A project report on customer satisfaction towards depository participants at hdfc


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A project report on customer satisfaction towards depository participants at hdfc

  1. 1. “A Study On Customer Satisfaction Towards Depository Participants”ContentsSl. No. Titles Page No.I Chapter 1  Executive summary  Introduction 3  Design of the study - Statement of the Problem 5 - Objective - Methodology Sampling design Data Collection Method - Limitation of the study 7II Chapter 2  Organization Profile 9  Introduction to Dematerlisation 24 - Accounting Opening 29 - Clearing member account 34 - Market Type & Settlements Number 37 - Depository 41 - Function of Depository 42 - Depository Participant 43 - Procedure for Dematerialisation 44 - Demat process 48 - Closure of account 50 - Trading & Settlement 51 - Selling And Buying Of Shares 53 - Other Services 54 - Demat Shares: Are They 100% Safe 55III Chapter 3  Results & discussion with Charts & graphs 63IV Chapter 4  Appendix • Questionnaire 88  Bibliography 98 Babasabpatilfreeppimba.com 1
  2. 2. “A Study On Customer Satisfaction Towards Depository Participants”EXECUTIVE SUMMARY Babasabpatilfreeppimba.com 2
  3. 3. “A Study On Customer Satisfaction Towards Depository Participants”HDFC has developed significant expertise in retail mortgage loans to different marketsegments and also has a large corporate client base for its housing related creditfacilities. With its experience in the financial markets, a strong market reputation,large shareholder base and unique consumer franchise, HDFC was ideally positionedto promote a bank in the Indian environment. In addition it also provides dematservices, mutual funds etc. Dematerialization or "Demat" is a process whereby your securitieslike shares, debentures etc, are converted into electronic data and stored in computersby a Depository. 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.The project emphasis on “Customer satisfaction towards depositoryparticipants” . Objectives of the Study: • To know the concept of dematerialization, depository and depository participants. • To know the percentage of people satisfied with the services of DP. • To know the investment habit of people in securities • To know how Demat account is helping in trading.. • To find out the behavior of respondents towards sharesResearch Methodology: Data source: Primary Data: Through Questionnaire Secondary Data: HDFC Bank’s reports, Magazines & Websites. Sample size: 100 customers of HDFC BANK Area Covered for research: Only Belgaum HDFC BANKS customers. Sampling Procedure: Random sampling method from available database.Findings: Babasabpatilfreeppimba.com 3
  4. 4. “A Study On Customer Satisfaction Towards Depository Participants” Most of the investors are small investors (that is about 51%. And about 32% are long term investors , and 17% are traders. The respondents aware of the new services provided by HDFC BANK are mainly from agents that is about 39%,and from friends is 21%,and from newspaper is 17%, and broker is 17% and from others is 6%. From the analysis it is clear that 33% of the respondents are extremely satisfied with Demat services and 36% are satisfied and 13% are neither satisfied/Nor satisfied and 18% of them are unsatisfied. From the analysis it clearly states that 16% of the respondents are extremely satisfied with the service of settlement(Selling/Buying) and 37% are satisfied and 28% are neither satisfied/Nor unsatisfied,15% are unsatisfied and 4% are extremely unsatisfied. 20% of the respondents are extremely satisfied with the service of sell ‘n’ cash and35% are satisfied,33% are neither satisfied nor unsatisfied, 7% are unsatisfied and 3% are extremely unsatisfied 46% of the respondents are satisfied by telephone queries,9% are extremely satisfied,25% are neither satisfied ,11% are unsatisfied,9% are extremely unsatisfied. 21% of the respondents are extremely satisfied regarding the co-operation by staff ,42% are satisfied,33% are neither satisfied nor unsatisfied,4% are unsatisfied. 24% of the respondents are 20% satisfied with the services of DP,25% of the respondents are 40% satisfied with the services of DP, and 32% are 60% satisfied with the services of DP. 30.4% of the respondents prefer DP over other DP’s because of quality service,9.8% because of rates charged,34.8% for nothing in particular, and 25% for safety. Babasabpatilfreeppimba.com 4
  5. 5. “A Study On Customer Satisfaction Towards Depository Participants”IntroductionIndia has two hundred years old tradition in Securities. Infact that first India stockexchange established in Bombay is the oldest in Asia. The earliest security dealingswere Transactions in loan securities of East India Company, the dominant institutionof those days. Corporate Shares came into the picture by 1830’s and assumedsignificance with the Companies Act of 1956. In 1887 the broker community gavebirth to the “Native share and stock brokers Association” which is now known as theBombay Stock Exchange.The Indian Capital grew at a very moderate rate from 1951 to 1980. However itregistered 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 NSE 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 IndiDesign of the studyTile of the project: “Customer satisfaction towards depository participants”Statement of the Problem: HDFC BANK is providing the Demat service. Hence inthis report an attempt is made to know the present customer satisfaction towardsdepository participants Babasabpatilfreeppimba.com 5
