This document provides an overview of depository accounts and the account opening process. It discusses the different types of accounts available at a Depository Participant including beneficial owner accounts, house accounts, non-house accounts, clearing member accounts, and intermediary accounts. It then describes the documentation required to open individual and corporate client accounts, including KYC requirements and 'in-person' verification. The key steps to open a beneficiary account and features like zero balance and nomination are also summarized.

1. 1
INTRODUCTION
TO
DEPOSITORY

2. 2
Functions of Financial Market
Surplus Sector Deficit Sector
House Holds (Savers) Corporate & Public
Sector( Borrowers)
Investable Funds Requirement of funds
Borrows Funds and Issue Securities

3. 3
Financial Market
 FM is a Place where the securities are
traded
 FM Consists of Investors buyers and
sellers
of securities
FM has No physical location for trade
FM has no formal trading rules
FM has no relationship & communication

4. 4
Financial Market
Organized
Unorganized
Money Market Capital Market Money lenders
Primary Secondary Pan
brokers
Participants
Commercial Bks RBI Issue new
instruments
Core of MM LIC in corporate sector
Inter Bank GIC
Call Money STCI Equity shares, Govt

5. 5
Primary Market issues Securities through
a prospectus in a retail market and there is
no physical location.
 Secondary market of securities is a
market for trading the securities that have
already been issued in the primary market.

6. 6
Secondary Market
 Place for trading securities already
issued
Consists registered Brokers/sub Brks of
SE
Consists 22 stock exchanges
Has physical location/ trading floor
Provides Liquidity to the initital buyers in
PM
Place for buying and selling securities
Since 1995 trading is screen based
Sale/purchase of securities can be made

7. 7
Capital market participants
Primary Market Secondary
Market
Financial Institutions Stock Exchange
FII Stock Brokers
Merchant Bankers R&T Agents
Mutual Funds Custodians
Depositories
MF, FI, FII
Individual Investors

8. 8
Market Regulation
Required for Smooth functioning
of Capital Market
 is an arena of players associated
with economic growth
Until 1992 the FM was highly
segmented on various counts of
regulation and administered prices

9. 9
Capital Issue Control Act 1947
Restricted access to securities Market
for issuers and Controlled pricing of
Issues.
Companies Act 1956
Controlled Issues, allotment
&Transfer
Disclosure to Public
Securities contract Act 1956
Securities transaction regulation

10. 10
To regulate, administer, control and
bring under a single authority SEBI
Act was passed in 1992.
Objectives of SEBI-
Improve market efficiency
Enhance transparency
Check unfair trade practices
Bring CM to International standards
Liberalize, regulate, develop Security
Mkt

11. 11
Present Situation in Secondary
Market
Screen Based trading
Secondary Market has overcome
geographical barriers
Physical securities almost disappeared
Settlement period has reduced to 2
days
Investor friendly

12. 12
Capital Market Intermediaries
Merchant Bankers
Credit rating agencies
R & T Agents
Stock brokers
Custodians
Mutual Funds
Depositories
Depository Participants
Instruments

13. 13
Capital Market Intermediaries
Instruments
Debentures-Convertible/Non-
contble
Bonds
Equity/Preference shares
Govt Securities
Ware house Receipts
Other Instruments

14. 14
MILESTONES INMILESTONES IN
INDIAN CAPITALINDIAN CAPITAL
MARKETMARKET
NSE
NOV
1994
FIRST NATIONWIDE
SCREEN BASED
TRADING
NSCCL
JUN
1996
FIRST CLEARING CORP.
OFFERING GUARANTEED
SETTLEMENT (part of NSE,
Inter Region Clearing)
(Novation)
NSDL
NOV
1996
FIRST DEPOSITORY
FACILITATING
SCRIPLESS TRADING

15. 15
MILESTONES IN SETTING UPMILESTONES IN SETTING UP
OF NSDLOF NSDL
DEPOSITORIES ORDINANCE SEPT 95
IDBI
UTI
NSE
NSDL INCORPORATION DEC 95
SEBI REGULATIONS MAY 96
DEPOSITORIES ACT AUG 96
NSDL
SEBI CERTIFICATION
COMMENCEMENT
CERTIFICATE
INAUGURATION
JUNE 96
OCT 96
NOV96

16. 16
NSDL-NSDL- BANK--AN ANALOGYBANK--AN ANALOGY
BANKBANK
FundsFunds
BANKBANK
FundsFunds
NSDLNSDL
SecuritiesSecurities
1 Holds funds in
accounts
1 Holds securities in accounts
2 Transfers funds
between accounts
2 Transfers securities between
accounts
3 Transfers without
handling money
3 Transfers without handling
securities
4 Safekeeping of money 4 Safekeeping of securities

17. 17
BANKBANK
FundsFunds
BANKBANK
FundsFunds
NSDLNSDL
SecuritiesSecurities
NSDL- BANK-The differenceNSDL- BANK-The difference
1 Any one of the
holders can sign
instruction
1 All joint holders to sign
instructions
2 Minimum Balance
to be maintained
2 No minimum balance required
3 Entitled for interest
3 interest only by participating in
stock lending
4 Use balance in the
account
5 Nomination
4 Does not move balance in
account with out account holders
authorisation
5 Signature and photograph

