (client ID). • This client ID along with your DP ID gives you a unique identification in the depository system. There is no restriction on the number of depository accounts a person canopen. However, if your existing physical shares are in joint names, you have to openthe account in the same order of names before you submit your share certificates forBabasabpatilfreepptmba.com Page 19
  20. 20. A Study of Respondent Satisfaction towards Depository Participants at Karvydemat. A sole holder of the share certificates cannot add more names as joint holdersat the time of dematerializing his share certificates. However, if the investor wants to transfer the ownership from his individualname to a joint name, he should first open an account as the sole holder (account A)and dematerialize the share certificates. He should then open another depositoryaccount (account B) in which he is the first holder and the other person is the secondholder and make an off market transfer of the shares from the account A to account B.The investor will incur a charge on this transaction. Alternatively, the certificates canbe transferred to the joint ownership and then sent for Dematerialization. Right now, as per the Companies Act, there is no nomination facility forshares (whether in the physical or in the electronic form). The nomination facility forshares can be availed of only when the relevant provisions in the Companies Act areamended. NSDL captures the details of the nominee when the account is opened so asto offer the facility as soon as the relevant amendments are effected in the Law. A client can choose to open more than one account with same DP. In additionto this, he has a choice of opening accounts with more than one DP. However a brokercan open just one Clearing Member account per card/ stock exchange for clearingpurpose, but he can still open multiple beneficiary accounts Beneficiary is thepersonal account wherein brokers can keep their personal holdings. Account opening Any investor who wishes to avail depository services must first open anaccount with a depository participant of NSDL The process of opening a Demataccount is very similar to a bank account The investor can open an account with anyBabasabpatilfreepptmba.com Page 20
  21. 21. A Study of Respondent Satisfaction towards Depository Participants at Karvydepository participant of NSDL An investor may open an account with several DPs orhe may open several account with single There are several DPs offering variousdepositary related services. Each DP is free to fix its own fee structure Investors havethe freedom to choose a DP based on criteria like convenience , comfort has to enterinto an agreement with the DP The form and contents of this agreement are specifiedby the business rules of NSLD Types of depositary account depends on the operation to be performed There arethree types of Demat accounts which can be opened with a depositary participant viz(a) Beneficiary Account (b) Clearing member Accounts and (c) intermediary account Types of accounts Beneficial owner Clearing member Intermediary Account Account Account House Non-House • A DP may be required to open three categories of accounts for client – beneficiary account, clearing member account and intermediary account • A beneficiary account is an ownership account The holder/s of securities in this type of account own those securities • The clearing member account and intermediary account are transitory account The securities in these are held for commercial purpose onlyBabasabpatilfreepptmba.com Page 21
  22. 22. A Study of Respondent Satisfaction towards Depository Participants at Karvy • A clearing member account is opened by a broker or a clearing member for the purpose of settlement of trades • An intermediary account can opened by a SEBI registered intermediary for the purpose of stock leading and borrowingBabasabpatilfreepptmba.com Page 22
  23. 23. A Study of Respondent Satisfaction towards Depository Participants at Karvy BENEFICIARY ACCOUNT This is an account opened by investor to hold their securities indematerialized from with a depository and to carry out the transactions of salepurchase of such securities in book entry form through the depositary system Abeneficiary account holder is legally entitled for all rights and liabilities attached tothe securities held in that account Therefore, the account is called “beneficial owneraccount” a beneficial account can be in the name of individual, corporate, HUF,minor, bank, financial institution , trust etc or the broker himself for the purpose of hispersonal investments in demat form . The account is opened with a DP House account vs. non –house account opened by a DP for the custody ofand transactions in its own investment is referred to as a house account DPS Arerequired to open house accounts for their own investments to prevent co-mingling ofasset with that of their clients Neither the depositories ACT nor the regulations made under the act laydown any specifications about who can open a beneficiary account since all beneficialowners are deemed to be member of a company (under section 41 (3) of thecompanies act) only those who are eligible to become members of a company act canopen a beneficiary account with a depository Thus all legal entities with the exceptionof partnership firms can open an account in the depository systemDocuments for verification: For the purpose of verification, all investors have to submit the following documents along with the prescribed account opening form Proof of identity- a beneficiary account must be opened only after obtaining aproof of identity of the applicant The applicants signature and photograph must beBabasabpatilfreepptmba.com Page 23
  24. 24. A Study of Respondent Satisfaction towards Depository Participants at Karvyauthenticated by an existing account holder or by the applicant bank or after dueverification made with the original of the applicants valid passport , voter id , drivinglicense or PAN card with photograph and further Proof of address- The account opening form should be supported with proofof address such as verified copies of ration card/ passport/ voter ID/ PAN card/drivinglicense / bank passbook an authorized official of the participant, under his signature,shall verify the original documents In case any account holder fails o produce the original documents forverification within the foreside period of 30 days, it must be immediately brought tothe notice of NSDL Failure to produce the original within the prescribed time wouldinvite appropriate action against such account holder, which could even includefreezing of their accountsCommon information: The process of opening an account with a depository, nature of such an account, and various factors to be considered for opening a depository account are explained below. Some details are common to all types of accounts. These are: 1. Name of the holder 2. Date of birth (for individual accounts) 3. Occupation 4. Address & phone / fax number 5. Bank details like name of the bank, type of the account (current/savings), accounts number, branch address, MICR, etc 6. PAN number, if applicable 7. Details of nomination 8. Specimen signaturesBabasabpatilfreepptmba.com Page 24