  6. 6. “A Study On Customer Satisfaction Towards Depository Participants”RESEARCH OBJECTIVES: • To know the concept of dematerialization, depository and depository participants. • To know the percentage of people satisfied with the services of DP. • To know the investment habit of people in securities • To know how Demat account is helping in trading.. • To find out the behavior of respondents towards sharesMethods and MethodologySampling Design:  Sampling since segment wise investors in HDFC BANK were available the overall customers were considered for the study... 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 HDFC BANK.  Field Study: Directly approached respondents.DATA COLLECTION METHOD: 1. PRIMARY DATA: For a study of this nature primary data is collected through Questionnaire. 2. SECOUNDARY DATA: This is been is collected through HDFC Bank’s 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 Babasabpatilfreeppimba.com 6
  7. 7. “A Study On Customer Satisfaction Towards Depository Participants”Limitations of study • Since Sample size is only 100,it does give the entire picture.. • 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. Babasabpatilfreeppimba.com 7
  8. 8. “A Study On Customer Satisfaction Towards Depository Participants”ORGANISATION PROFILE Babasabpatilfreeppimba.com 8
  9. 9. “A Study On Customer Satisfaction Towards Depository Participants”HDFC is Indias premier housing finance company and enjoys an impeccable trackrecord in India as well as in international markets. Since its inception in 1977, theCorporation has maintained a consistent and healthy growth in its operations toremain the market leader in mortgages. Its outstanding loan portfolio covers well overa million dwelling units. HDFC has developed significant expertise in retail mortgageloans to different market segments and also has a large corporate client base for itshousing related credit facilities. With its experience in the financial markets, a strongmarket reputation, large shareholder base and unique consumer franchise, HDFC wasideally positioned to promote a bank in the Indian environment.The Housing Development Finance Corporation Limited (HDFC) was amongst thefirst to receive an in principle approval from the Reserve Bank of India (RBI) to setup a bank in the private sector, as part of the RBIs liberalization of the IndianBanking Industry in 1994. The bank was incorporated in August 1994 in the name ofHDFC Bank Limited, with its registered office in Mumbai, India. HDFC Bankcommenced operations as a Scheduled Commercial Bank in January 1995.BROAD AREAS IN WHICH IT OPERATESThe Bank operates in three segments: retail banking, wholesale banking and treasuryservices. The retail banking segment serves retail customers through a branch networkand other delivery channels. The wholesale banking provides loans and transactionservices to corporate and institutional customers. The treasury services segmentundertakes trading operations on the proprietary account, foreign exchange operationsand derivatives trading. The Bank operates in India.Retail Banking Babasabpatilfreeppimba.com 9
  10. 10. “A Study On Customer Satisfaction Towards Depository Participants”This segment raises deposits from customers and makes loans and provides advisoryservices to such customers. The objective of the Retail Bank is to provide its targetmarket customers a range of financial products and banking services, giving thecustomer a one-stop window for all his/her banking requirements. The products arebacked by service and delivered to the customers through the growing branchnetwork, as well as through alternative delivery channels like automated tellermachines (ATMs), phone banking, net banking and mobile banking.The HDFC Bank Preferred program for high net worth individuals, the HDFC BankPlus and the Investment Advisory Services programs have been designed keeping inmind needs of customers who seek distinct financial solutions, information and adviceon various investment avenues. The Bank also has an array of retail loan products,including auto loans, loans against marketable securities, personal loans and loans fortwo-wheelers. It is also a provider of depository participant (DP) services for retailcustomers, providing customers the facility to hold their investments in electronicform.HDFC Bank has launched an international debit card in association with VISA (VISAElectron) and also issues the MasterCard Maestro debit card. The Bank launched itscredit card business during the fiscal year ended March 31, 2001. By September 30,2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. TheBank is also engaged in the merchant acquiring business with over 50,000 point-of-sale (POS) terminals for debit/credit cards acceptance at merchant establishments.Wholesale Banking, The Banks target market ranges from large, blue-chip manufacturing companies inthe Indian corporate to small and mid-sized corporates and agri-based businesses. For Babasabpatilfreeppimba.com 10
  11. 11. “A Study On Customer Satisfaction Towards Depository Participants”these customers, the Bank provides a range of commercial and transactional bankingservices, including working capital finance, trade services, transactional services andcash management. The bank is also a provider of structured solutions, which combinecash management services with vendor and distributor finance for facilitating superiorsupply chain management for its corporate customers. It provides cash managementand transactional banking solutions to corporate customersTreasury ServicesWithin this business, the bank has three main product areas: Foreign Exchange andDerivatives, Local Currency Money Market & Debt Securities, and Equities. Riskmanagement information, advice and product structures, as well as fine pricing onvarious treasury products are provided through the Banks Treasury team. TheTreasury business is responsible for managing the returns and market risk on thisinvestment portfolioCUSTOMER FOCUSHDFC Banks mission is to be a World-Class Indian Bank.The objective is to build sound customer franchises across distinct businesses so as tobe the preferred provider of banking services for target retail and wholesale customersegments, and to achieve healthy growth in profitability, consistent with the banksrisk appetite. The bank is committed to maintain the highest level of ethical standards,professional integrity, corporate governance and regulatory compliance. HDFCBanks business philosophy is based on four core values - Operational Excellence,Customer Focus, Product Leadership and PeopleCAPITAL STRUCTUREAuthorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-upcapital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the Babasabpatilfreeppimba.com 11
