Your SlideShare is downloading. ×
Ppt on depository system in india
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Ppt on depository system in india

21,814
views

Published on

this ppt help you to know about the depository system

this ppt help you to know about the depository system

Published in: Business, Economy & Finance

3 Comments
12 Likes
Statistics
Notes
No Downloads
Views
Total Views
21,814
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
1,432
Comments
3
Likes
12
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Prepared by Nagabhushan nagabhushan
  • 2.
    • An effective and fully developed depository system is essential for maintaining and enhancing the effeciency of a mature capital market
    nagabhushan
  • 3.
    • Before introduction of Depository system, the problems faced by investors and corporates in handling large volume of paper were as follows:
    • Bad deliveries
    • Fake certificates
    • Loss of certificates in transit
    • Mutilation of certificates
    • Delays in transfer
    • Long settlement cycles
    • Mismatch of signatures
    • Delay in refund and remission of dividend etc
    nagabhushan
  • 4.
    • The first depository was set up way back in 1947 in Germany.
    • In India it is a relatively new concept introduced in 1996 with the enactment of Depositories Act 1996
    • Their operations are carried out in accordance with regulations made by SEBI ,bye-laws and rules of Depositories Act and SEBI (Depositories and Participants) Regulations Act 1996
    nagabhushan
  • 5.
    • The term Depository means a place where a deposit of money, securities, property etc is deposited for safekeeping under the terms of depository agreement
    • A depository is an organisation, which assists in the allotment and transfer of securities and securities lending.
    • The shares here are held in the form of electronic accounts i.e dematerialised form and the depository system revolves around the concept of paper-less or scrip-less trading.
    nagabhushan
  • 6.
    • It holds the securities of the investors in the form of electronic book entries avoiding risks associated with paper
    • It is not mandatory and is left to the investor to decide
    • Depositories carry out its operations through various functionaries called business partners
    nagabhushan
  • 7. nagabhushan
  • 8.
    • A depository system is governed by the following acts
    • Securities & Exchange Board of India Act 1992
    • The SEBI(Depositories and Participants) Regulations, 1996
    • Bye –laws of depository
    • Business rules of depository
    • The Companies Act 1956
    nagabhushan
  • 9.
    • Presently there are two Depositories working in India:
    • National Securities Depository Limited
    • (NSDL)
    • It was registered by the SEBI on june 7 1996 as India’s first Depository to facilitate trading and settlement of securities in the demat form. It is promoted by IDBI, UTI, NSE
    nagabhushan
  • 10.
    • Central Depository Services (India) Limited (CSDL)
    • It commenced its operations during feb 1999 and was promoted by Stock Exchange Mumbai in association with Bank of Baroda, Bank of India, SBI and HDFC Bank
    nagabhushan
  • 11.
    • At present 10 Stock Exchanges are connected to the Depositories
    • NSE
    • The SE , mumbai
    • Calcutta Stock Exchange
    • Delhi SE
    • Ludhiana SE
    • Bangalore SE
    • Over the counter exchange of India
    • Madras SE
    • Inter connected SE
    • Ahmedabad SE
    nagabhushan
  • 12.
    • Market trade: trade done settled through a SE and clearing corporation.
    • Off market trades: trades done privately without involvement of stock brokers and SE
    • Again investor may either choose to invest privately, through SB or DP
    nagabhushan
  • 13.
    • Depository
    • Depository Participant (DP)
    • Securities, Issuers and Registrars and Share Transfer Agents
    • Stock Exchanges and Stock Brokers
    • Clearing Corporation/ Clearing House and Clearing Members
    • Banking system
    • Investors
    nagabhushan
  • 14.
    • Depository : it is an organisation where the securities are held in electronic form and carries out the securities transaction by book entry
    • DP : DP is an agent of the depository and functions as the interacting medium between the depository and the investor
    • He should be registered with the SEBI
    nagabhushan
  • 15.