  25. 25. A Study of Respondent Satisfaction towards Depository Participants at Karvy Beneficiary account- procedure for opening an account Investor have the choice of selecting a DP based on their convenience,comfort, service, levels, safety, reputation charges, etc they have flexibility to havemore than one account with the same DP or any other DPS No minimum balance isrequired for opening a depository account Investor also have the freedom to close anaccount with one DP and open another one with any other DP The type of the account opening from to field by an investor and the list ofdocuments required depend on the type of beneficiary account to be opened –whetherit is for NRI’s or corporate or individual Further, the individual account can be in asignal name or joint name clearing members and brokers have to open in a beneficiaryaccount if they have to deal with their own holdings There are several client types in the depository system and different codes areallotted to them. These are listed below 1. Resident • Ordinary • HUF 2. Financial institutions • Government –sponsored FI • State financial corporation • Other 3. FIIS • Mauritius –based • Others 4. NRI • RepatriableBabasabpatilfreepptmba.com Page 25
  26. 26. A Study of Respondent Satisfaction towards Depository Participants at Karvy • Non-Repatriable • Depository receipt 5. Body corporate • Domestic company • Overseas corporate body Repatriable • Government company • Central government • State government • Co-operative body • NBFC • Non –NBFC • Broker • Foreign bodies • Group companies • Others • OCB-Nonrepatriable • Depository receipt 6. CM (clearing member) 7. Foreign national – national /depository receipt 8. Mutual fund –depository receipt 9. Trust, Bank 10. Intermediary Clearing Member AccountBabasabpatilfreepptmba.com Page 26
  27. 27. A Study of Respondent Satisfaction towards Depository Participants at Karvy The entities that are authorized to pay out from a clearing corporation/ clearinghouse against traders done by them or their clients are known as clearing members.CMs are identified in the system through their CM-BP ID. All pay-in and pay-outtransactions are carried out through their accounts.There are two types of clearing members: 1. All members of a stock exchange popularly know as brokers, are clearing members; 2. Custodians who are permitted by the stock exchange to act as a clearing members.Babasabpatilfreepptmba.com Page 27
  28. 28. A Study of Respondent Satisfaction towards Depository Participants at Karvy PROCEDURE TO OPEN A CLEARING MEMBER ACCOUNT The steps undertaken to open the account are same as those of the individuals,difference lies in the type of the clearing members has to first register itself with thedepository and obtain a business partner identification number (CM-BP-ID). Theclearing member is identified by the combination of CC-CM-ID given by the DP. Immediately after opening a clearing account, the DP should inform thedepository the details of clearing members name, CM-BP-ID, client-ID, and date ofthe opening the account in DPM system. The clearing account should only be for clearing and settlement purpose andnit for any other purpose, e.g., holding of securities received in a settlement receivedin a settlement account should be transferred to the transferred to respective beneficialaccounts as soon as possible, but in no case later than the time prescribed by thedepository/ stock exchange/ SEBI in this regard. The opening of clearing membersaccount constitutes a “standing instruction” to receive credits from the clearingcorporation when there is a pay-out. The Clearing House deals with ONLY ONE designated account for pay-inand pay-out with the Broker. This single account allows you to know to whichaccount securities must be delivered and received from. One Clearing Member PoolAccount is opened per card / Stock Exchange to settle trades in the Dematerialisedform. Structure Of Clearing Account The clearing account is identified in the depository system by its CM-BP-ID.The internal structure of the Clearing Account consists of three parts to facilitate easybook keeping.Babasabpatilfreepptmba.com Page 28
  29. 29. A Study of Respondent Satisfaction towards Depository Participants at Karvy • Arrangement of clearing account  Pool Account  Delivery Account  Receipt Account Clearing Corporation (CC)/Clearing House (CH) Clearing Account Receipt Account Delivery Account Pool Account Selling Buying client Clienta) Pool Account: It has two roles in clearing of Securities, viz., before pay-in, the selling client of the clearing member transfers securities from his client Account to the Clearing Account. After receiving pay-out, the clearing member transfers securities from his Clearing Account to the account of the buying client.b) Delivery Account: The securities before pay-in, the securities move from the Pool Account To the Delivery Account. The movement will be automatic if clearing member has given such an undertaking to its Clearing If the Clearing Corporation. It will be effected on the basis of instruction received from the Clearing house/ Clearing Corporation. If the clearing house/ Clearing Corporation has not taken such undertaking, the clearing member to its DP must submit a delivery instruction form. At the time of pay-in, NSDL flushes out the securities in the Delivery Account & transfers the same to the Clearing house/ Clearing Corporation.Babasabpatilfreepptmba.com Page 29
  30. 30. A Study of Respondent Satisfaction towards Depository Participants at Karvyc) Receipt Account: On pay-out day, the Clearing house/ Clearing Corporation transfers securities to the Pool Account (to The extent of net receipt) through the Receipt Account. This account can be used to trace details of settlement-wise receipt of the clearing member.Market Type & Settlements Number : A clearing account can be broken intocompartment and sub-compartments. Each compartment can be called as market typeand be as settlement number. Hence, if securities are moved from any clearingaccount, apart from the CM-BP-ID, the combination of market type and settlementnumber must be provided. A diagrammatic illustration of the internal structure of aclearing account is depicted in next page.Babasabpatilfreepptmba.com Page 30
  31. 31. A Study of Respondent Satisfaction towards Depository Participants at Karvy Clearing Account (IN503265) Physical Rolling Action Rolling 2000014 9000152 2000248 Delivery Pool Receipt Delivery Pool Receipt Delivery Pool Receipt 2000015 9000153 2000248 Delivery Pool Receipt Delivery Pool Receipt Delivery Pool Receipt 2000016 9000152 2000249 Delivery Pool Receipt Delivery Pool Receipt Delivery Pool ReceiptSettlement calendar: Settlement calendar is decided by the stock exchange. Itcontains details for each market type & settlement number. The detail for eachsettlement consists of the date of trading, pay-in time, pay-out date, settlementnumber etc. Clearing member can obtain the settlement calendar from its own stockexchange. This is also available in the depository software of the DP.MARKET TRANSFERS: Any trade, which is cleared & settled by the clearinghouse/ Clearing Corporation of the stock exchange, is considered as a market trade inthe depository. Consequently, the transfers routed through the clearing account.Typically, a market trade has the following legs of transactions. a. Receiving securities for pay-in from clients (client to clearing members)Babasabpatilfreepptmba.com Page 31