18. 18
CUSTOMER INTERFACECUSTOMER INTERFACE
BANKBANK
DCDC
NSDLNSDL
SecuritiesSecurities
BRANCHBRANCH
BRANCHBRANCHBRANCHBRANCH
DPDP
DPDP DPDP
CUSTOMER INTERFACECUSTOMER INTERFACE CUSTOMER INTERFACECUSTOMER INTERFACE

19. 19
LEGAL FRAMEWORKLEGAL FRAMEWORK
Operation of DepositoryOperation of Depository
• Depositories Act 1996
(Comp Act 1956, SEBI Reg, Demat Form)
• SEBI (Depositories & Participants)
Regulations 1996
• Bye Laws of NSDL - framed under Sec. 26
of the Depositories Act
• Business Rules of NSDL

20. 20
LEGALLEGAL FRAMEWORKFRAMEWORK
(Key Features)(Key Features)
• Option to the investor to hold securities either inOption to the investor to hold securities either in
Physical or Dematerialized formPhysical or Dematerialized form
• DEMATERIALISATION -- Physical to ElectronicDEMATERIALISATION -- Physical to Electronic
• FUNGIBILITYFUNGIBILITY -- No distinctive numbers-- No distinctive numbers
• REMATERIALISATION -- Electronic to PhysicalREMATERIALISATION -- Electronic to Physical
• Client interfaceClient interface through Depository Participantsthrough Depository Participants
• DP -DP - Agent of NSDLAgent of NSDL
• Registered OwnerRegistered Owner ---- NSDLNSDL
• Beneficial Owner --Beneficial Owner -- INVESTORINVESTOR

21. 21
LEGAL FRAMEWORK
(Key Features Contd.)
• Free Transferability
• Agreement between NSDL and DP
• Agreement between Depository Participant and
investor / Beneficial owner
• NSDL enters into a Tripartite Agreement
Between NSDL, Issuer and R&T Agent
• Depository to indemnify losses for negligence
D/DP

22. • Minimum net worth: Rs. 100 crore
(Total assets minus total outside
liabilities )
• Sponsors to hold at least 51% of equity
capital in depository
• No DP can hold more than 5% equity
capital in depository
• Foreign entity individually or
collectively cannot hold more than 20%
equity capital in Depository
22
SETTING UP OFSETTING UP OF
DEPOSITORYDEPOSITORY

23. 23
 DEPOSITORY SERVICES
 Account Opening
 Dematerialisation & Rematerialisation
 Delivery & Settlement of Securities
 Benpos to Companies & Corporate Action
 Pledge of Securities & Hypothecation
 Internet Initiative

24. • NSDL
• SPEED-e Services
• Clients Simple Spice Ideas Steady
• Submit Instruction
• View Status of inst
• Submit instruction through mobile password
based, GPRS
• Submission of POA based instruction for clients
electronically (POA-to Broker, SB use Digital
signature and send to DP
• To view Balance and transactions in Demat 24

25. Steady
• Securities Trading information Easy Access
and Delivery
• Generally used by Brokers, Custodians, Fund
Manager. Transmission of trade information
across market participants using smart card
and digital signature
25

26. 26
JOINING AS A DPJOINING AS A DP
• Ten Eligible EntitiesTen Eligible Entities
• SEBI net worth - 50 Lakh,SEBI net worth - 50 Lakh, NSDLNSDL
requirement 300 Lakhrequirement 300 Lakh
• For R & T Agents minimumFor R & T Agents minimum
networth is Rs 10 crnetworth is Rs 10 cr
• Depositories can fix a higher amountDepositories can fix a higher amount
• Net worth certificate by a CANet worth certificate by a CA
• Certificate is valid for 5 yearsCertificate is valid for 5 years

27. 27
Any Entity SEBI
1
2
4
Desirous
of DP
3
NSDL
DP
approv
es
Verifies &
Recommend
30 days
Issues
Certificate
Collects
Security
deposit/Insur
ance Charge
5

28. 28
www.nsdl.co.in
8
INVESTOR BROKER/ CLEARING
MEMBER
ISSUERISSUER
INVESTOR
CC/ CHCC/ CH
DPDP DPDP
System
Linkage
BROKER/ CLEARING
MEMBER
Electronic Link Electronic Link
Electronic Link
ElectronicLink

29. 29
• Back-up
Machine Level Back up
Disaster back-up site
Remote Site Back up
• Alternative Connectivity
• Insurance Cover
• NCFM/NCDO qualified persons
SAFETYSAFETY

30. 30
BENEFITS TOBENEFITS TO
INVESTORSINVESTORS
• Eliminates bad deliveries
• Effects transfer of securities immediately
• Globally moving towards faster
settlement cycles
• No stamp duty for transfer of securities in
the depository
• Reduces transaction costs

31. 31
BENEFITS TOBENEFITS TO
INVESTORSINVESTORS
(Contd.)
• Reduces handling of huge volumes of
paper
• Eliminates all risks associated with
physical certificates such as loss, theft,
mutilation, forgery, etc.
• Facilitates lending and borrowing
• Transparency while trading