  12. 12. “A Study On Customer Satisfaction Towards Depository Participants”banks equity and about 19.4% of the equity is held by the ADS Depository (in respectof the banks American Depository Shares (ADS) Issue). Roughly 31.3% of the equityis held by Foreign Institutional Investors (FIIs) and the bank has about 190,000shareholders. The shares are listed on the The Stock Exchange, Mumbai and theNational Stock Exchange. The banks American Depository Shares are listed on theNew York Stock Exchange (NYSE) under the symbol "HDBVARIOUS SERVICESFOREX AND TRADE SERVICES., HDFC Bank has a range of products and services that one can choose from totransact smoothly.The following are different methods of transacting in foreign exchange and remittingmoney.  Travellers cheques  Foreign currency cash.  Foreign currency drafts  Cheque deposits  Remittances  Cash to master  Trade services  Foreign services branch locatorImportant guidelines and schedules Babasabpatilfreeppimba.com 12
  13. 13. “A Study On Customer Satisfaction Towards Depository Participants”All Foreign Exchange transactions are conducted by strictly adhering to RBI guidelines. Depending onthe nature of your transaction or point of travel, you will need to understand your Foreign Exchangelimits.LOANS  Home Loans  Personal Loans  Two Wheeler Loans  New Car Loans  Used Car Loans  Overdraft Against Car  Express Loans  Loans Against Securities  Loans Against PropertyPERSONAL BANKINGSavings AccountsThese Accounts are primarily meant to inculcate a sense of saving for the future,accumulating funds over a period of time. Whatever may be the occupation, bank isconfident that customer will find the perfect banking solution. Open an account inyour name (customer’s name) or register for one jointly with a family member today. Babasabpatilfreeppimba.com 13
  14. 14. “A Study On Customer Satisfaction Towards Depository Participants”Current AccountsNow, with an HDFC Bank Current Account, experience the freedom of multi-citybanking! Customer can have the power of multi-location access to his account fromany of banks 500 branches in 220 cities. Not only that, he can do most of his bankingtransactions from the comfort of his office or home without stepping out.At HDFC Bank, it understand that running a business requires time and money, alsothat customers business needs are constantly evolving. Thats where it come in. Itprovides him with a choice of Current Account options to exclusively suit hisbusiness - whatever the size or scope.Fixed DepositsLong-term investments form the chunk of everybodys future plans. An alternative tosimply applying for loans, fixed deposits allow the customer to borrow from his ownfunds for a limited period, thus fulfilling his needs as well as keeping his savingssecure.As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tarriffs,Charges or Fees Brochures will attract Service Tax @10% & Education Cess @2% ofthe service tax amount effective 10th September 2004. The same will appear asseparate debits in the statements.PRIVATE BANKINGHDFC Bank offers Private Banking services to high net worth individuals andinstitutions. Banks team of seasoned financial and investment professionals provide Babasabpatilfreeppimba.com 14
  15. 15. “A Study On Customer Satisfaction Towards Depository Participants”objective guidance backed by thorough research and in-depth analysis keeping inmind customers financial goals.Multiple Recognition from Euro moneyAt HDFC Bank, they have always strived towards providing exceptional service toeach of their esteemed customers. As testament to this dedication, they have earnedthe following ranks in a recently conducted Euromoney Survey.  Rated as the best private bank in the super effluent category in India HDFC Bank Investment Advisory Services - Helping you take your Investment portfolio further.  Dedicated investment advisor HDFC Private Banking service involves a high degree of personalization. When customer avail of this facility, a dedicated Investment Advisor serves him. This seasoned finance professional adds value to his portfolio by keeping him up to date with financial markets and investment opportunities .PAYMENT SERVICESWith HDFC Banks payment services, one can bid goodbye to queues and paperwork. Its range of payment options make it easy for customer to pay for a variety ofutilities and services.  Verified by visa If one wants to be worry free for his online purchases. Now he can shop securely online with yhis existing Visa Debit/Credit card.  Net safe Now shop online without revealing your(customers) HDFC Bank Credit Card number. Babasabpatilfreeppimba.com 15