    • Must possess requisite qualifications prescribed by the concerned depository of which he is a participant
    • He is responsible for maintaining the investors’ securities a/c with the depository and handles them as per the investors written instructions
    • He is linked to a broker who trades on behalf of investors
    nagabhushan
  • 16.
    • To avail their services an account similar to a bank a/c has to be opened with the DP
    • As per SEBI Regulations , financial institutions, banks, custodians, stock brokers etc can become DP’s
    • However investors may choose DP’s of their choice and also deal with 1 or more DP;s at a time
    nagabhushan
  • 17.
    • Securities, Issuers and Registrars and Share Transfer Agents: eg: an agreement between the depository , issuer of security and the designated registrar/ share transfer agents for the underlying security in the cases of issues like transfer of securities by their beneficial owners
    nagabhushan
  • 18.
    • Stock Exchanges and Stock Brokers
    • SE is an organised market for dealings in securities commonly referred as secondary market.one of its main functions is price discovery i.e to cause prices to reflect currently avalable information about a security
    • SB are members of SE primarily engaged in 2 main activities i.e buy and sell securities for their clients charging a comm and as dealers or traders and dealers they buy and sell on their own a/c for trading gains
    nagabhushan
  • 19.
    • Clearing Corporation/ Clearing House and Clearing Members
    • A clearing corporation is a central organisation created to facilitate efficient , fast and economical settlement of transactions at a SE . it being an internal department of a SE is an independent entity
    • The members of Clearing Corporation brokerage firms, banks or other financial institutions who are called as clearing members.
    • Eg:all trades done at NSE & OTCEI are settled through National Securities Clearing Corporation Limited (NSCCL)
    nagabhushan
  • 20.
    • It acts as a central mechanism for consolidating and settling transactions instead of the member firms settling each trade individually amongst themselves
    nagabhushan
  • 21.
    • Banking system
    • Depository essentially plays a dual role i.e of a depository and a limited bank
    • It maintains current a/c’s for participants and executes fund transactions relating to securities transactions for participants
    nagabhushan
  • 22.
    • Investors :may be individuals or corporates who have acquired shares either in primary market or in secondary market
    nagabhushan
  • 23.
    • Opening of depository system
    • Dematerialisation
    • Rematerialisation
    • Settlement of trades in dematerialised securities
    • Account transfer
    • Transfer ,transmission and transposition
    nagabhushan
  • 24.
    • Pledge and hypothecation
    • Redemption or repurchase
    • Stock lending and borrowing
    • Corporate action
    • Account freezing
    • Nomination
    • Demat of debt instruments
    • Dealing in govt securities
    nagabhushan
  • 25.
    • Opening of depository system: SEBI has made compulsory trading of shares of all the companies listed in stock exchanges in demat form w.e.f 2 nd jan 2002
    • Hence if the investor wants to trade in respect of the companies which have established connectivity with NSDL & CSDL, he may have to open a beneficiary a/c
    nagabhushan
  • 26.
    • Beneficiary a/c is an a/c opened by the investor or a broker with a DP of his choice to hold shares in demat form and undertake scripless trading
    • For opening demat a/c, the following documents are required:
    • Demat opening form duly filled
    • Address proof
    • photograph
    nagabhushan
  • 27.
    • Once a demat a/c is opened investor must sign an agreement with the DP and the investor will be allotted an account no. called as client identity
    • No minimum balance is required
    • The investor is provided with a transaction statement by his DP at regular intervals based on which the investor will know his security balances
    nagabhushan
  • 28.
    • Dematerialisation
    • It means conversion of the physical certificates into dematerialised holdings at the request of the investor
    • Only shares registered in the name of the a/c holder are accepted for dematerialisation at the depository
    nagabhushan
  • 29.
    • Procedure:
    • First open a demat a/c or security a/c with any DP of investor’s choice
    • Obtain a/c no. from his DP
    • A dematerialisation request form (DRF) to be submitted to the DP who intimates depository of the request
    • DP then submits the certificate along with the DRF to the registrar who confirms the demat request
    • Registrar validates the request, updates records ,destroys the certificates and informs depository who in turn credits the DP a/c
    • Depository participant updates the investor a/c and informs the investor
    nagabhushan
  • 30.
