Project On Working of Depostry System

1
Working of Depository system
A PROJECT REPORT On Working of
Depository system
A project Report submitted in partia fu fi ment of t!e re"uirements for t!e a#ard of t!e degree of
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TO WHOMSOEVER IT MAY CONCERN

T!is is to certify t!at t!e project report tit ed 9Working of depositort system: carried out by $r1sus!i kumar; %<o %!ri1 Rnd!ir sing! 7&at!er=s *ame8 !as been accomp is!ed under my guidance > super?ision as a du y registered $'A student of t!e %ri sai co ege of engineering and tec!no ogy; 'ad!ani1 T!is project is being submitted by !im in t!e partia fu fi ment of t!e re"uirements for t!e a#ard of t!e $aster of 'usiness Administration from %ri sai co ege of engineering and tec!no ogy1 -is project #ork represents !is origina #ork and is #ort!y of consideration for t!e a#ard of t!e degree of $aster of 'usiness Administration1 @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 7*ame > %ignature of t!e &acu ty Ad?isor8 Tit eA Working of depository system DateA @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@
AC0*OW+ED,E$E*T
) #ou d ike to eBpress my appreciation and gratitude to ?arious peop e #!o !a?e s!ared t!eir ?a uab e time and made possib e t!is project ;t!roug! t!eir direct indirect cooperation 1 $y !onorab e %ir $r1 Puneet %!arma 7-OD8 and $iss Ripsy ma!ajan 7Project inC c!arge8; for a o#ing me to #ork on t!is project and pro?ide necessary !e p1 ) t!ank my respected facu ties; dear friend > co eagues; #!o !e p me in e?ery possib e #ays ; support me and encouraged me to eBp ore ne# dimensions1
%(%-)+ 0($AR $'A Dnd %emester RO++ *OA 23435516346
INDEX
S.NO. 1. !. &. (. PARTICULARS Certificate Dec"arati#$ Preface I$tr#)*cti#$ De+#,it#r De+#,i#r- ,-,te. Lea/a" fra.e0#r1 #f DS 2*$cti#$, #f DS 3e$efit, #f DS Safet- feat*re i$ t4e DS Differe$ce 560 3a$1 a$) De+#,it#r S#.e i.+#rta$t +r#ce,, i$ DS . Nati#$a" ,ec*ritir, )e+#,it#r- ,-,te. A5#*t NSDL Ma$a/e.e$t #f NSDL 2ee ,tr*ct*re #f NSDL Tec4$#"#/- a$) c#$$ecti9it- i$ NSDL %. C#..#$ ,#ft0are *,e i$ NSDL Ce$tra" ,ec*ritir, )e+#,it#r- ,-,te. A5#*t CSDL S4are4#")er, #f CSDL 3#ar) #f )iect#r, a$) .a$a/e.e$t 2ee ,tr*ct*re #f CSDL PAGE NO. 0 0% 0' 07 08 1& 1( 18 !1 !! & &% (!: 0 (& ( (' (7 0 1: ! & (
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CERT)&)CATE
T!is to certify t!at %(%-)+ 0($AR successfu y comp eted !is project on my guide ine1
;$1'1A D %emester ;%1%1C1E1T 'ad!ani
7Pat!ankot8 under P1T1( Ja and!ar !as done project on 9Working of depositary system== and !as
Working of Depository system )t is on y for academic purpose and is a bonfires #ork done by researc!er 1
Project ,uide $r1 Puneet %!arma &acu ty %1%1C1E1T
DEC+ARAT)O*
) am %us!i 0umar do !ere by dec are t!at t!e project #ork entit e on t!e 9Working of depositary system== is t!e origina #ork done by me1
Working of Depository system T!is project report presented as a partia fu fi ment re"uirement for t!e degree of $aster of 'usiness administration1
%us!i kumar
$'A Dnd semester %1%1C1E1T
PRE&ACE
T!e successfu comp etion of t!is project #as a uni"ue eBperience for me because by ?isiting many p ace and interacting ?arious person; ) ac!ie?ed a better kno# edge about t!is
Working of Depository system system1 T!e eBperience #!ic! ) gained by doing t!is project #as essentia at t!is turning point of my carrier t!is project is being submitted #!ic! content detai ed ana ysis of t!e researc! under taken by me1 T!e researc! pro?ides an opportunity to t!e student to de?ote !is<!er ski s kno# edge and competencies re"uired during t!e tec!nica session1 T!e researc! is on t!e topic 9Working of Depositary system:
)*TROD(CT)O*
INTODUCTION
One of t!e biggest prob em faced by t!e indian capita market !as been t!e manua and paper based sett ement system1 (nder t!is system; t!e c earing and sett ement of transaction take p ace on y #it! t!e use of paper #ork1 T!e system of p!ysica de i?ery of scrip=s poses