32. 32
PROGRESS in 2009PROGRESS in 2009
• ParticipantsParticipants :: 280280
• Service CentersService Centers :: 10,985
• Demat ValueDemat Value :: US$1,198 billion..
• IssuersIssuers :: 7,7987,798
• Investor accountsInvestor accounts :: 1,00,62,274 (active)(active)
• Stock ExchangesStock Exchanges
connectedconnected :: 88
(NSE, BSE, CSE(NSE, BSE, CSE,, DSE, MSE, ASE, ISE, OTCEI)DSE, MSE, ASE, ISE, OTCEI)
• Settlement in Demat formSettlement in Demat form :: 100%100%

33. ACCOUNT OPENING
33

34. TYPE OF ACCOUNTS
• Beneficial Owner Account
• House Account (Its own account/Investment)
• Non-House Account
• Clearing Member Account (settlement of trade)
• Intermediary account (Lending and borrowing)
34

35. Type of Accounts at DP
35
Types of accounts
BO Account CM Account Intermediary
Account
House
Non House
POOLDelivery Receipt
Lending & Borrowing
Margin Acct

36. WHAT DO THEY MEAN contd…..
• Clearing Member- CM-To transfer securities
– client to stock exchange (pay in)
– receive securities from stock exchange (pay-
-out)
– Partnership firm can also open this account
36

37. Opening of a client Account
(Non House)
37
 Investor submits a/c opening form
 Signs the DP -Client Agreement
 DP to check :
Proof of identity
Proof of address

38. Documents for Verification
A) For Individual Accounts
1) Some Proof of Identity
Passport
Voter ID card
Driving license
PAN card with photograph
Identity card/document with applicant’s
Photo, issued by -
a) Central/State Government and its
Departments
38

39. Documents for Verification
2) Some Proof of Address
Ration card
Passport
Voter ID card
Driving license
Bank passbook / Bank statement
Verified copies of
a) Electricity bills (not more than two months old),
b) Residence Telephone bills (not more than two
months old) and
c)Lease and License agreement / Agreement for sale.
39

40. Documents for Verification
2) Proof of Address contd...
 Self-declaration by High Court & Supreme Court
judges, giving the new address in respect of their
own accounts
 Identity card/document with address, issued by
a) Central/State Government and its Departments
b) Statutory/Regulatory Authorities
c) Public Sector Undertakings
d) Scheduled Commercial Banks
e) Public Financial Institutions
f) Colleges affiliated to Universities
g) Professional Bodies such as ICAI, ICWAI, Bar Council
etc., to their Members
40

41. Documents for Verification
B) For Corporate clients
Proof of Identity / Address
• Memorandum & Article of Association, board
resolution,list of authorised signatories alongwith
specimen signatures & photograph.
• Introduction by an existing account holder/client’s Bank
• Documents registered with ROC
• Acknowledged copy of Income Tax Return
• Bank Statement
41

42. PERMANENT ACCOUNT NUMBER (PAN)
MANDATORY
• SEBI directive on PAN as a mandatory requirement
for Demat accounts
• PAN compulsory for all categories of clients
• Verification from ITD website
• NSDL facility for PAN verification
• DP to affix ‘PAN verified’ stamp on photocopy of PAN
card
• Penalty for invalid PAN.
42

43. ‘In-person’ verification
• SEBI mandate of ‘In-person’ verification of non-body
corporate clients at the time of account opening
• ‘In-person’ verification to be carried out only by DP
staff
• the DP staff should establish the identity of the
Client(s) (including guardian in case of minor
account) by verifying the photograph(s) affixed in the
account opening form as well as proof of identity
document(s).
43

44. Beneficiary Account – Features...
 Zero Balance
 More than one account (same or different DP).
 Names of account holders to be fully spelt out.
 Mailing and communication address documents to be
checked.
44

45. Beneficiary Account – Procedure...
Minor - Guardian details, Date of Birth certificate/
Passport/Mark sheet of minor.
Foreign Address and RBI approval dates -NRI /FII/
OCB accounts.
FII /OCB – SEBI Registration details
Details of Bank Account, MICR (9 Digit Code )
Details of Income Tax Permanent Account Number
Nomination* details – Photograph & Signature
 (*Only In case of Individuals)
45

46. Beneficiary Account
Forms for joint Holders:
Names of all joint holders with signature.
Order of names should be same as appearing in the
share certificates to be dematerialized.
Supporting documents with photograph. PAN CARD IS
MANDATORY FOR ALL HOLDERS.
Communication will be made to first holder only
 Sequence of name should be accordingly.
Transmission cases - A new account.
46

47. Beneficiary Account - procedure..
DP-Client Agreement
Standard Agreement - Non judicial stamp paper
SEBI Approved document
Part of NSDL Bye Laws
Copy of the Agreement- to client
DP charges -Schedule A
Transaction Statement (Monthly/Quarterly)
47

48. Beneficiary Account - procedure..
Form for HUF : Name of Karta
Form for Companies : operated by the person authorized
by a resolution.
Form for minors : Operated through a guardian. Required
to give Birth certificate.
48

49. BO Account - Closure & Shifting
Client submits a/c closing form to DP
Balances in the account
Rematerialize
Transfer to another account
Procedure to deal with pending Demat
request
49

50. 50
Opening of house A/C
DP (operational) of NSDL
Details on DPM (except client name and
address) - generates Client Id.
More than one house account
No need to sign the agreement

51. 51
Opening of CM A/C
 CM submits following documents to DP
 CM Id Allotment letter
A/c opening form
Photocopies of these documents and
covering letter to NSDL
Agreement with CM
NSDL allots CM-BP ID

52. 52
Opening of CM A/C
contd...
 DP opens a/c based on CM-BP Id
 CM cannot open more than one
A/c per stock exchange
 Shifting of a/c from one DP to
another is allowed.