  32. 32. A Study of Respondent Satisfaction towards Depository Participants at Karvy b. Delivering securities to the clearing house/clearing corporation for pay-in. (clearing house/clearing corporation) c. Receiving pay-out from the clearing house/clearing corporation. (Clearing House/clearing Corporation to clearing member) d. Distribution of pay-out to clients. (Clearing member to client) A diagrammatic illustration of the settlement of a market trade in a depositoryis depicted below: DP of buyer DP of Buyer’s CM D C NSDL CH/CC A B DP of Seller DP of Seller’s CMBabasabpatilfreepptmba.com Page 32
  33. 33. A Study of Respondent Satisfaction towards Depository Participants at KarvyReceiving securities for pay-in from clients (client to clearing member) A selling client of a clearing member (broker) would transfer securities fromhis beneficial owner account to the clearing account of the clearing member foronwards delivery to the clearing house/clearing corporation. This transfer is effectedby his DP on the basis of a delivery instruction provided by the selling client. Adiagrammatic Illustration for securities received for pay-in from clients is depictedbelow: NSDL DP2 DP1 Seller Seller Seller Clearing A B C Member AAAlle Indicates flow of securities rA Indicates paper /electronic instruction given.OFF MARKET TRANSFERS: Any trade, which is not cleared and settled bythe clearing house/clearing corporation of the stock exchange, is considered as an off-market trade in the depository. Consequently, the transfer is not routed through theclearing account. Such transfers take place directly between two beneficiary accounts.Both buyer and seller may open account either with the same DP or with differentDPs. The buyer and seller will trade amongst themselves and later on will exchangemoney, i.e., settle funds amongst themselves. The selling client would deliverBabasabpatilfreepptmba.com Page 33
  34. 34. A Study of Respondent Satisfaction towards Depository Participants at Karvysecurities from its beneficiary account to the beneficiary account of the buying client.This transfer is effected by the DP of the selling client on the basis of a deliveryinstruction provided by the selling clients. A diagrammatic illustration of thesettlement of an off-market trade in depository is depicted below: Indicates flow of securities Indicates paper /electronic instruction given.Babasabpatilfreepptmba.com Page 34
  35. 35. A Study of Respondent Satisfaction towards Depository Participants at Karvy Depository: A Depository is a Company where the shares of an individual are held in theelectronic form, at the request of the shareholder. This eliminates the physical form ofholding. IDBI, UTI, SBI and NSE promoted the National Securities DepositoryLimited (NSDL). The Central Securities Depository Limited (CDSL) was promotedby BSE. Your money may be held in the form of liquid cash at your home or may bedeposited in a bank. The bank holds your funds in the electronic form andsubsequently debits or credits the account. Depending on your issuance of cheques ordeposit of cheques. The advantages of safety and convenience of dealing with a Bankoverweigh the reasons for holding liquid cash in your home. Your financial assetssuch as Equity Shares may be compared to the above example. You may holdphysical share certificates in your home and be exposed to the various risks of lack ofsafety, mutilation, loss etc. Alternatively, you may deposit your shares in anorganization called a Depository, which holds your shares in the electronic form. Youcan dematerialize shares of only those companies that have signed agreement todematerialize their shares with the depository. You cannot dematerialize shares if theyare not in your name, i.e. shares held in street name (market deliveries) cannot bedematerialized. However, when you send shares to the registrar to be transferred toyour name you can request that you want those shares in dematerialized form. Karvy Consultants Ltd. has four DPMs as on date. They are:1.Hyderabad-IN3003942.Lucknow - IN301557Babasabpatilfreepptmba.com Page 35
  36. 36. A Study of Respondent Satisfaction towards Depository Participants at Karvy3.Bangalore- IN3019264. Mumbai - IN302470 In India depositories are required to be registered with SEBI and are governedby the provision of the Depositories Act, 1996 and regulation and bylaws framed fordepositories by the SEBI. The depositories work in a completely computerized environment withelectronic linkages with the point of origination for the transactions that may causethe change in ownership of securities. A depository will be electrically linked withthe Register of the members maintained by the company/registrar, clearing andsettlement system in the stock exchanges, stock lending organization (if in existence),custodians of securities, depository participants and brokers. Function of Depository Dematerlisation: one of the primary functions of depository is to eliminate orminimize the movement of the physical securities in the market. This is achievedthrough dematerialisation of securities. Dematerlisation is the process of convertingsecurities held in physical form into holdings in book entry form.Account Transfer: The depository gives effect to all transfers resulting from thesettlement of trade and other transactions between various beneficial owners byrecording entries in the accounts of such beneficial owners.Transfer and Registration: A transfer is the legal change of ownership of a securityin the records of the issuer. For effecting a transfer, certain legal steps have to betaken like endorsement, execution of a transfer of security occurs merely by passingBabasabpatilfreepptmba.com Page 36
  37. 37. A Study of Respondent Satisfaction towards Depository Participants at Karvybook entries in the records of the depositories, on the instructions of the beneficialowners.Corporate Actions: A depository may handle corporate actions in two ways. In thefirst case, it merely provides information to the issuer about the persons entitled toreceive corporate benefits. In the other case, depository itself takes the responsibilityof distribution of corporate benefits.Pledge and hypothecation: Depositories allow the securities placed with them tobe used as collateral securities in physical form to the lender or its custodian. Thesesecurities are verified for authenticity and often need to be transferred in the name oflender. This has a time and money cost by way of transfer fees or stamp duty. If theborrower wants to substitute the Pledging/Hypothecating the securities makes theprocess very simple and collateral accounting through book entries in the records ofthe depository.Linkage with clearing system: whether it is a separating clearing corporationattached to a stock exchange or a clearing house (department) of a stock exchange, theclearing system performs the function of ascertaining the pay-in (sell) or pay-out(buy) of brokers who have traded on the stock exchange. Actual delivery of securitiesto the clearing system from the selling and delivery of securities from the clearingsystem to the buying broker is done by the depository. To achieve this, depositoriesand the clearing system should be electronically linked.Babasabpatilfreepptmba.com Page 37