  16. 16. “A Study On Customer Satisfaction Towards Depository Participants” Prepaid refillIf a person is a HDFC Bank Account holder and a prepaid customer, he can nowrefill his Prepaid Mobile card with this service. Bill payOne can pay his telephone, electricity and mobile phone bills at his convenience.Through the Internet, ATMs, his mobile phone and telephone - with Bill Pay, bank’scomprehensive bill payments solution Visa Bill PayOne can pay his utility bills from the comfort of his home! Pay using his HDFCBank Visa credit card and forget long queue and late payments forever Insta payOne can Pay his bills, make donations and subscribe to magazines without goingthrough the hassles of any registration. Direct payShop or Pay bills online without cash or card. Debit your(customers ) accountdirectly with bank’s Direct Pay service! Smart pay(with credit cards)With Smart Pay, paying customers r electricity, telephone, mobile phone, waterbills, gas and insurance premia payments becomes easy like never before Visa money transferOne can transfer funds to any Visa Card (debit or credit) within India at his ownconvenience through HDFC Banks Net Banking facility. e-Monies Electronic Funds TransferTransfer funds from customers account to any account in any Bank in India at15 locations - FREE of cost! Babasabpatilfreeppimba.com 16
  17. 17. “A Study On Customer Satisfaction Towards Depository Participants”  Online payment of excise and service tax One can make his Excise and Service Tax payments at his own convenience. PREFFERED/CLASSIC BANKING If a customer expects more from everything, even HDFC bank, will invite him into the world of exclusive banking. Where he will never again have to wait to be served. With HDFC Bank Preferred Programme, his comfort always comes first. Ideal for seasoned professionals or businessmen, this programme will provide him with a banker dedicated to take care of all his banking and investment needs. It also means he get preferential rates on various banking products and other exclusive benefits. HDFC BANK CLASSIC BANKING If a person wants to experience banking beyond the ordinary, our HDFC Bank Classic Programme is just for him. Becoming an HDFC Bank Classic customer entitles him to a host of benefits, including a bouquet of preferentially priced products and specialized wealth management solutions.AWARDS AND ACHIEVMENTSHDFC Bank began operations in 1995 with a simple mission: to be a "World-classIndian Bank". They realized that only a single-minded focus on product quality andservice excellence would help them get there. Today, they are proud to say that theyare well on the way towards that goal. Babasabpatilfreeppimba.com 17
  18. 18. “A Study On Customer Satisfaction Towards Depository Participants”2006 Business Today Best Bank in India. Forbes Magazine One of Asia Pacifics Best 50 companies. Businessworld Best listed Bank of India. The Asset Best Domestic Bank. Magazines Triple A Country Awards Asiamoney Awards Best Local Cash Management Bank in Large and Medium segments. Euromoney Awards "Best Bank" in India. 2005 Asia money Awards Best Domestic Commercial Bank Asia money Awards Best Cash Management Bank - India . The Asian Banker Retail Banking Risk Management Award in India. Excellence Hong Kong-based Best Bank India Finance Asia magazine Economic Times "Company of the Year" Award for Corporate Excellence. AwardsAsiamoney also named the bank: Best Local Cash Management Bank in India 2004 - US$11-100m Best Local Cash Management Bank in India 2004 - >US$501m Best Local Cash Management Bank in India 1989-2004 (poll of polls) Best Overall Domestic Trade Finance Services in India 2004 Most Improved company for Best Management Practices in India 2004 Babasabpatilfreeppimba.com 18
  19. 19. “A Study On Customer Satisfaction Towards Depository Participants”The Business Today-KPMG Survey published in the leading Indian businessmagazine Business Today has named HDFC Bank "Best Bank in India" for the thirdconsecutive year in 2005.The Asset magazine named HDFC Bank "Best Cash Management Bank" and "BestTrade Finance Bank" in India, in 2006.HDFC Bank named the "Most Customer Responsive Company - Banking andFinancial Services in The Economic Times - Avaya Global Connect CustomerResponsiveness Awards 2005"HDFC Bank has been named Best Domestic Bank in India in The Asset Triple ACountry Awards 2005.HDFC Bank has been named Best Domestic Bank in India Region in The Asset TripleA Country Awards 2004 and 2003.In 2004, HDFC Bank was selected by BusinessWorld as "One of Indias MostRespected Companies" as part of The Business World Most Respected CompanyAwards 2004.In 2004, Forbes Global again named us in its listing of Best Under a Billion, 100 BestSmaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004 issue.In 2004, HDFC Bank won the award for "Operational Excellence in Retail FinancialServices" - India as part of the Asian Banker Awards 2003.In 2003, Forbes Global named us in its ranking of "Best Under a Billion, 200 BestSmall Companies for 2003". Babasabpatilfreeppimba.com 19
  20. 20. “A Study On Customer Satisfaction Towards Depository Participants”Leading business newspaper The Financial Express named HDFC Bank the "BestNew Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey 2003.Leading Personal Finance Magazine in India Outlook Money named HDFC Bank the"Best Bank in the Private Sector" for the year 2003.Leading Indian business magazine Business Today in a survey rated us "Best Bank inIndia" 2003, and "Best Private Sector Bank" in India in 1999.NASSCOM and economictimes.com have named us the Best IT User in Banking atthe IT Users Awards 2003.There have been some other proud moments as well: London-based Euromoney magazine gave us the award for "Best Bank - India" in 1999, "Best Domestic Bank" in India in 2000, and "Best Bank in India" in 2001 and 2002 Asiamoney magazine has named us "Best Commercial Bank in India 2002". For our use of information technology we have been recognized as a "Computerworld Honors Laureate" and awarded the 21st Century Achievement Award in 2002 for Finance, Insurance & Real Estate category by Computerworld, Inc., USA. Our technology initiative has been included as a case study in their online global archives.The Economic Times has conferred on us The Economic Times Awards for Corporate Excellence as the Emerging Company of the Year 2000-01. Leading Indian business magazine Business India named us "Indias Best Bank" in 2000. In the year 2000, leading financial magazine Forbes Global named us in its list of "The 300 Best Small Companies" in the world and as one of the "20 for 2001" best Babasabpatilfreeppimba.com 20