53. 53
Procedure for Shifting/Closure
of CM A/C
CM - Application for closure to old DP.
Submits to NSDL :
 A/c opening form
 CM Id allotment letter - stock exchange
 Application for shifting of CM A/c
 Acknowledgment copy of Application
for closure of a/c with old DP.

54. 54
Procedure for Shifting/Closure
of CM A/C
DP forwards copies of documents to NSDL
DP executes agreement with CM
NSDL allots new CM-BP Id
New Participant opens account based on
new CM-BP Id
Intimates NSDL.
Old Participant closes the a/c - intimation
from NSDL

55. 55
Freezing of Accounts
 Suspending further transactions - Dr. or both Dr.
and Cr.
 A/c or ISIN or Specific number of Securities in a/c
 Mode of freeze instruction :
Written instruction from client to DP
Electronic request by client to DP / NSDL
Orders received by DP / NSDL from Central or
State Govt., SEBI, or any order by the court,
tribunal, or any statutory authority.
Request received by NSDL from DP / Client.
Order of DAC / DP insolvent / winding up of
Corporate

56. 56
UnFreezing of Accounts
 Reactivation of Account
 Reverse steps
Valid written instructions of client
NSDL direction as per order of
appropriate authority
Electronic instruction by client onlyElectronic instruction by client only
 (Speed-e - smart card user)(Speed-e - smart card user)
 Clear notice of one dayClear notice of one day

57. Change of Address
Clients/Authorised representative to visit DP office
personally.
Submit proof of Identity.
Submit transaction statement received from DP
Client (incl. Joint holders) to sign application for
change of address.
DP to verify signature with his records
57

58. Change of Signature
Client to submit reasons for change of signature.
New signature - attested by client’s banker.
Submit proof of Identity and latest transaction
statement.
Client to affix signature in the presence of the
officials of DP.
DP to verify identity proof, photograph with his
records and sign the documents.
58

59. Facility of standing instruction
This facility is provided on the DPM for all types
of accounts (except intermediary) in order to
receive the securities into the account without
giving a specific Receipt Instruction. The
Participant should ensure that the field marked
for this facility is ticked, in case the client
wants to avail of the same.
59

60. 60

61. 61
PROCEDURE FOR DEMAT AT DP
 Account with Depository Participant (DP)
 Securities should be available for Dematerialization
 Demat of physical securities or fresh issue
 Demat Request Form (DRF)
 Signed by all holders
 ISIN - Each ISIN separate DRF
 Pattern of Holdings with A/c
 Certificate details are entered correctly
 No of shares in DRF matches with
 certificate and demat order
 DP Authorisation
 Separate DRF for free and locked in securities (ESOP)

62. 62
PROCEDURE FOR DEMAT AT DP … contd.
 Deface Certificates
 Surrendered for Dematerialisation
 Enter DP name, DP Id and Client Id
 Punch Two Holes
 Independent personnel
 Capturing
 Verify & Release (before EOD)
 Demat Request Number (DRN)
 DRF to contain DRN
 Dispatch of DRF and Certificate within 7 days
 Follow up for Confirmation and Correction of

63. 63

64. 64
PROCESSING AT
ISSUER/RTA Inward of documents
 Checking the documents, signatures etc.
 Verify genuineness of Certificates
 Pending Court order, prohibitory order etc.
 Processing only on receipt of request of both in
Electronic & physical certificates
 Process DRF as Normal Transfer
 Seller folio - Client (who wishes to demat)
 Buyer folio - NSDL
 Update ROM
 Confirm Electronic request
 Destruction of certificates

65. 65
REJECTION OF DEMAT REQUEST
 Signature mismatch
 Signature of the 1st/2nd/3rd holder(s) not present
 Mismatch between share qty received and DRF qty
 Certificates sent are fake
 Certificates sent are reported stolen
 Duplicate certificates already issued
 Old defunct certificates surrendered for demat.
 Forfeited securities surrendered for demat.
 Forged Endorsement on Certificate
 Incorrect Holder(s) name / Pattern
 Certificate details mismatch

66. 66
REJECTION OF DEMAT
REQUEST (Contd.) DRF sent to incorrect registrar
 Certificate(s) not received within 30 days
 Court injunction pending
 Demat request initiated under wrong ISIN
 Allotment / Call Payment receipt not attached
 Security Certificates recd not available for Demat
Deb/warrant certs recd instead of share certs
 Transposition Form not submitted.
 Transmission Form/Death Certificate not submitted
 Investor request for rejection and a/c closure.