Working of Depository system many prob ems for t!e purc!aser as #e as t!e se er in t!e form of de ayed sett ements; ong sett ement periods; !ig! e?e of fai ed trade; !ig! cost of transaction; bad de i?eries etc1 )n many cases transfer process takes muc! onger time t!en t#o mont! as stipu ated in section 115 of companies Act; 1F4E or section GG A of t!e securities Contracts 7Regu ations8 Act; 1F4E1 $oreo?er; a arge number of transactions end up as bad de i?eries due to fau ty comp iance of paper #ork; mismatc! of signatures on transfer deeds #it! specimen record of t!e issuer or ot!er procedura reasons1 'esides; t!eft; forgery; mu tination of certificates and ot!er irregu arities !a?e a so become rampant1 -o#e?er; as a conse"uence of imp ementation of reforms measures; t!e )ndian capita market !as s!o#n rapid gro#t! in t!e recent past #it! foreign in?estors; more stock eBc!anges and increased market intermediaries1 T!e o d manua system of sett ement and transfer !as a most fai ed to !and e t!e gro#ing ?o ume of paper t!at !as oaded t!e market1 T!us; to e iminate paper#ork; faci itate scrip ess trading and e ectronic book entry of t!e transfer of securities; s!orten sett ement periods; and to impro?e i"uidity in t!e stock market; it #as found necessary to rep ace t!e o d system of transfer and sett ement #it! t!e ne# and modern system of depositories1 According y t!e go?ernment of )ndia enacted t!e depositories Act in 1FFE for t!e order y gro#t! and de?e opment of t!e )ndian capita market1 )t is a system #!ereby t!e transfer and sett ement of scrip=s take p ace not t!roug! t!e traditiona met!od of transfer deeds and p!ysica de i?ery of scrip=s but t!roug! t!e modern system of effecting transfer of o#ners!ip of securities by means of book entry on t!e edgers or t!e depositary #it!out t!e p!ysica mo?ement of scrip=s1 T!e ne# system; t!us ; e iminates paper #ork; faci ities automatic and transparent trading in scrip=s; s!ortens t!e sett ement period and u timate y contributes to t!e i"uidity of in?estment in securities1 T!e system is a so kno#n as Hscrip es trading system=1
T!ere are essentia y four p ayer in t!e depository systemA T!e Depositary participant T!e 'eneficia o#ner<in?estor T!e issuer
Working of Depository system T!e depositary A depositary is a firm #!erein t!e securities of an in?estor are !e d in e ectonic form in t!e same #ay a bank !o ds money1 )t crries out t!e transactions of securities by means of book entry; #it!out any p!ysica mo?ement of securities1 T!e depositary based sette ment system is a so ca ed Hbook entry transfer sette ment=1 T!e depositary acts as a defecto o#ner of t!e securities odged #it! it forn t!e imited purpose of transfer of o#ners!ip1 )t functions as a custodian of securities of its c ients1 T!e name of t!e depositary appears in t!e records1 Wit! increase in t!e number of transactions in t!e stock market; it !ad become difficu t for t!e in?estors to !o d s!are certificates and debt instruments in bu k1 'ut no#; depositary institutions !and e t!is job1 At present t!ere are t#o depositories in india1 *umber of Depositories in )ndia *ationa securities depositary +td1 7*%D+8 Centra depositary ser?ices 7india8 +td1 7CD%+8
*%D+ #as formed and registered under t!e companies= act 1F4E during December 1FF4 and commenced operations during no?ember1FFE1 *%D+ #as promoted by )ndustria De?e opment 'ank of )ndia 7)D')8Ct!e argest de?e opment bank in )ndia; (nit trust of )ndia 7(T)8Ct!e argest mutua fund in )ndia and *ationa stock eBc!ange 7*%E8Ct!e argest stock eBc!ange in )ndia1 %ome of t!e prominent banks in t!e country a so !a?e a stake in *%D+1 Centra Depository ser?ices 7)ndia8 imited #!ic! commenced operations during &ebruary 1FFF1C%D+ #as promoted by stock eBc!ange; $umbai in association #it! 'ank of 'aroda; 'ank of )ndia; %tate 'ank of )ndia and -D&C 'ank1
DEPO%)TAR. %.%TE$
WHAT IS DEPOSITORY
E ectronic re?o ution !as broug!t about a number of c!anges in t!e functioning of )ndian capita market1 T!e most re?o utionary c!ange t!at #as broug!t in t!e entire !istory of t!e )ndian market is t!e introduction of depository1