  21. 21. “A Study On Customer Satisfaction Towards Depository Participants” small companies in the world.CORPORATE GOVERNARCEHDFC Bank recognizes the importance of good corporate governance, which isgenerally accepted as a key factor in attaining fairness for all stakeholders andachieving organizational efficiency. This Corporate Governance Policy, therefore, isestablished to provide a direction and framework for managing and monitoring thebank in accordance with the principles of good corporate governance.BOARD OF DIRECTORS  Mr. Jagdish Capoor, Chairman  Mr. Aditya Puri , Managing Director  Mr. Keki Mistry  Dr. (Mrs.) Amla Samanta  Mr.Anil Ahuja  Dr. Venkat Rao Gadwai  Mr.Vineet Jain Babasabpatilfreeppimba.com 21
  22. 22. “A Study On Customer Satisfaction Towards Depository Participants”  Renu Karnad  Mr.Aravind Pande  Mr. Ranjan Kanpur(w.e.f January 9, 2004)  Mr. Bobby Parikh (w.e.f.January 9,2004)VICE PRESIDENT(LEGAL)& COMPANY SECRETARY  Mr. Sanjay DongreAUDITOTS  Mr. P.C. Hansotia&Co (Chartered accountants)REGISTERED OFFICEHDFC BANK HouseSenapati Bapat MargLower ParelMumbai 400013Tel No: 56521000Fax No: 24960739Web –site : www.hdfcbank.co Babasabpatilfreeppimba.com 22
  23. 23. “A Study On Customer Satisfaction Towards Depository Participants”INTRODUCTION 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 up Babasabpatilfreeppimba.com 23
  24. 24. “A Study On Customer Satisfaction Towards Depository Participants”a 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. Following table compares the two.Bank DepositoryHolds funds in accounts Holds securities in accountTransfers funds between accounts Transfers securities between accountsTransfers without handling money Transfers without handling securitiesSafekeeping 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. Babasabpatilfreeppimba.com 24
  25. 25. “A Study On Customer Satisfaction Towards Depository Participants”• 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 could 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 Babasabpatilfreeppimba.com 25
  26. 26. “A Study On Customer Satisfaction Towards Depository Participants”  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 formwhere 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. Babasabpatilfreeppimba.com 26
  27. 27. “A Study On Customer Satisfaction Towards Depository Participants” • 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 fordemat. 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. Babasabpatilfreeppimba.com 27
  28. 28. “A Study On Customer Satisfaction Towards Depository Participants” 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 anydepository 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 Babasabpatilfreeppimba.com 28
  29. 29. “A Study On Customer Satisfaction Towards Depository Participants” 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 only• 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 borrowing 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 attachedto the securities held in that account Therefore, the account is called “beneficialowner account” a beneficial account can be in the name of individual, corporate,HUF, minor, bank, financial institution , trust etc or the broker himself for the Babasabpatilfreeppimba.com 29
  30. 30. “A Study On Customer Satisfaction Towards Depository Participants” purpose of his personal investments in demat form . The account is opened with a DP House account vs. non –house account opened by a DP for the custody of and transactions in its own investment is referred to as a house account DPS Are required to open house accounts for their own investments to prevent co- mingling of asset with that of their clients Neither the depositories ACT nor the regulations made under the act lay down any specifications about who can open a beneficiary account since all beneficial owners are deemed to be member of a company (under section 41 (3) of the companies act) only those who are eligible to become members of a company act can open a beneficiary account with a depository Thus all legal entities with the exception of partnership firms can open an account in the depository system Documents 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 beauthenticated 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 proof ofaddress 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 Babasabpatilfreeppimba.com 30
  31. 31. “A Study On Customer Satisfaction Towards Depository Participants” 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 signatures 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 have more than one account with the same DP or any other DPS No minimum balance is required for opening a depository account Investor also have the freedom to close an account with one DP and open another one with any other DP Babasabpatilfreeppimba.com 31
  32. 32. “A Study On Customer Satisfaction Towards Depository Participants”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 –whether it is for NRI’s or corporate or individual Further, the individual accountcan be in a signal name or joint name clearing members and brokers have to openin a beneficiary account if they have to deal with their own holdings There are several client types in the depository system and different codes are allotted to them. These are listed below 1. Resident o Ordinary • HUF 2. Financial institutions • Government –sponsored FI • State financial corporation • Other 3. FIIS • Mauritius –based • Others 4. NRI • Repatriable • Non-Repatriable • Depository receipt 5. Body corporate • Domestic company • Overseas corporate body Repatriable Babasabpatilfreeppimba.com 32