  38. 38. A Study of Respondent Satisfaction towards Depository Participants at Karvy Depository Participant: Depository Participant (DP) is an organisation that acts as an Agent of theDepository and interacts with the investor. A DP is responsible for maintaining yoursecurities account and operating it only under your written instructions. TheDepositories Acts mandates that investors can use Depository facilities only throughDP’s. The distribution channel and geographical spread of the DP’s offices allowsyou to access the Depository at a low cost. DP can only access their own clientsinformation. They cannot access the client information of any other DP. Theinformation of your holdings in the account is completely confidential& it is similarto your account balance in a bank. You can select your DP to open a demat account just like you select a bank foropening a savings account. Some of the important factors for selection of a DP can be: 1. Convenience - Proximity to your office/residence, business hours. 2. Comfort - Reputation of the DP, past association with the organisation, whether the DP is in a position to give the specific service you may need? 3. Cost - The service charges levied by DP and the service standards. Individual accounts can be opened by Ordinary Resident, HUF, NRIRepatriable and NRI Non-Repatriable. Body Corporate, Banks, Trusts, FinancialInstitutions, Foreign Institutional Investors, and Overseas Commercial Banks etc canopen corporate Accounts. An account can be opened in the name of HUF in a similarway to individual account and mentioning the account category as HUF. However,Kartha of HUF will sign the application, agreement and all transactions under theaccountBabasabpatilfreepptmba.com Page 38
  39. 39. A Study of Respondent Satisfaction towards Depository Participants at Karvy An account cannot be opened in the name of the firm. It has to be opened inthe name of any of the Partner as an Individual account only. Procedure for Dematerialisation Dematerialisation Process: 1 Investor DP 2A 2 5 R & T Agent 3 NSDL 4Steps: 1. Client/ investor submits the DRF (Demat Request Form) and Physical certificates to DP. DP checks whether the securities are available for demat. Client defaces the certificates by stamping ‘Surrender for Dematerlisation’. DP punches two holes on the name of the company and draws two parallel lines across the face of the certificate. 2. DP enters the demat request in his system to be sent to NSDL. DP dispatches the physical certificates along with the DRF to the R & T Agent. 3. NSDL records the details of the electronic request in the system and forwards the request to the R&T Agent. 4. R&T Agent, on receiving the physical documents and the electronic request, verifies and checks them. Once the R&T Agent is satisfied, Dematerialisation of the concerned securities is electronically confirmed to NSDL.Babasabpatilfreepptmba.com Page 39
  40. 40. A Study of Respondent Satisfaction towards Depository Participants at Karvy 5. NSDL 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. a. DPs provide Dematerlisation request forms (DRF) to their clients. b. The client completes the DRF in all respect 7 submits to the DP along with the security certificates to be dematerialized. c. The DP checks the DRF for validity, completeness and correctness. The following points should be checked particularly:  The security certificate sought to be dematerialized are attached to DRF.  The attached security certificates are marked (defaced) with the words ‘surrendered for dematerialisation’. This is a precautionary measure to prevent misuse of share certificates by anyone.  The certificate are not mutilated or defaced in a manner affecting any material information.  The name of client on DRF and the certificates is exactly the same as in the client’s account in DPM. However, minor variations in the name (like abbreviated name, initials in the place of first name, middle name, minor name mistake in the name) may be permitted if it can be reasonably established that both names are of the same person. The permitted variations refer to initials not being spelt out fully or put prior to after the surname. In such cases, if the signature on the DRF matches the specimen signature available with the DP, the securities can be considered for demat.  Details like security type, face value, paid-up value, pari passu status, certificate numbers, distinctive numbers, number of certificates, total quantity of securities and lock-in statues are filled-in correctly.Babasabpatilfreepptmba.com Page 40
  41. 41. A Study of Respondent Satisfaction towards Depository Participants at Karvy d. If the DRF & the accompanying security certificates are found in order, the DP should accept the DRF and certificates. e. If DRF and the accompanying security certificates are not found in order, the DP should return the DRF and certificates. f. The DP should enter the dematerialisation request in the DPM. DPM generates a request number (DRN), which should be mentioned on DRF. g. An authorized person, other than one who entered the DRF details in the DPM, should verify the details of DRN and release a request to NSDL. h. Once the DP has received the certificates defaced by investor, the DP punches two holes on the name of the issuer or its R&T Agent for dematerialisation. DRF and enclosures have to be sent at the “address to which physical certificate to be sent” communicated by NSDL. The forwarding letter should refer to the allotted DRN and should refer to the allotted DRN and should Be sent within seven days of accepting it from the client. i. The issuer or its R&T Agent verify the DRF & the accompanying certificate for validity, completeness and correctness. They also match the details with the intimation received from NSDL against the same DRN. j. In case DRF is not found in order, the issuer or its R&T Agent send an objection memo to the DP, with or without DRF & security certificates depending upon the reason for rejection. k. DRFs & Certificate are sent back on the following grounds: • DRN does not match with message from DM • Quantity of actual securities is less than DRF • Quantity of actual securities is more than DRFBabasabpatilfreepptmba.com Page 41