Working of Depository system T!e century o d )ndian market !as been ?ibrant a a ong but its paperC based sett ement of trades caused prob ems ike bad de i?ery; de ayed transfers etc1; unti t!e en!ancement of depository act in 1FFE1 T!e depository mode in )ndia is a competiti?e mu ti depository system in )ndia t!e system of demateria iIation is fo o#ed; #!erein t!e securities #i be cance ed as against t!e system of immobi iIation in #!ic! t!e securities are kept in custody1A depository is an organiIation #!ere t!e securities of an in?estor are !e d in e ectronic form and carries out t!e securities transaction by book entry1 A depository is a fi e or set of fi es in #!ic! data is stored for t!e purpose of safekeeping or identity aut!entication1 A common eBamp e is t!e set of persona data fi es at a credit reporting agency suc! as E"uifaB1 Anot!er eBamp e is t!e data contained at a state motor ?e!ic e department1 )n a biometric security system; a depository contains data about peop eJs p!ysica c!aracteristics suc! as iris prints and finger images1 Additiona information may be added; inc uding facia c!aracteristics; ?oice prints; and !and prints1 W!en a personJs identity must be ?erified; one or more biometric samp es is taken in rea time; and t!is data is compared #it! t!e data in t!e depository1 )n genera information storage app ications; a depository is a p!ysica site #!ere data is kept in t!e form of !ard copies; magnetic disks; magnetic tapes; compact disks 7CDs8; and simi ar media1 A good eBamp e is t!e safe deposit ?au t in a financia institution1 An idea depository is secure; in t!e sense t!at on y aut!oriIed persons or institutions can gain access to t!e data it contains1 -o#e?er; eBperience !as s!o#n t!at many depositories; no matter !o# secure t!ey c aim to be; can be compromised by a determined !acker or t!ief1
WHAT IS DEPOSTORY SYSTEM

T!e erst#!i e sett ement system on )ndian stock eBc!anges #as a so inefficient and increased risk; due to t!e time t!at e apsed before trades #ere sett ed1 T!e transfer #as by p!ysica mo?ement of papers1 T!ere !ad to be a p!ysica de i?ery of securities Ca process
Working of Depository system fraug!t #it! de ays and resu tant risks1 T!e second aspect of t!e sett ement re ates to transfer of s!ares in fa?our of t!e purc!aser by t!e company1 T!e system of transfer of o#ners!ip #as gross y inefficient as e?ery transfer in?o ?es p!ysica mo?ement of paper securities to t!e issuer for registration; #it! t!e c!ange of o#ners!ip being e?idenced by an endorsement on t!e security certificate1 )n many cases t!e process of transfer #ou d take muc! onger t!an t!e t#o mont!s stipu ated in t!e Companies Act; and a significant proportion of transactions #ou d end up as bad de i?ery due to fau ty comp iance of paper #ork1 T!eft; forgery; muti ation of certificates and ot!er irregu arities #ere rampant1 )n addition; t!e issuer !as t!e rig!t to refuse t!e transfer of a security1 A t!is added to costs and de ays in sett ement; restricted i"uidity and made in?estor grie?ance redressa time consuming and; at times; intractab e1 To ob?iate t!ese prob ems; t!e Depositories Act; 1FFE #as passed1 )t pro?ides for t!e estab is!ment of depositories in securities #it! t!e objecti?e of ensuring free transferabi ity of securities #it! speed; accuracy and security1 )t does so by 7a8 making securities of pub ic imited companies free y transferab e; subject to certain eBceptionsK 7b8 demateria ising t!e securities in t!e depository modeK and 7c8 pro?iding for maintenance of o#ners!ip records in a book entry form1 )n order to stream ine bot! t!e stages of sett ement process; t!e Act en?isages transfer o#ners!ip of securities e ectronica y by book entry #it!out making t!e securities mo?e from person to person1 T!e Act !as made t!e securities of a pub ic imited companies free y transferab e; restricting t!e companyJs rig!t to use discretion in