  33. 33. “A Study On Customer Satisfaction Towards Depository Participants” • 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. IntermediaryClearing Member Account 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: Babasabpatilfreeppimba.com 33
  34. 34. “A Study On Customer Satisfaction Towards Depository Participants” 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.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. Babasabpatilfreeppimba.com 34
  35. 35. “A Study On Customer Satisfaction Towards Depository Participants”STRUCTURE OF CLEARING ACCOUNT The clearing account is identified in the depository system by its CM-BP-ID. Theinternal structure of the Clearing Account consists of three parts to facilitate easybook keeping • 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 Client a) 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 Babasabpatilfreeppimba.com 35
  36. 36. “A Study On Customer Satisfaction Towards Depository Participants” 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.c) 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 into compartment and sub-compartments. Each compartment can be called as market type and be as settlement number. Hence, if securities are moved from any clearing account, apart from the CM-BP-ID, the combination of market type and settlement number must be provided. A diagrammatic illustration of the internal structure of a clearing account is depicted below Clearing Account (IN503265) PhysicalBabasabpatilfreeppimba.com Rolling 36 Action Rolling 2000016 2000015 2000014 9000153 9000152 2000249 2000248 Delivery Pool Receipt Delivery Pool Receipt Receipt Delivery Pool Receipt Receipt Receipt
  37. 37. “A Study On Customer Satisfaction Towards Depository Participants”Settlement 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 clearing house/ Clearing Corporation of the stock exchange, is considered as a market trade in the 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) 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) Babasabpatilfreeppimba.com 37
  38. 38. “A Study On Customer Satisfaction Towards Depository Participants” A diagrammatic illustration of the settlement of a market trade in a depository isdepicted below: DP of buyer DP of Buyer’s CM D C NSDL CH/CC A B DP of Seller DP of Seller’s CM  Receiving securities for pay-in from clients (client to clearing member) A selling client of a clearing member (broker) would transfer securities from his beneficial owner account to the clearing account of the clearing member for onwards delivery to the clearing house/clearing corporation. This transfer is effected by his DP on the basis of a delivery instruction provided by the selling client. A diagrammatic Illustration for securities received for pay-in from clients is depicted below: NSDL DP2 DP1 Seller Seller Seller Clearing A B C Member AAAlle rA Babasabpatilfreeppimba.com 38
  39. 39. “A Study On Customer Satisfaction Towards Depository Participants” Indicates flow of securities Indicates paper /electronic instruction given. OFF MARKET TRANSFERS: Any trade, which is not cleared and settled by the 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 the clearing account. Such transfers take place directly between two beneficiary accounts. Both buyer and seller may open account either with the same DP or with different DPs. The buyer and seller will trade amongst themselves and later on will exchange money, i.e., settle funds amongst themselves. The selling client would deliver securities 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 delivery instruction provided by the selling clients. A diagrammatic illustration of the settlement of an off-market trade in depository is depicted below: Babasabpatilfreeppimba.com 39
  40. 40. “A Study On Customer Satisfaction Towards Depository Participants” Indicates flow of securities Indicates paper /electronic instruction given.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 and Babasabpatilfreeppimba.com 40
  41. 41. “A Study On Customer Satisfaction Towards Depository Participants”subsequently 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. 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.Functions of Depository Babasabpatilfreeppimba.com 41
  42. 42. “A Study On Customer Satisfaction Towards Depository Participants” Dematerlisation: one of the primary functions of depository is to eliminate orminimize the movement of the physical securities in the market. This is achievedthrough dematerialization 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 security inthe records of the issuer. For effecting a transfer, certain legal steps have to be takenlike endorsement, execution of a transfer of security occurs merely by passing bookentries in the records of the depositories, on the instructions of the beneficial owners.Corporate Actions: A depository may handle corporate actions in two ways. In 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 to beused 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 corporation attachedto a stock exchange or a clearing house (department) of a stock exchange, the clearingsystem performs the function of ascertaining the pay-in (sell) or pay-out (buy) of Babasabpatilfreeppimba.com 42