67. 67
 Shares under Stop Transfer
 Changes in DP ID/Client ID on certs not
authorized
 Mismatch of DP ID/ Client ID on
certificates
 DRF not signed/ stamped by DP
 Miscellaneous
REJECTION OF DEMAT
REQUEST (Contd.)

68. 68
TRANSPOSITION CUM DEMAT
SCHEME
 Facility given to demat shares in same account
 Investor submits to DP the : -
 DRF
 Transposition form
 Share certificates
 Dispatch of DRF and Transposition form
 Verify and confirm the demat request by
Issuer/RTA

69. 69
DP
Client Issuer/RTA
DRF
+
physical
Certificat
e
1
7
Statement
of Holding
2
6Status Intimation
Confirmation /
Rejection
5
Demat
module
Demat
Request
4
8
Objecti
on
memo
3
Certificate
+ DRF +
DRN
DEMATERIALISATIO

70. 70
REMATERIALISATIO
N Conversion of electronic shares to physical
 Rematerialisation Request Form (RRF)
 DP makes electronic request
 Remat Request Number (RRN)
 DP to verify the details, Pattern of holdings etc.
 Shares blocked in the account
 Issuer/RTA gets electronic request
 RRF sent to Issuer/RTA
 No. of shares reduced from NSDL folio
 Client folio created - certificates printed
 Electronic request is confirmed
 Physical certificates couriered to client
 Signature on RRF - for future transfers

71. 71
 Incomplete or incorrect RRF
 RRF details mismatch
 RRF not received by registrar
 Rejected due to ACA
REJECTION OF REMAT
REQUEST

72. 72
DP
Client Issuer/RTA
1
2
6Status Intimation
Confirmation /
Rejection
5
4
7
3
Remat Order
RRF +
RRN
Remat
Request
Printed Certificates
RRF
REMATERIALISATIO

73. 73
Trading And Settlement

74. 74
TRADING & SETTLEMENT(BSE)TRADING & SETTLEMENT(BSE)
M T W TH F S S M T W TH F S S M T WM T W TH F S S M T W TH F S S M T W
Mixed/ Unified (Physical) Segment
Pay-in of Sec
& Funds
Pay- out of
Fund & Sec
Trading Period =5 days
(Squaring-up within 5 days)
Trading Period
Settlement

75. Rolling Settlement
75
Rolling Settlement T+2Rolling Settlement T+2 (NSE)(NSE)
M T W TH F M T W TH FM T W TH F M T W TH F
2 3 4 5 8 9 10 11 122 3 4 5 8 9 10 11 1211
TD 1TD 1 SD 1SD 1
Trading Period = 1 dayTrading Period = 1 day
(Squaring up = Intra day)(Squaring up = Intra day)
AuctionAuction
TradingTrading
AuctionAuction
Pay-in &Pay-in &
Pay-OutPay-Out

76. Rolling Settlement
76
Rolling Settlement T+2Rolling Settlement T+2 (BSE)(BSE)
M T W TH F S S M T W TH FM T W TH F S S M T W TH F
2 3 4 5 6 7 8 9 10 11 122 3 4 5 6 7 8 9 10 11 1211
TD 1TD 1 SD 1SD 1
Trading Period = 1 dayTrading Period = 1 day
(Squaring up = Intra day)(Squaring up = Intra day)
AuctionAuction
TradingTrading
AuctionAuction
Pay-in &Pay-in &
Pay-OutPay-Out

77. 77
ACCOUNT TYPES
 BENEFICIARY A/C
-- HOUSE / CLIENT
 CLEARING MEMBER A/C
-- POOL A/C
-- DELIVERY A/C
RECEIPT A/C
INTERMEDIARY A/C

78. 79
TYPES OF TRANSFERS
OFF-MARKET
SOURCE OR TARGET IS NOT CM
MARKET
SOURCE OR TARGET IS CM

79. TYPES OF TRANSFERS
• Off-Market Transfers
 Client - Client
• Market Transfers
 Client - CM (Sell)
 CM - CC (Pay-In) & CC - CM (Pay-Out)
 CM - Client (Buy)
 Inter-Settlement
 CM - CM (Pool to Pool)
 Inter Depository Transfer
80

80. Off-Market Trf - Client to Client
Source Target
81
Instruction
Client
Delivery Instrn
by Clients
Account Client
Standing Instrns
OR Receipt Instrns
Client Account to another
Client Account
Movement
Special Remarks
Special Care for off-market
If value > Rs. 5 lac, extra care

81. Clearing Member Account
82
PAY-in Pay-out

82. Market Trf - Client to CM - Sell
Source Target
83
Instruction
CM
Delivery Instrn
by Clients
Account Client
Standing Instrns
OR Receipt Instrn
Client Account to Pool Account
of CM
Movement

83. 84
PAY-IN TO CC
NSDL
CC
DP DP DP DP
CM - SELLERS CM - SELLERS

84. Market Trf - CC to CM - Pay-Out
Source Target
85
Instruction
CM
Electronic Instrn.
Account CC
Automatic
CC to Pool AccountMovement

85. MARKET TRADE - ELECTRONIC
86
CCCC
CMCM CMCM
SELLER SELLER BUYERBUYER
NSDLNSDL
DPDP DPDP

86. Internet Initiatives
• Corporate Website - www.nsdl.co.in
• SPEED - Securities Position Easy Electronic
Dissemination
• SPEED - e
• IDeAS
88