effecting t!e transfer of securities; and t!e transfer deed and ot!er procedura re"uirements under t!e Companies Act !a?e been dispensed #it!1 T#o depositories; ?iI1; *%D+ and CD%+; !a?e come up to pro?ide instantaneous e ectronic transfer of securities1 )n any stock eBc!ange; trades or transactions !a?e to be sett ed by eit!er s"uaring up t!e carrying for#ard positions or sett ing by payment of net cas! or net de i?ery of securities1 T!is account sett ement period; if it is ong eads to se?era price distortions and a o#s for market manipu ation1 )t increases t!e c!ances of specu ation resu ting in ?o ati ity; #!ic! !urts t!e sma in?estors1 Wit! t!e app ication of )T in t!e securities market C screenCbased trading and trading t!roug! t!e )nternet C it !as been possib e to reduce t!is sett ement period1
Le/a" 2ra.e0#r1 #f )e+#,itar- ,-,te.

T!e operations of t!e depositories are primari y go?erned by t!e Depositories Act; 1FFE; %ecurities and EBc!ange 'oard of )ndia 7Depositories > Participants8 Regu ations; 1FFE; 'yeC +a#s appro?ed by %E'); and 'usiness Ru es framed in accordance #it! t!e Regu ations and 'yeC+a#s1 T!e Depositories Act passed by Par iament recei?ed t!e PresidentJs assent on August 13; 1FFE1 )t #as notified in a ,aIette on August 1G of t!e same year1 T!e Act enab es t!e setting up of mu tip e depositories in t!e country1 T!is #as to see t!at t!ere is competition in t!e ser?ice and t!ere is more t!an one depository in operation1 At present; t#o depositories are registered #it! %E') C T!e *ationa %ecurities Depository +imited 7*%D+8 and Centra Depository %er?ices 7)ndia8 +imited 7CD%+81 On y a company registered under t!e Companies Act; 1F4E and sponsored by t!e specified category of institutions can set up a depository in )ndia1 'efore commencing operations; depositories s!ou d obtain a certificate of registration and a certificate of commencement of business from %E')1 T!e rig!ts and ob igations of depositories; depository participants; issuers and beneficia o#ners are spe t out c ear y in t!e Depositories Act 1FFE1
A, +er t4e Act =

L Secti#$ (A DP is an agent of t!e DepositoryA A DP is an agent of t!e depository; #!o pro?ides ?arious ser?ices of t!e depository to in?estors1 T!e DP !as to enter into an agreement #it! t!e depository to t!is effect1 Any in?estor #!o #ou d ike to a?ai t!e ser?ices of a depository !as to enter into an agreement #it! any DP of !is c!oice1 T!e DP #i t!en make t!e depository ser?ices a?ai ab e to t!e in?estor1 L Secti#$ 'A &ree Transferabi ity A T!e securities !e d by an in?estor in t!e depository are free y transferab e from one beneficia o#ner to anot!er1 L Secti#$ 7A Option to !o d securities in demat form A )n t!e depository system; e?ery in?estor subscribing to securities offered by an issuer !as an option to recei?e t!e same in p!ysica form or demateria ised form1 )f an in?estor opts for recei?ing t!e securities in demateria ised form; t!e issuer intimates t!e depository t!e detai s of a otment of security1 On receipt of t!is
Working of Depository system information; t!e depository enters t!e name of t!e a ottee as t!e beneficia o#ner of t!at security in its record1 L Secti#$ 8A %ecurities !e d in a depository are fungib e A A securities !e d by t!e depository are in demateria ised and fungib e form1 L Secti#$ 10A Registered O#ner and 'eneficia O#ner A T!e depository is deemed to be t!e registered o#ner for t!e purpose of effecting transfer of o#ners!ip of security on be!a f of a beneficia o#ner1 'ut as a registered o#ner; it does not !a?e any ?oting rig!ts or any ot!er rig!ts in respect of t!ose securities1 T!e beneficia o#ner is entit ed to a rig!ts and benefits as #e as subject to a iabi ities in respect of !is securities !e d in t!e depository1 L Secti#$ 1(A Option to opt out of depository A A beneficia o#ner may opt out of a depository in respect of any security by re"uisite intimation to t!e depository1 L Secti#$ 1%A Depository to indemnify osses A A depository s!a indemnify a beneficia o#ner; any oss caused due to neg igence of t!e depository or its participant1 E"i/i5i"it- Criteria f#r a De+#,it#r- > A$- #f t4e f#""#0i$/ .a- +r#.