    • Once the company is admitted into depository system, an ISIN (international securities identifiction number) is allotted by the depository. This no. is unique for each security of the company that is admitted in the depository
    • The entire process takes about 15 days time.
    • However when large no. of certificates are submitted from institutions, it takes upto 30 days for demat
    nagabhushan
  • 31.
    • An investor may demat a part of his holdings and hold the balance in physical mode for the same security
    • Demat shares are fungible because they do not have any distinctive or certificate numbers
    nagabhushan
  • 32.
    • Rematerialisation
    • It means conversion of demat holdings back into certificates
    • If the investors wish to get the securities in physical form ,all he has to do is to request DP for remat
    nagabhushan
  • 33.
    • Procedure :
    • Investor must fill up a remat request form (RRF)
    • The DP will forward the request to depository after verifying that the shareholder has the necessary balances
    • Depository will in turn intimate the registrar
    • RTA (registrar & transfer agent) will print the certificates and dispatch the same to the investor
    nagabhushan
  • 34.
    • Settlement of trades in dematerialised securities
    • The following stock exchanges have been admitted on the depository to conduct this activity
    • NSE
    • The SE , mumbai
    • Calcutta Stock Exchange
    • Delhi SE
    • Ludhiana SE
    • Bangalore SE
    • Over the counter exchange of India
    • Madras SE
    • Inter connected SE
    • Ahmedabad SE
    nagabhushan
  • 35.
    • Account transfer
    • Depository gives effect to all transfers resulting from the settlement of trades and other transactions that take place between various beneficial owners.
    • Buying of securities:
    • It is similar to buying of physical securities
    nagabhushan
  • 36.
    • Procedure:
    • Investor purchases securities in any of the SE connected to Depository through a broker
    • Investor pays broker
    • Broker pays clearing corporation
    • On the pay – out day broker receives credit for securities
    nagabhushan
  • 37.
    • He gives instructions to DP to debit clearing a/c and credit clients a/c
    • Investor receives shares into his a/c
    • Investor has to make sure that the broker transfers the securities into his a/c before the book closure
    • Or else the company may hive corporate benefits to the broker
    nagabhushan
  • 38.
    • Selling of securities: procedure
    • Investor sells securities in any SE linked to depository through a broker
    • Investor gives instruction to DP to debit his a/c and credit broker’ a/c
    • Before the pay-in day, investor’s broker transfers the securities to clearing corporation
    nagabhushan
  • 39.
    • Broker receives payment from SE
    • Investor receives payment from broker
    • Sale in demat form is similar to sale under physical mode
    nagabhushan
  • 40.
    • Transfer:
    • Depository being electronically linked to DP’s, issuer company or registrar & transfer agent and the clearing corporation of the SE, serves as an integrated set up for maintenance of investor a/c’s
    • Hence , here transfer of securities occur merely by passing book entries in the records of the depository as and when instructed by the beneficial owners
    nagabhushan
  • 41.
    • Transmission: the claimant will have to fill a TRF i.e a transmission request form supported by documents like death certificate, succession certificate etc
    • The DP after verifying that the application is genuine, will transfer securities to demat a/c of claimant
    • Demat transmission all the formalities can be completed in one go
    nagabhushan
  • 42.
    • Transposition
    • Security certificates for this purpose must be submitted along with TRF and DRF to the DP
    nagabhushan
  • 43.
    • Pledge and hypothecation
    • Depositories allow the securities placed with them to be used as collateral to secure loans and other credits
    • Pledging demat securities is easier and advantageous than pledging physical securities
    nagabhushan
  • 44.
    • Procedure:
    • Both borrower (pledger) and lender (pledgee) must have depository a/c’s
    • Details of securities to be pledged should be submitted by the pledger to his DP in a standard format
    • Pledgee should confirm the request through his DP
    • Once this is done, securities are pledged.then the financial transactions between pledger and pledgee are handled outside the depository system
    nagabhushan
  • 45.