87. SPEED-e
• Eliminate Paper Instructions
• Delivery of instruction over Internet
• Freeze Facility
• View status of instruction
89

88. Type of Users
• Password Users
• Smart Card / e–Token Users
90

89. Smart Card/ e-Token Users Features
• Beneficial Owners, Brokers
• Only Debit Transactions
 to any other account
• Account/ISIN/Qty Level Freeze
• Multiple Levels of Authorisation
91

90. Security
• High End Users
Agreement between DP and User
In line with Indian IT Law
NSDL as CA and DP as RA
• Low End Users
Agreement between DP and User
Safety through Pre-Notified Account (PNA)
92

91. PLEDGE OF PHYSICAL SHARES
93
PLEDGEE
(Lender)
PLEDGOR
(Borrower)
Agreement
SHARES
LOAN

92. Pledge / Hypothecation Module
• PLEDGE OF PHYSICAL SHARES
• WHAT CHANGES WITH DEMAT SHARES
• PROCESS OF PLEDGE IN DEMAT SHARES
94

93. PHYSICAL Vs DEMAT
95
 Possession of shares not with PLEDGEE,
instead blocked in PLEDGOR’s a/c
 PLEDGEE cannot transfer securities to its
name as part of pledge -- can do so only in
case of default ( invocation)
 Agreement should also include Pledge or
hypothecation, Account details, agreement
number

94. Key Features
• Pledge vs hypothecation
• Pledgor & Pledgee to have demat
accounts
• Pledgor & Pledgee can have accounts with
different DPs of NSDL
• Commercial arrangement outside system
• Blocked in pledgor’s account, but in
control of pledgee
• One ISIN per order -- use of agreement
number
96

95. PLEDGE PROCESS
97
LOAN
PLEDGEE
(Lender)
PLEDGOR
(Borrower)
AGREEMENT
PLEDGOR’S DP
REQUEST/
NSDL
PLEDGEE’S DP
CONFIRMATION

96. Pledge Closure (Normal)
98
PLEDGEE
(Lender)
PLEDGOR
(Borrower)
AGREEMENT
PLEDGOR’S DP
REQUEST
NSDL
PLEDGEE’S DP
CONFIRMATION
Repayment of Loan

97. Pledge Closure (Unilateral)
99
PLEDGEE
(Lender)
PLEDGOR
(Borrower)
REPAYMENT
PLEDGOR’S DP
NSDL
PLEDGEE’S DP
PLEDGE
CLOSURE

98. PLEDGE INVOCATION
100
PLEDGEE
(Lender)
PLEDGOR
(Borrower)
NOTICE
PLEDGEE’S DP
INVOCATION
ORDER
NSDL
PLEDGOR’S DP

99. POINTS TO REMEMBER (contd..)
• Lock-in Securities Allowed -- Invocation Only
After Lock-in Release
• Partial Closure and Invocation Allowed
• Holdings Statement of PLEDGOR Will Reflect
Pledged Balances
• Pledge Reports for PLEDGOR and PLEDGEE
101

100. Other Features
• Execution date and Overdue
• Unilateral Closure
• Bonus on Pledged shares
102

101. 103
 Bank account details doesn’t form part of
Pledge/ Hypothecation form.
 NSDL does not charge its DPs for closing a
pledge in the Depository system.
 An Intermediary account is not required to be
opened for the purpose of Pledge and
Hypothecation.

102. 104
 The credit of pledged securities remains in the
account of the Pledgor.
 Locked in securities can be pledged.
 In case of pledged balance in demat form,
the corporate benefits will flow to the Pledgor.

103. 105
 In the Depository system, pledged securities
are marked for the pledge and are blocked
in the pledgors account.
 For the purpose of pledging of securities, both
the parties to agreement, i.e. the pledgor and
the pledgee must have a beneficiary account
with any DP of NSDL.
 An instruction for unilateral closure of pledge
can be given by Pledgee.

104. 106
 As per applicable statutes, a Depository is
required to maintain at all times a networth of
Rs. 100 crore.
 What are the charges by NSDL to its DPs for
creating a pledge in the Depository system :
Rs. 25/- per instruction.
 What are the remat charges levied by NSDL
to its DPs : Rs. 10 per certificate.

105. Dematerialisation of
Government Securities

106. Presentation SummaryPresentation Summary
 How does the GSEC come intoHow does the GSEC come into
existence?existence?
 Present SystemPresent System
 Policy Initiative of NSDLPolicy Initiative of NSDL
 NSDL SystemNSDL System
 Benefits of DematBenefits of Demat

107. Types of G-SecTypes of G-Sec
 Central GovernmentCentral Government
 State GovernmentState Government
 Treasury Bills (T-Bills)Treasury Bills (T-Bills)

108. Forms of G-SecForms of G-Sec
Physical CertificatesPhysical Certificates
Subsidiary General Ledger (SGL):Subsidiary General Ledger (SGL):
Investments made by the SGL entity on itsInvestments made by the SGL entity on its
own account are held in SGL 1 account.own account are held in SGL 1 account.
The SGL 2 (CSGL) account holds theThe SGL 2 (CSGL) account holds the
investments of all the constituents of theinvestments of all the constituents of the
SGL entity. This is maintained in bookSGL entity. This is maintained in book
entry form at RBI.entry form at RBI.