#te a )e+#,it#r-= 11 A pub ic financia )nstitution as defined in section DA of t!e Companies Act; 1F4EK G1 A bank inc uded in t!e %econd %c!edu e to t!e Reser?e 'ank of )ndia Act; 1F5DK 51 A foreign bank operating in )ndia #it! t!e appro?a of t!e Reser?e 'ank of )ndiaK D1 A recognised stock eBc!angeK 41 An institution engaged in pro?iding financia ser?ices #!ere not ess t!an 64M of t!e e"uity is !e d joint y or se?era y by t!ese institutionsK E1 A custodian of securities appro?ed by ,o?ernment of )ndia; and 61 A foreign financia ser?ices institution appro?ed by ,o?ernment of )ndia1 T!e promoters of a depository are a so kno#n as its sponsors1 A depository company must !a?e a minimum net #ort! of Rs1 133 crore1 T!e sponsor7s8 of t!e depository !a?e to !o d at east 41M of t!e e"uity capita of t!e depository company1 Participants of t!at depository; if any; can !o d t!e ba ance of t!e e"uity capita 1 -o#e?er; no sing e participant can !o d; at any point of time; more t!an 4M of t!e e"uity capita 1 *o foreign entity; indi?idua y or co ecti?e y
Working of Depository system eit!er as a sponsor or as a DP; or as a sponsor and DP toget!er; can !o d more t!an G3M of t!e e"uity capita of t!e depository1 Re/i,trati#$ N As per t!e pro?isions of t!e %E') Act; a depository can dea in securities on y after obtaining a certificate of registration from %E')1 T!e sponsors of t!e proposed depository s!ou d app y to %E') for a certificate of registration in t!e prescribed form1 On being satisfied #it! t!e e igibi ity parameters of a company to act as a depository; %E') may grant a certificate of registration subject to certain conditions1 C#..e$ce.e$t #f 3*,i$e,, N A depository t!at !as obtained registration as stated abo?e; can function on y if it obtains a certificate of commencement of business from %E')1 A depository must app y for and obtain a certificate of commencement of business from %E') #it!in one year from t!e date of recei?ing t!e certificate of registration from %E')1 %E') grants a certificate of commencement of business if it is satisfied t!at t!e depository !as ade"uate systems and safeguards to pre?ent manipu ation of records and transactions1 %E') takes into account a matters re e?ant to t!e efficient and order y functioning of t!e depository1 )t particu ar y eBamines #!et!er A 11 T!e depository !as a net #ort! of not ess t!an Rs1 133 croreK G1 T!e 'yeC+a#s of t!e depository !a?e been appro?ed by %E')K 51 T!e automatic data processing systems of t!e depository !a?e been protected against unaut!orised access; a teration; destruction; disc osure or dissemination of records and dataK D1 T!e net#ork; t!roug! #!ic! continuous e ectronic means of communication are estab is!ed bet#een t!e depository; participants; issuers and issuersJ agents; is secure against unaut!orised entry or access1 41 T!e depository !as estab is!ed standard transmission and encryption formats for e ectronic communication of data bet#een t!e depository; participants; issuers and issuersJ agentsK E1 T!e p!ysica or e ectronic access to t!e premises; faci ities; automatic data processing systems; data storage sites and faci ities inc uding backCup sites; and to t!e e ectronic data communication net#ork connecting t!e DPs; issuers and issuersJ agents is contro ed; monitored and recordedK