  43. 43. “A Study On Customer Satisfaction Towards Depository Participants”brokers who have traded on the stock exchange. Actual delivery of securities to theclearing system from the selling and delivery of securities from the clearing system tothe buying broker is done by the depository. To achieve this, depositories and theclearing system should be electronically linkedDepository Participant: Depository Participant (DP) is an organization 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 organization, 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, NRI ~Repatriable and NRI Non-Repatriable. Body Corporate, Banks, Trusts, Financial Babasabpatilfreeppimba.com 43
  44. 44. “A Study On Customer Satisfaction Towards Depository Participants”Institutions, 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 theaccount 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 DematerializationDematerialisation Process 1 Investor DP 2A 2 5 3 NSDL R & T Agent 4Steps:1. Client/ investor submits the DRF (Demat Request Form) and Physical certificatesto DP. DP checks whether the securities are available for demat. Client defaces thecertificates by stamping ‘Surrender for Dematerlisation’. DP punches two holes on thename 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 thephysical certificates along with the DRF to the R & T Agent.3.NSDL records the details of the electronic request in the system and forwards therequest to the R&T Agent. Babasabpatilfreeppimba.com 44
  45. 45. “A Study On Customer Satisfaction Towards Depository Participants”4.R&T Agent, on receiving the physical documents and the electronic request, verifiesand checks them. Once the R&T Agent is satisfied, Dematerialization of theconcerned securities is electronically confirmed to NSDL.5.NSDL credits the dematerialized securities to the beneficiary account of the investorand intimates the DP electronically. The DP issues a statement of transaction to theclient.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 thesecurity certificates to be dematerialized.C. The DP checks the DRF for validity, completeness and correctness. The followingpoints 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 dematerialization’. 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 Babasabpatilfreeppimba.com 45
  46. 46. “A Study On Customer Satisfaction Towards Depository Participants” 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.D. If the DRF & the accompanying security certificates are found in order, the DPshould accept the DRF and certificates.E. If DRF and the accompanying security certificates are not found in order, the DPshould return the DRF and certificates.F. The DP should enter the dematerialization request in the DPM. DPM generates arequest 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 twoholes on the name of the issuer or its R&T Agent for dematerialization. DRF andenclosures 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 andshould refer to the allotted DRN and should Be sent within seven days of accepting itfrom the client. Babasabpatilfreeppimba.com 46
  47. 47. “A Study On Customer Satisfaction Towards Depository Participants”I. The issuer or its R&T Agent verify the DRF & the accompanying certificate forvalidity, completeness and correctness. They also match the details with theintimation 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 objectionmemo to the DP, with or without DRF & security certificates depending upon thereason 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 DRFL. 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 forobjection. The DP removes these or provides additional information to theissuer or its R & T Agent within 15days of receiving the objection memo. Babasabpatilfreeppimba.com 47
  48. 48. “A Study On Customer Satisfaction Towards Depository Participants”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 date • 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 request Babasabpatilfreeppimba.com 48
  49. 49. “A Study On Customer Satisfaction Towards Depository Participants”properly. 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.Closure of account:Closure on Client’s Request- A DP can close a depository account on receipt of anapplication in the prescribed format. The application should be made by the account.In case joint-holders. An account can be closed sought to be closed, the followingsteps are necessary.a. Re-materialization of all securities standing to the credit of the same accountmaking the application for closure; orb. Transferring the balance to the credit of another account opened by the sameaccount holder(s) either with the same participant or with a different participant. Babasabpatilfreeppimba.com 49
  50. 50. “A Study On Customer Satisfaction Towards Depository Participants”Before closing the account the DP should ensure that all pending transactions havebeen settled. The request for closure should be processed only after ensuring that thereis 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 client hasdefaulted 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.Closure/ Shifting of Clearing Account –A clearing member may transfer its clearingaccount from one DP to another DP. For this, simultaneously applications have to bemade for closure of account to the earlier DP and for opening of new clearing memberaccount to the new DP. On receipt of the application, the new DP forwards theapplication to the depository for approval and allotment of a new CM-BP-ID isallotted, the new DP opens a new Clearing account and intimates the depository aboutthe new client- ID. On receipt of intimation from the intimates the clearing member.All pay-out of securities, subsequent to the closure of old clearing account, take placein the new account. Pg-17-3Trading & Settlement: Babasabpatilfreeppimba.com 50
  51. 51. “A Study On Customer Satisfaction Towards Depository Participants”This is the an area where the DP must the DP must take immense care while acceptingand processing request listed below should from the account of his client to anotheraccount. 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.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 the unified(erstwhile - physical) segment follows account period settlement cycle. In case ofrolling 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. Babasabpatilfreeppimba.com 51