109. PUBLIC DEBT OFFICE
CENTERS(PDO)
There are in all 14 PDO centers
established by RBI in order to facilitate the
dematerialization of government
securities.

110. Participants in the MarketParticipants in the Market
All Banks/Primary DealersAll Banks/Primary Dealers
Financial InstitutionsFinancial Institutions
Mutual FundsMutual Funds
Corporate TreasuriesCorporate Treasuries
PF / GF trusts & Pension FundsPF / GF trusts & Pension Funds
NBFCs, Brokers and IndividualsNBFCs, Brokers and Individuals

111. Constraints of the Present System
PDO registration is required to hold G-Sec
in physicals
Conversion from physical to SGL time
consuming
Trading concentrated at Mumbai PDO &
only in SGL form
Inter PDO transfers require attestation

112. Policy Initiative of NSDLPolicy Initiative of NSDL
RBI permits NSDL to open ConstituentRBI permits NSDL to open Constituent
SGLSGL
RBI permits value free transferRBI permits value free transfer
Central PF and Regional PFCentral PF and Regional PF
commissioner permits PF Trusts tocommissioner permits PF Trusts to
open account with NSDLopen account with NSDL
Budget 2001- Retailing of G-Sec,Budget 2001- Retailing of G-Sec,
Screen based Trading of G-Sec fromScreen based Trading of G-Sec from
Jan 15, 2003Jan 15, 2003

113. NSDL UpdateNSDL Update
NSDL SGL II maintained at PDO,NSDL SGL II maintained at PDO,
MumbaiMumbai
Primary dealers viz. ICMS, PNB Gilts,Primary dealers viz. ICMS, PNB Gilts,
etc banks like HDFC Bank, Dena Bank.etc banks like HDFC Bank, Dena Bank.
commenced the retailing through NSDLcommenced the retailing through NSDL
As on date, 524 active G-Sec ISINs areAs on date, 524 active G-Sec ISINs are
available in NSDL system.available in NSDL system.
Individuals, PF Trusts already hold G-Individuals, PF Trusts already hold G-
sec in demat, from various cities.sec in demat, from various cities.
Presently T-Bills are not admitted inPresently T-Bills are not admitted in
NSDLNSDL

114. IDENTIFICATIONIDENTIFICATION
IN XX YYYY A ZZ CIN XX YYYY A ZZ C
 1st & 2nd digits -‘IN’ stands for INDIA1st & 2nd digits -‘IN’ stands for INDIA
 3rd & 4th digit Issuer type and State Code3rd & 4th digit Issuer type and State Code
(start from 00 to 99)(start from 00 to 99)
 YYYY for Year of Issue (Financial Year)YYYY for Year of Issue (Financial Year)
 A for Security type ( 0 to 9 )A for Security type ( 0 to 9 )
 ZZ for Serial No. of issue in the financial yearZZ for Serial No. of issue in the financial year

115. IssuerIssuer Central / StateCentral / State
Loan codeLoan code 9800798007
Issuer Short NameIssuer Short Name Government of IndiaGovernment of India
Date of MaturityDate of Maturity May 02, 2008May 02, 2008
Coupon RateCoupon Rate 12%12%
Year of IssueYear of Issue 19981998
IN0019980047 98007 GOI 02MY08 12 FV RS 100
Central Government Loan

116. RBI, PDO NSDL
DP
2
3
1
4
1. Initiate demat request to NSDL and fill & forward Form Of
Transfer & Certificate to NSDL.
2. NSDL will submit Form Of Transfer & Certificate to RBI for
transfer of securities to NSDL SGL II.
3. Credit confirmation by RBI.
4. Confirmation of demat request by NSDL, creating balances in
demat account.
Dematerialisation- Physical

117. Certificates not to be defaced.
If the certificates are issued by PDO other
than Mumbai PDO- Signature attestation
by issuing PDO is necessary.
Form of transfer on single sheet of paper
Dematerialisation- Physical

118. Negotiated Dealing System of RBI.
(NDS)
DP1 DP2
NSDL
Depository (SGL Entity)
RBI NDS
SGL Entity 1
(HDFC)
SGL Entity 2
(PNB Gilts)
SGL I A/c SGL I A/c
SGL II A/c SGL II A/c
SGL I A/c
SGL II A/c

119. RBI, PDO NSDL
DP
2
3
1 4
1. Initiate demat request through DP & NDS request through SGL
entity
2. NSDL approves the NDS request.
3. PDO Mumbai, RBI settles the NDS transaction same day. NSDL
SGL II A/C is credited.
4. Confirmation of DRN.
Dematerialisation - VFT

120. Benefits Of DEMAT
 Single demat account for maintaining
various securities viz. PSU bonds,
Government Securities (G-Sec),
Corporate Debt etc.
 Most of the trusts are already holding
demat accounts for maintaining
corporate debt instruments, PSU bonds.
No additional documentation for
maintaining G-Sec in these accounts.
Transfer of G-Sec from existing CSGL
accounts is seamless and can happen
on same day.