  42. 42. A Study of Respondent Satisfaction towards Depository Participants at Karvy l. DRF & certificate are not sent back: • If the certificate is fake • If the certificate has been reported to be stolen • If the duplicates of the original certificates sent for demat have already been issued • If the endorsements are forged • If the securities are not in the name of the account holder as per DRF • If the details of the certificates do not pertain to the R&T Agent • If the signatures differ • If there is any court order on the securities • If the certificate are received after 15 days of the electronic request. m. The DP informs the client accordingly & requests removal of reasons for objection. The DP removes these or provides additional information to the issuer or its R & T Agent within 15days of receiving the objection memo. n. The DP, if the client so requires, may generate a new dematerialisation request & send the securities again to the issuer or R &T Agent.Precaution to be taken while processing DRF  Ensure account to have the same sequence of names of holders and name structure as printed on the physical certificate.  Ensure ISIN is activated  Separate DRF for: • Partly & fully paid-up shares • Locked & free holding • Holdings locked in for different reasons • Locked in holdings having different release dateBabasabpatilfreepptmba.com Page 42
  43. 43. A Study of Respondent Satisfaction towards Depository Participants at Karvy • Different ISINs of the company  ISIN to be entered by DP.  All joint holders to sign DRF.  Check DRF form with details on certificate. DEMAT PROCESS The demat process requires defacing of securities which will make the securitycertificate undeliverable unless the demat formalities are completed. Therefore, theclient should be assisted in ascertaining whether the securities in question areavailable for demineralisation. Clients should be helped in filling up the demat requestproperly. Demat rejection causes great inconvenience to the client. DP should attendto this area with care and caution. One of the important reasons for demat rejection issignature mismatch. Taking the following precaution can reduce this:  If the client is aware that the signature with the company& signature of the client should be advised to the register the new signature.  If the signature is slightly different, client should be advised to sign as per the signature that was recorded by the company and as recorded with the DP.  Ensure dispatch of DRFs and certificate to R &T Agents within seven days.  Client may be encouraged to use the Transfer-cum-demat facility if it is offered by the company. They should be made aware of the procedures of the scheme.  In case of joint holdings, the clients should be informed about the availability of Transposition cum Demat facility.Babasabpatilfreepptmba.com Page 43
  44. 44. A Study of Respondent Satisfaction towards Depository Participants at Karvy CLOSURE OF ACCOUNT: Closure on Client’s Request- A DP can close a depository account on receiptof an application in the prescribed format. The application should be made by theaccount. In case joint-holders. An account can be closed sought to be closed, thefollowing steps are necessary. a. Re-materialization of all securities standing to the credit of the same account making the application for closure; or b. Transferring the balance to the credit of another account opened by the same account holder(s) either with the same participant or with a different participant. Before closing the account the DP should ensure that all pending transactionshave been settled. The request for closure should be processed only after ensuring thatthere is no balance lying in the account.Consolidations of accounts- Some clients have opened multiple accounts todematerialize their shares held in multiple combination and sequence of names.However, they may not need so many accounts after they have dematerialized theirshares and may want to bring all their share holdings into one or fewer accounts. Thiscan be achieved by using normal off Market transfer instruction.Closure by DP – the DP may also initiate closure of a client’s account if the clienthas defaulted in performing should give sufficient notice to the client before initiatingclosure of his account. The notice should clearly state the reasons for closure of hisaccount. The notice should clearly state the reasons for closure of account. Theprocess of closing account in such a case is the same that of client-initiated closure.Babasabpatilfreepptmba.com Page 44
  45. 45. A Study of Respondent Satisfaction towards Depository Participants at KarvyClosure/ Shifting of Clearing Account –A clearing member may transfer itsclearing account from one DP to another DP. For this, simultaneously applicationshave to be made for closure of account to the earlier DP and for opening of newclearing member account to the new DP. On receipt of the application, the new DPforwards the application to the depository for approval and allotment of a new CM-BP-ID is allotted, the new DP opens a new Clearing account and intimates thedepository about the new client- ID. On receipt of intimation from the intimates theclearing member. All pay-out of securities, subsequent to the closure of old clearingaccount, take place in the new account. Pg-17-3Babasabpatilfreepptmba.com Page 45
  46. 46. A Study of Respondent Satisfaction towards Depository Participants at Karvy TRADING & SETTLEMENT: This is the an area where the DP must the DP must take immense care whileaccepting and processing request listed below should from the account of his client toanother account. The aspects listed below should be kept in mind.  Ensure that the delivery instruction book given to each client has pre-printed serial number and client-ID.  Inform clients about the pay-in deadline of the stock exchange and the deadline of the DP.  Each DIS received should be inwarded correctly with the date and time stamp.  Late stamp must be affixed on the instructions received after the expiry of the deadline set by the DP.  Ensure the correctness of execution date on the DIS.  Ensure signature on DIS matches with the records of the DP.  Ensure that the signatures of all holders are obtain in case of joint accounts.  If the client has not issued “standing instructions”, he should be made aware that a receipt in instruction will be required to the credits into the account on purchase of shares.  Client should be made aware of the accounting freezing facility.Babasabpatilfreepptmba.com Page 46
  47. 47. A Study of Respondent Satisfaction towards Depository Participants at Karvy SETTLEMENT The settlement of trades in the stock exchanges is undertaken by the clearingcorporation (CC)/ clearing house (CH) of the corresponding stock exchanges. Whilethe settlement of dematerialized securities is effected through depository, the fundssettlement is effected through the clearing banks. The clearing members directly withthe CC/ CH settle the physical securities. Exclusive demat segment follows rolling settlement (T+5) cycle and theunified (erstwhile - physical) segment follows account period settlement cycle. In caseof rolling settlement cycle, the account period is reduced to one day. • In case of settlement of trades done in exclusive demat segments, the pay-in and pay out of funds and securities are effected on the same day afternoon and evening (same day) thus reducing the blockage of funds and limiting exposure to the clearing corporation. • Settlement of funds is effected through the clearing banks and depository plays no role in this. • Settlement of securities is effected through NSDL depository system. • Clearing and settlement of the regular market trades is effected through the clearing members of the clearing houses of respective stock exchanges. All trading members of stock exchanges are clearing members of clearing houses. In addition, for settlement of institutional trades, custodians are also allowed to act as clearing members.Babasabpatilfreepptmba.com Page 47