Working of Depository system 61 T!e depository !as a detai ed operationa manua eBp aining a aspects of its functioning; inc uding t!e interface and met!od of transmission of information bet#een t!e depository; issuers; issuersJ agents; DPs and beneficia o#nersK 21 T!e depository !as estab is!ed ade"uate procedures and faci ities to ensure t!at its records are protected against oss or destruction and arrangements !a?e been made for maintaining backCup faci ities at a ocation different from t!at of t!e depositoryK F1 T!e depository !as made ade"uate arrangements inc uding insurance for indemnifying t!e beneficia o#ners for any oss t!at may be caused to suc! beneficia o#ners by t!e #rongfu act; neg igence or defau t of t!e depository or its participants or of any emp oyee of t!e depository or participantK 131 T!e granting of certificate of commencement of business is in t!e interest of in?estors in securities market1 Agreement bet#een Depository and )ssuers N )f eit!er t!e issuer 7a company #!ic! !as issued securities8 or t!e in?estor opts to !o d !is securities in a demat form; t!e issuer enters into an agreement #it! t!e depository to enab e t!e in?estors to demateria ise t!eir securities1 N# ,*c4 a/ree.e$t i, $ece,,ar- 04ere A i1 Depository; is t!e issuer of securities; orK ii1 T!e %tate or Centra ,o?ernment is t!e issuer of go?ernment securities1 W!ere t!e issuer !as appointed a registrar to t!e issue or s!are transfer; t!e depository enters into a tripartite agreement #it! t!e )ssuer and Registrar > Transfer 7R>T8 Agent; as t!e case may be; for t!e securities dec ared e igib e for demateria isation1 At present; *%D+ is disc!arging t!e responsibi ity of R>T Agent for t!e securities issued by %tate and Centra ,o?ernments1 Rig!ts and Ob igations of Depositories N Depositories !a?e t!e rig!ts and ob igations conferred upon t!em under t!e Depositories Act; t!e regu ations made under t!e Depositories Act; 'yeC +a#s appro?ed by %E'); and t!e agreements made #it! t!e participants; issuers and t!eir R>T agents1
Working of Depository system E?ery depository must !a?e ade"uate mec!anisms for re?ie#ing; monitoring and e?a uating t!e depositoryJs contro s; systems; procedures and safeguards1 )t s!ou d conduct an annua inspection of t!ese procedures and for#ard a copy of t!e inspection report to %E')1 T!e depository is a so re"uired to ensure t!at t!e integrity of t!e automatic data processing systems is maintained at a times and take a precautions necessary to ensure t!at t!e records are not ost; destroyed or tampered #it!1 )n t!e e?ent of oss or destruction; sufficient back up of records s!ou d be a?ai ab e at a different p ace1 Ade"uate measures s!ou d be taken; inc uding insurance; to protect t!e interests of t!e beneficia o#ners against any risks1 E?ery depository is re"uired to eBtend a suc! coCoperation to t!e beneficia o#ners; issuers; issuersJ agents; custodians of securities; ot!er depositories and c earing organisations; as is necessary for t!e effecti?e; prompt and accurate c earance and sett ement of securities transactions and conduct of business1 T!e depository s!ou d indemnify beneficia o#ners of securities for any oss caused to t!em due to t!e neg igence of t!e DP1 -o#e?er; #!ere t!e oss is caused due to t!e neg igence of a DP; t!e depository s!a !a?e t!e rig!t to reco?er it from suc! DPs1 3-e:La0, N A depository is re"uired to make 'yeC+a#s go?erning its operations1 T!e 'yeC +a#s !a?e to be in conformity #it! t!e Depositories Act and t!e regu ations made t!ereunder; and need to be appro?ed by %E') before becoming effecti?e1 De+#,it#r- N E?ery depository is re"uired to maintain t!e fo o#ing records and documents1 T!ese !a?e to be preser?ed for a minimum period of fi?e years1 11 Records of securities demateria ised and remateria ised1 G1 T!e names of t!e transferor; transferee; and t!e dates of transfer of securities1 51 A register and an indeB of beneficia o#ners1 D1 Detai s of t!e !o dings of t!e securities of beneficia o#ners as at t!e end of eac! day1 41 Records of instructions recei?ed from; and sent to; participants; issuers; issuersJ agents and beneficia o#ners1 E1 Records of appro?a ; notice; entry and cance ation of p edge or !ypot!ecation1 61 Detai s of participants1 21 Detai s of securities dec ared to be e igib e for demateria isation in t!e depository1