121.  Periodic Transaction Statement simplifies
compliance of prevailing investments
guidelines and audit process for trusts.
 Buying of security in smaller lot is
possible. Settlement of fund and
securities takes place on the same day
and the risk of physical settlement is
eliminated.
 Lower cost of dematerialisation results in
overall cost saving in terms of
administrative charges for the trusts.

122. Interest & Redemption Payments
RBI credits NSDL’s current a/c as on the
due date i.e. interest payment due date.
NSDL will consolidate the same as per the
beneficiary positions as on record date.
Issue RBI cheques to SGL entity, direct
credits to the demat account holders
having HDFC bank account and HDFC
bank DDs to remaining beneficiaries.

123. An Update on GSEC
As on October 24, 2008
No. of ISINs 532
Value in demat form Rs. 7804.53 cr.
Number of holders 2478

124. OVERVIEW OF NCDO
126
 Points To Be RememberedPoints To Be Remembered


125. 127
 NSDL is a public limited company
incorporated under the Companies Act, 1956.
 NSE is a company under the Indian
Companies Act, 1956.
 The meaning of T + 2 rolling settlement is
that settlement of trade takes place on the
second working day from the date of trade.

126. 128
 What is the legal basis for free transfer of title
between account holders in the Depository
environment : The Depositories Act, 1996.
 There are no custody charges levied by
NSDL to its DPs.
 The custody fee is payable by Issuer to NSDL
on a yearly (financial year) basis.

127. 129
 When an investor opens an account with a DP,
an agreement is signed between the investor
and DP.
 To buy or sell shares in electronic form, the
investor has to have demat account with any
DP of his choice.
 The Dematerialisation Request Form (DRF)
should be signed by all the joint account
holders.

128. 130
 For an investor holding shares in demat form,
dividend will be declared by the Issuer
company.
 A clearing member can dematerialise its own
holdings in its beneficiary account
 All dematerialised securities are mandatorily
registered in the name of the Depository.

129. 131
 Can lock in securities be rematerialised? : Yes
 In case of a rights issue, the rights issue form
for securities held in demat form will be sent
to the investor by : The Issuer/ its R and T
Agent.
 A trade that is cleared and settled without the
participation of a stock exchange/clearing
corporation is : Off Market Trade

130. 132
 The request for change of address in a demat
account has to be signed by all the account
holders.
 The full form of SGL is Subsidiary General
Ledger.
 Information on book closure, record dates,
dates for interest payment, etc is provided to
NSDL by Issuer/its R and T Agent for the
purpose of Corporate Action.

131. 133
 In case of Partnership Firm Demat account
has to be opened in the name of Partners only.
 Delivery Instruction Slip (DIS) for off market
transfer of shares from a joint demat account
should be signed by all the account holders.
 NSDL acts as R and T Agent in case of
government securities under NSDL SGL II?

132. 134
More than20 custodians
Citibank N. A.
DBS Bank Ltd. India
Deutsche Bank AG
HDFC Bank Ltd
Hongkong and Shanghai Banking Corporation Limited
ICICI Bank Limited.

133. 135
Securities lending is primarily used by
short-sellers (approved intermediary) who
borrow stocks from other investors to
meet their obligations to the clearing house.
Large institutional investors such as foreign
institutional investors and mutual funds
who hold shares for the long term have
traditionally been lenders in the market.

134. 136
GIR (General Index
Register) No. was earlier
being allotted by the
Income Tax Deptt. for
assessees but ever since the
PAN system is in place GIR
has become obsolate.

135. 137
Dividend stripping is the purchase of
shares just before a dividend is paid, and
the sale of those shares after that payment,
ie. when they go ex-dividend.
This may be done either by an ordinary
investor as an investment strategy, or by a
company's owners or associates as a
tax avoidance strategy.

136. 138
PARI PASSU: The term is Latin and
translates to "without partiality." For
example, a secondary issue of shares that
carry equal rights with existing shares are
said to "rank pari passu." (equal footing)
ACA: Auto corporate action. While
converting securities from an old ISIN to
new ISIN the securities lying in the CM
pool account is also considered
automatically for conversion.

137. 139

138. 140

139. NDS
Seller of Govt Security Buyer of Govt
Security
141
B BANK
NDS Platform
INFINET
A BANK
CCILPDO, RBI
C/A RBI
Members(NDS)
Primary Dealers
Banks
SGL

140. Information
• T+2 Rolling Settlement from April 2003
• MAPIN introduced from Nov 2004
• Market participant identification Number
• MAPIN cards are unique ID number cards like
PAN cards, issued by SEBI required for any
investor who enters a transaction in the
securities market of Rs 1 lakh or more.
• NSC/KVP can be dematerialized from Oct 2003
142

141. • NSDL central system is known as DM and DP
as DPM
• Transaction first effected in Central system
then updated at other points
• Each system connected to NSDL system has its
own database relating to its clients
• No two business partners have direct linkage
to each other in the NSDL system
• Every transaction is recorded in NSDL as well
as DP database
143

142. • NSDL Audit Financial reports from all its DPs
once in a year and inspection of R&T Agent,
Clearing corporation
144