  48. 48. A Study of Respondent Satisfaction towards Depository Participants at Karvy • Clearing members of clearing house, dealing in dematerialized securities are expected to open a clearing account with any DP for the purpose of settling trades in dematerialized securities. As, in the mixed (unified) segment, there is a possibility for all clearing members to receive dematerialized securities, they are expected to open clearing accounts. If there is any short delivery at the time of pay-in of securities, these shortpositions are auctioned in the Demat segment as done in the Unified (erstwhile-physical) segment.Selling and Buying Of Shares: Selling dematerialized shares in stock exchanges is similar to the procedurefor selling physical shares. Instead of delivering physical shares to the broker, youinstruct your DP to debit your account with the number of shares sold by you andcredit your brokers clearing account. For this, a delivery instruction has to be given to your DP in a standardizedformat, which will be available with your DP. In short, for selling demat shares; • You can sell shares in any of the stock exchanges linked to a depository through a broker of your choice. • Give an instruction to your DP to debit your account and credit your brokers clearing member pool account. (this is a depository account used exclusively for settling transactions by a broker)Babasabpatilfreepptmba.com Page 48
  49. 49. A Study of Respondent Satisfaction towards Depository Participants at Karvy • On the pay-in day, your broker gives instruction to his DP for delivery of the shares to clearing corporation of the relevant stock exchange. • The broker receives payment from the clearing corporation • You receive payment from your broker for the sale in the same manner you would receive payment for a sale in the physical mode.Buying Demat Shares: The procedure for buying dematerialized shares in stock exchanges is similar to the procedure for buying physical shares. When you want to purchase shares in electronic form, you have to instruct your broker to purchase the dematerialized shares from the stock exchanges linked to a depository. Once the order is executed, you have to instruct your DP (vide a simple formatwhich is available with the DP) to receive securities from your brokers clearingaccount. Alternatively, you may give a standing instruction to receive credits into youraccount and do away with giving a separate receipt instruction each time you expect acredit. You have to ensure that your broker too gives a matching instruction to his DPto transfer the shares purchased on your behalf into your depository account. You should also ensure that your broker transfers the shares purchased fromhis clearing account to your depository account, before the book closure. This is reallyimportant because shares that remain in the clearing account of the broker on the bookclosure/ record date will not be eligible for corporate benefits.Babasabpatilfreepptmba.com Page 49
  50. 50. A Study of Respondent Satisfaction towards Depository Participants at KarvyIn brief, the transactions relating to purchase of shares are: • You can purchase shares in any of the stock exchanges connected to a depository through a broker of your choice and make a payment to your broker; • Your broker receives credit in his clearing account with his DP on the pay-out day; • Broker gives instructions to his DP to debit his clearing account and credit your account; • You instruct your DP for receiving credit into your depository account either through a specific receipt instruction or using the "standing instruction" facility. • In case you are not using the "standing instruction" facility then, your depository account is credited only if the instructions given by you and your broker match. Other ServicesBesides demat and trading Depositories also offer other services, these are: o Pledging/ hypothecation of dematerialized securities. o Electronic credit in public offerings of companies. o Receipt of non-cash corporate benefits such as bonus, rights in electronic form. o Stock lending and borrowing. o Transmission of securities.Pledging: Dematerialized shares could be pledged; in fact, this is moreadvantageous as compared to pledging share certificates.Babasabpatilfreepptmba.com Page 50
  51. 51. A Study of Respondent Satisfaction towards Depository Participants at KarvyTo pledge your Demat shares • Both you (pledgor) as well as the lender (pledgee) must have depository accounts. • You must initiate the pledge by submitting the details of the securities to be pledged in a standard format (available with DPs). • The pledgee should confirm the request through his DP. • Once this is done, your securities are pledged • All commercial documentation between the pledgor and the pledgee are handled outside the depository system. After you have repaid your loan, you can request for a closure of pledge byinstructing your DP through a standard format. The pledgee on receiving therepayment as well as the request for closure of pledge will instruct his DPaccordingly. Even the locked-in securities can be pledged, however they cannot be invokedbefore the lock-in release date. Even after the securities are pledged, the pledgor continues to remain thebeneficiary holder of those securities and will receive benefits of a corporate action, ifany.Babasabpatilfreepptmba.com Page 51
  52. 52. A Study of Respondent Satisfaction towards Depository Participants at KarvyInitial Public Offerings: Credits for public offers can be directly received intodemat account. In the public issue application form of depository eligible companies,there will be a provision to indicate the manner in which securities should be allottedto the applicant. All you have to do is to mention your client account number and thename and identification number of your DP.Any allotment due to you will be credited into your account. If the applicant is allotted securities in dematerialized form, but the detailsregarding the beneficiary account are incomplete/ wrong, the person will get physicaldelivery of allotted securities. If securities were allotted in the dematerialized form, these would be creditedto applicant’s account any day between allotment date and listing date, at thediscretion of the company. The issuer company/ their R&T agent will forward the applicant the allotmentadvice giving the number of shares allotted in dematerialized form. Through this youcan come to know that you have been allotted shares. An amendment to the company law requiring all future public issues aboveRs100mn to compulsorily offer securities in dematerialized form is awaitinglegislative approval. After this all the issues above Rs100mn will require investors totrade only in demat way. Partly paid up and fully paid up shares in the depository, will be givenseparate ISINs (International Securities Identification Number). These are also tradedseparately at the stock exchanges.Babasabpatilfreepptmba.com Page 52