  52. 52. “A Study On Customer Satisfaction Towards Depository Participants” • 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. • 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 short positions are auctioned in the Demat segment as done in the Unified (erstwhile- physical) segment. Selling And Buying Of Shares: Selling dematerialized shares in stock exchangesis similar to the procedure for selling physical shares. Instead of delivering physicalshares to the broker, you instruct your DP to debit your account with the number ofshares sold by you and credit your brokers clearing account.For this, a delivery instruction has to be given to your DP in a standardized format,which will be available with your DP. Babasabpatilfreeppimba.com 52
  53. 53. “A Study On Customer Satisfaction Towards Depository Participants”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) • 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. Babasabpatilfreeppimba.com 53
  54. 54. “A Study On Customer Satisfaction Towards Depository Participants” 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.In 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 Services Babasabpatilfreeppimba.com 54
  55. 55. “A Study On Customer Satisfaction Towards Depository Participants”Besides 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 more advantageousas compared to pledging share certificates.To 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 the Babasabpatilfreeppimba.com 55
  56. 56. “A Study On Customer Satisfaction Towards Depository Participants”repayment 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 invoked beforethe lock-in release date.Even after the securities are pledged, the pledgor continues to remain the beneficiaryholder of those securities and will receive benefits of a corporate action, if any.Initial 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. Babasabpatilfreeppimba.com 56
  57. 57. “A Study On Customer Satisfaction Towards Depository Participants” 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. 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 as rights orbonus or dividend is announced for a particular security, depository will give thedetails 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. Babasabpatilfreeppimba.com 57
  58. 58. “A Study On Customer Satisfaction Towards Depository Participants” 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.Stock Lending and borrowing: Through the depository account securities in thedemat 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 (whichis available with your DP) to deposit your securities with the intermediary.If the intermediary accepts your deposit of securities, the securities will be movedfrom your account into the intermediarys account. If you wish to recall the securitieslent by you, you can make a request vide a standard format available with your 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. Babasabpatilfreeppimba.com 58
  59. 59. “A Study On Customer Satisfaction Towards Depository Participants”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 thetransmission 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 sole Clientaccount.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 hasprescribed criteria for becoming a DP in the regulations. Babasabpatilfreeppimba.com 59
  60. 60. “A Study On Customer Satisfaction Towards Depository Participants”• 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.• 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. Babasabpatilfreeppimba.com 60
  61. 61. “A Study On Customer Satisfaction Towards Depository Participants” • 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. Babasabpatilfreeppimba.com 61
  62. 62. “A Study On Customer Satisfaction Towards Depository Participants” Babasabpatilfreeppimba.com 62
  63. 63. “A Study On Customer Satisfaction Towards Depository Participants”Analysis of customer satisfaction1.Scheme of holding sharesSmall investors Longterm investors Traders51 32 1751% 32% 17% In which scheme you are holding shares 60 50 40 30 20 Percent 10 0 Small investors Long term investors Traders In which scheme you are holding sharesInterpretation:The above table and graph shows that most of the investors are small investors (that isabout 51%. And about 32% are long term investors , and 17% are traders.2 Awareness about new services will come to be known byFriends Newspaper Broker Agents Other21 17 17 39 621% 17% 17% 39% 6% Babasabpatilfreeppimba.com 63
  64. 64. “A Study On Customer Satisfaction Towards Depository Participants” If you are the new services, then how do you come to know the se 50 40 30 20 Percent 10 0 Friends New spaper Broker Agents Others If you are the new services, then how do you come to know the servicesInterpretation:The above table and chart shows that the respondents aware of the following servicesis mainly from agents that is about 39%,and from friends is 21%,and fromnewspaper is 17%, and broker is 17% and from others is 6%.3a.Schemes/Services awareness and the availed servicesSchemes/Services I have availed the service I am aware of the serviceShare trading 80 20% of respondents 80% 20% Please tick fromthe following service(share trading) 100 80 60 40 Percent 20 0 I have availed the f I m aw are of the f ol Please tick fromthe following service(share trading)Interpretation:From the above graph and chart it shows that 80% of the customers have availed theservice of share trading and 20% of them are aware of the service. Babasabpatilfreeppimba.com 64