    • After the loan is repaid, the borrower can request for a closure of pledge by instructing his DP
    • If the pledgee agrees , the investor may change the securities offered in a pledge.
    nagabhushan
  • 46.
    • Redemption or repurchase
    • This occurs when the securities are surrendered to the issuer either on maturity or in pursuance of an option given by the issuer , in lieu of agreed consideration.
    • The consideration may be in cash or new securities in lieu of existing securities
    nagabhushan
  • 47.
    • Procedure:
    • RRF (repurchase request form) is used instead of remat RF
    • Client may be paid in cash or new securities in lieu of existing securities
    nagabhushan
  • 48.
    • Stock lending and borrowing
    • It involves lending and borrowing of securities under an approved scheme
    • It is executed through approved intermediaries duly registered with SEBI under the securities lending act 1997
    • Intermediaries may deal in a depository system only through a special a/c known as intermediary a/c opened with a participant
    nagabhushan
  • 49.
    • Corporate action
    nagabhushan
  • 50.
    • Nomination
    • Like shares in physical form, shares in electronic form also can be nominated
    • Nomination can be made only by individuals holding beneficiary a/c
    • Minor can nominate only through guardian
    • It can be made demat a/c wise and not security wise
    nagabhushan
  • 51. nagabhushan
  • 52.
    • Demat of debt instruments
    • Debt instruments can also be held in demat form
    • Instruments like bonds, debentures, CP’s, CD’s
    • From oct 31 st 2001, RBI has mentioned that banks and financial institutions shall make investment in deb and bonds only in demat form
    nagabhushan
  • 53.
    • Investor need not open separate demat a/c for demat of debt or instruments
    • Procedure for demat of debt instruments is same as that of equity shares
    • The investor has to ensure that before the certificates are handed over to the DP for demat, he marks ‘surrendered for dematerialisation’ on the face of the certificates
    nagabhushan
  • 54.
    • Dealing in govt securities
    • A subscriber to govt securities who opts for SGL securities may open an SGL a/c with RBI or any other approved entity on its own a/c are held in SGL 1 a/c and investments held on a/c of other clients are held in SGL 2 a/c
    nagabhushan
  • 55.
    • To ensure safety to the investors the following measures are existing:
    • DP cannot effect any debit or credit in the demat a/c of the investor the valid authorisation of the investor
    • Regular reconciliation between DP and depositories
    • Periodic inspection by depositories of the office of DP and registrar ( RTA)
    nagabhushan
  • 56.
    • All investors have a right to receive their statement of a/c’s periodically from the DP
    • If the depository goes bankrupt, the creditors of the DP will have no access to the holdings in the name of the clients of the DP. Such investors may however transfer their holdings to another DP
    • Compulsory internal audit of operations of DP by practicing Chartered Accountant every quarter
    • Steps to be taken for safe keeping and back up of data at all levels
    nagabhushan
  • 57.
    • To the nation:
    • Growing and more liquid markets
    • Increase in competitiveness in the international market place attracting many investors
    • Improved prospects for privatisation of public sector units by creating a conducive environment
    • Considerable reduction in delay
    • Minimises settlement risk and fraud restoring investors’ faith in the capital markets
    nagabhushan
  • 58.
    • To the investing public
    • Reduction of risks associated with loss, mutilation, theft and forgery of physical scrip
    • Elimination of financial loss from loss of physical scrip
    • Greater liquidity from speedier settlements
    • Reduction in delays in registration
    • Faster receipt of corporate benefits
    • Reduced transaction costs through greater efficiency
    nagabhushan
  • 59.
    • To issuers:
    • Up-to-date knowledge of shareholders’ names and addresses
    • Reduction in printing and distribution costs of new issues
    • Easy transfer of corporate benefits
    • Improved ability to attract international investors without having to incur expenditure of issuance in overseas markets
    nagabhushan
  • 60. nagabhushan