  53. 53. A Study of Respondent Satisfaction towards Depository Participants at Karvy The company issues call notices to the beneficial holders of securities in theelectronic form. The details of such beneficial holders will be provided to the issuer/their R&T agent by NSDL. After the call money realization, issuer/ their R&T agentwill electronically convert the partly paid up shares to fully paid up shares.Receipt Of Cash/ Non-Cash Benefits: When any corporate event such asrights or bonus or dividend is announced for a particular security, depository will givethe details of all the clients having electronic holdings in that security as of the recorddate to the registrar. The registrar will then calculate the corporate benefits due to allthe shareholders. The disbursement of cash benefits such as dividend/ interest will bedone directly by the registrar. In case of non-cash benefits, depository will directlycredit the securities entitlements in the depository accounts of all those clients whohave opted for electronic allotment based on the information provided by the registrar. The bonus/ rights issue against holding in dematerialized form can be either inthe physical/ dematerialized form as per the choice of the investor. If no choice isgiven, by default, the securities will be issued in the physical form. Even if an investor has holdings in physical form, he can receive the bonus/rights issue against this in the dematerialized form. In case of fractional part, as in the physical segment, it would be paid in cashand the remaining whole part would be credited to the investors account. The statement of holding and transaction statement is sent by the investors DP,it will show the bonus/ rights credit into investor’s account. This report is sent to theinvestor every fifteen days. In addition, an allotment advise will be send by the issuer/their R&T agent for bonus/ rights entitlement.Babasabpatilfreepptmba.com Page 53
  54. 54. A Study of Respondent Satisfaction towards Depository Participants at KarvyStock Lending and borrowing: Through the depository account securities inthe demat form can be easily lent/ borrowed. Securities can be lent or borrowed inelectronic form through an approved intermediary, who has opened a specialintermediary account with a DP.To Lend Securities: You have to instruct your DP through a standard format(which is available with your DP) to deposit your securities with the intermediary. If the intermediary accepts your deposit of securities, the securities will bemoved from your account into the intermediarys account. If you wish to recall thesecurities lent by you, you can make a request vide a standard format available withyour DP.To Borrow Securities: You have to instruct your DP through a standard format(which is available with your DP) to borrow securities from the intermediary. If the intermediary accepts your request, the securities will be moved from theintermediarys account to your account. If you wish to return the securities borrowedby you, you can make a request vide a standard format available with your DP.Transmission Of Securities: Transmission of securities due to death, lunacy,bankruptcy, and insolvency or by any other lawful means other than transfer is alsopossible in the depository system. In the case of transmission, the claimant will haveto fill in a transmission request form, (which is available with the DP) supported byvalid documents. The DP, after ensuring that the application is genuine, will transfersecurities to the account of the claimant. For this, the claimant must have a depositoryaccount. The major advantage in transmission of dematerialized holdings is that theBabasabpatilfreepptmba.com Page 54
  55. 55. A Study of Respondent Satisfaction towards Depository Participants at Karvytransmission formalities for all securities held with a DP can be completed in one go,unlike in the case of share certificates, where the claimant will have to interact witheach issuing company or its R&T Agent. In case where the deceased was one of the joint holders in the Client account,the surviving client(s) shall be the person(s) recognized by depository as having titleto the securities held in that joint Client account. In case where the deceased was asole holder of the Client account, his legal heir(s) or the legal representative(s) will bethe person(s) recognized by depository as having title to the securities held in that soleClient account.Security: National Security and Depository Limited claims to have undertakensufficient security measures. These measures are: • A DP can be operational only after registration by Sebi, which is based on the recommendation from NSDL and Sebi’s own independent evaluation. Sebi has prescribed criteria for becoming a DP in the regulations. • DPs are allowed to effect any debit and credit to an account only on the basis of valid instruction from the client. • Every day, there is a system driven mandatory reconciliation between the DP and NSDL. • There are periodic inspections into the activities of both DP and R&T agent by NSDL. This also includes records based on which the debit/ credit are effected. • The data interchange between NSDL and its business partners is protected by standard protection measures such as encryption. This is a SEBI requirement.Babasabpatilfreepptmba.com Page 55
  56. 56. A Study of Respondent Satisfaction towards Depository Participants at Karvy • There are no direct communication links between two business partners and all communications between two business partners are routed through NSDL • All investors have a right to receive their statement of accounts periodically from the DP. • Every month NSDL forwards statement of accounts to a random sample of investors as a counter check. • In the depository, the depository holds the investor holdings 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. These investors can then either dematerialize their holdings or transfer them to a different account held with another DP. • Investor grievance: All grievances of the investors are to be resolved by the concerned DP. If they fail to do so the investor has the right to approach NSDL. • Insurance Cover: NSDL has taken a comprehensive insurance policy to protect the interest of the investors in cases of failure of the DP to resolve a genuine loss. The details of the policy is as under: • Upper limit per claim: Rs200mn. • Number of claims allowed: unlimited • Minimum value of the claim: Rs150, 000 • To cover claims valued less than Rs150, 000 NSDL has an investor protection fund in place. Besides all these safety measures efforts have been done to make this electronicsystem foolproof.Babasabpatilfreepptmba.com Page 56
  57. 57. A Study of Respondent Satisfaction towards Depository Participants at Karvy DEMAT SHARES: ARE THEY 100% SAFE When you buy physical shares from the stock market, you could never becertain of the validity of the title of shares. There were many reasons- the sellerssignature did not match, or the certificates were fake, forged or stolen, and so on. Demat shares are supposed to obviate these problems. Buying shares in thedemat form always guarantees you a good title as soon as the settlement is over. Thebiggest attraction of trading in demat shares is that the shares you buy come with aclean title and immediately after the settlement on the relevant stock exchange. Rule 100 of market regulator SEBI determines whether the shares delivered ina settlement, are good or not. Under rule 100, the shares that have been transferred thecompany can still withdraw any number of times, if a transfer is found to be invalidfor any reason. Suppose a sells physical shares to B and B gets them dematerialized. Later Bsells the shares in the stock exchange and C buys them. Meanwhile A discovers thathis share certificates were stolen and fraudulently sold by someone else. He gets acourt order restraining the company from further transferring the shares and attachingthem (currently in possession of C). This is known as stop transfer. So C who hasbought dematerialized shares is now struck with the shares. He cannot sell theseshares since they would be frozen in his account In demat shares, pre-demat problems about the validity of a share do not effectthe interest of the buyers after dematerialization. Shares go through a verificationprocess at the registrars before they are dematerialized.Babasabpatilfreepptmba.com Page 57
  58. 58. A Study of Respondent Satisfaction towards Depository Participants at Karvy Therefore the responsibility lies with the registrar. The registrar must find aremedy if the original transfer of shares, before their dematerialization comers underdoubt. But there is a catch. The company and its registrars are not responsible if thereasons for original transfer being invalid were not available at the time ofdematerialization. Matters have to be dealt with on a case-to-case basis. Which meansthat even demat buyer may find that his shares have been frozen in his demat account.This kind of case has to be contested in court by the parties involved. This issue is not directly addressed in The Depositories Act, 1996. Sebi’sregulations on depositories and depository participants also do not mention the issue. Matters get more complex if an investor has traded further in shares of thesame company in his demat account. Demat shares are fungible and don’t havedistinctive numbers. It is not easy to track the sale or trade of shares after they aredematerialized. In a rare event of your DP going bankrupt or closing the operations, theinterests of the investors will be fully protected. In such a situation, the investors willbe given an option of either transferring the securities to a new DP or they mayrematerialise the securitiesBabasabpatilfreepptmba.com Page 58
  59. 59. A Study of Respondent Satisfaction towards Depository Participants at Karvy ANALYSIS OF CUSTOMER SATISFACTIONSample size selected: 100 Total Number of customer available for survey: 100 sample for survey 100 50 Series1 0 1 The sample size selected for the survey was 100.(Hundred) customers ofKARVY CONSLUTANT STOCK BROKING were available for survey. So opinionwas taken to know the customer satisfactions towards demat account.Babasabpatilfreepptmba.com Page 59
  60. 60. A Study of Respondent Satisfaction towards Depository Participants at Karvy1.Respondent came to know the about “KARVY FINANCIAL CONSULTANT “ Total no. Of sample taken: 100 1 2 3 4 5 News Papers/ Friends Business Magazines Online Agent/Financial Others 47 18 10 14 11 11% Friends 14% News Papers/BusinessMagazin es 47% Online 10% Agent/Financial Others 18%Source: Survey Data The above table and chart shows the respondents know KARVY FINANCIAL CONSULTANT :- • 47.00% of respondent know KARVY FINANCIAL CONSULTANT through their Friends. • 18% of of respondent know KARVY FINANCIAL CONSULTANT through News Papers & Magazine. • 14% of respondent know KARVY FINANCIAL CONSULTANT through Agents & Financial Institutions. • 11% of respondent know KARVY FINANCIAL CONSULTANT through Others.Babasabpatilfreepptmba.com Page 60
  61. 61. A Study of Respondent Satisfaction towards Depository Participants at Karvy2.They are interested to visit “KARVY FINACIAL CONSULTANT “ Yes No 94 6 No 6% Yes No Yes 94%Source: Survey Data The above table and chart shows that 94% of respondents are interested tovisit KARVY FINANCIAL CONSULTANT & only 6% of Respondent are notinterested to visit the same .Babasabpatilfreepptmba.com Page 61
  62. 62. A Study of Respondent Satisfaction towards Depository Participants at Karvy3. They Respondents are interested to visit “KARVY FINACIAL CONSULTANT “because of visual pleasure ,hospitality & Excellent Guideline etc Agree Just agree No Opinion Just Disagree Disagree 47 45 8 0 0 50 47 45 40 30 Series1 20 10 8 0 0 0 Agree Just No Just Disagree agree Opinion DisagreeSource: Survey Data The above table and chart shows that 47% of Respondents are interested tovisit “KARVY FINANCIAL CONSULTANT “ , 45% of Respondent just agree &8% of Respondent are not interest to give there opinion .Babasabpatilfreepptmba.com Page 62
  63. 63. A Study of Respondent Satisfaction towards Depository Participants at Karvy4. They Respondents are definitely use service “KARVY FINANCIAL CONSULTANT “Because attitude of employee. Agree Just agree No Opinion Just Disagree Disagree 69 24 7 0 0 80 70 60 Agree 50 Just agree 40 No Opinion 69 30 Just Disagree 20 Disagree 10 24 7 0 0 0 Agree Just agree No Just Disagree Opinion DisagreeSource: Survey DataThe above table and chart shows that 69% of Respondents are interested to visit“KARVY FINANCIAL CONSULTANT “Because of there attitude, and, 24% ofRespondent just agree only 7% of Respondent are constant.Babasabpatilfreepptmba.com Page 63
  64. 64. A Study of Respondent Satisfaction towards Depository Participants at Karvy5. They Respondents are definitely using service of “KARVY FINACIAL CONSULTANTbecause what they benefit gets from them. Agree Just agree No Opinion Just Disagree Disagree 50 41 8 1 0 60 50 Agree 40 Just agree 30 No Opinion 50 Just Disagree 20 41 Disagree 10 8 0 1 0 Agree Just agree No Opinion Just Disagree DisagreeSource: Survey Data The above table and chart shows that 50% of Respondents are interested tovisit “KARVY FINANCIAL CONSULTANT because they get that much of benefitsfrom them , and, 41% of Respondent just agree only 8% of Respondent constant..1%of Respondent just disagrees.Babasabpatilfreepptmba.com Page 64
  65. 65. A Study of Respondent Satisfaction towards Depository Participants at Karvy 6 They Respondents are interested “KARVY FINANCIAL CONSULTANT “ because they introduce new scheme and we get benefit . Yes No 86 14 No 14% Yes No Yes 86%Source: Survey Data The above table and chart shows that 86% of respondents are interested to use service of “KARVY FINANCIAL CONSULTANT” because they introduce new scheme and we get benefit & only 14% of Respondent are not interested to visit the same.Babasabpatilfreepptmba.com Page 65
  66. 66. A Study of Respondent Satisfaction towards Depository Participants at KarvyBabasabpatilfreepptmba.com Page 66