Working of Depository system F1 %uc! ot!er records as may be specified by %E') for carrying on t!e acti?ities as a depository1 Ser9ice, #f De+#,it#r- N A depository estab is!ed under t!e Depositories Act can pro?ide any ser?ice connected #it! recording of a otment of securities or transfer of o#ners!ip of securities in t!e record of a depository1 Any person #i ing to a?ai t!e ser?ices of t!e depository can do so by entering into an agreement #it! t!e depository t!roug! any of its participants1 A depository can pro?ide depository ser?ices on y t!roug! a DP1 A depository cannot direct y open accounts and pro?ide ser?ices to c ients1 E?ery depository in its 'yeC+a#s must state #!ic! securities are e igib e for demat !o ding1 ,enera y; t!e fo o#ing securities are e igib e for demateria isationA 7a8 %!ares; scrips; stocks; bonds; debentures; debenture stock or ot!er marketab e securities of a ike nature in or of any incorporated company or ot!er body corporate1 7b8 (nits of mutua funds; rig!ts under co ecti?e in?estment sc!emes and ?enture capita funds; commercia paper; certificates of deposit; securitised debt; money market instruments; go?ernment securities; nationa sa?ing certificates; kisan ?ikas patra and un isted securities1 7c8 %ecurities admitted to *%D+ depository are notified to a DPs t!roug! circu ars sent by emai 1 )n?estors are informed about t!ese securities t!roug! *%D+Js Website C ###1nsd 1co1in and *E%T (pdate C a mont! y ne#s etter of *%D+1
2*$cti#$, #f De+#,it#rDemateria isationA One of t!e primary functions of depository is to e iminate or minimise t!e mo?ement of p!ysica securities in t!e market1 T!is is ac!ie?ed t!roug! demateria isation of securities1 Demateria isation is t!e process of con?erting securities !e d in p!ysica form into !o dings in book entry form1 Account TransferA T!e depository gi?es effects to a entries in t!e accounts of suc! beneficia o#ners1 Transfer and RegistrationA A transfer is t!e ega c!ange of o#ners!ip of a security in t!e records of t!e issuer1 &or effecting a transfer; certain ega steps !a?e to be taken ike endorsement; eBecution of a transfer instrument and payment of stamp duty1 T!e depository acce erates t!e transfer process by registering t!e o#ners!ip of s!ares in t!e name of t!e transfers resu ting from t!e sett ement of trades and ot!er transactions bet#een ?arious beneficia o#ners by recording
Working of Depository system depository1 (nder a depository system; transfer of security occurs mere y by passing book entries in t!e records of t!e depositories; on t!e instructions of t!e beneficia o#ners1 Corporate ActionsA A depository may !and e corporate actions in t#o #ays1 )n t!e first case; it mere y pro?ides information to t!e issuer about t!e persons entit ed to recei?e corporate benefits1 )n t!e ot!er case; depository itse f takes t!e responsibi ity of distribution of corporate benefits1 P edge and -ypot!ecationA T!e securities !e d #it! *%D+ may be used as co atera to secure oans and ot!er credits by t!e c ients1 )n a manua en?ironment; borro#ers are re"uired to de i?er p edged securities in p!ysica form to t!e ender or its custodian1 T!ese securities are ?erified for aut!enticity and often need to be transferred in t!e name of ender1 T!is !as a time and money cost by #ay of transfer fees or stamp duty1 )f t!e borro#er #ants to substitute t!e p edged securities; t!ese steps !a?e to be repeated1 (se of depository ser?ices for p edging< !ypot!ecating t!e securities makes t!e process ?ery simp e and cost effecti?e1 T!e securities p edged<!ypot!ecated are transferred to a segregated or co atera account t!roug! book entries in t!e records of t!e depository1 +inkages #it! C earing %ystemA W!et!er it is a separate c earing corporation attac!ed to a stock eBc!ange or a c earing !ouse 7department8 of a stock eBc!ange; t!e c earing system performs t!e functions of ascertaining t!e payCin 7se 8 or payCout 7buy8 of brokers #!o !a?e traded on t!e stock eBc!ange1 Actua de i?ery of securities to t!e c earing system from t!e se ing brokers and de i?ery of securities from t!e c earing system to t!e buying broker is done by t!e depository1 To ac!ie?e t!is; depositories and t!e c earing system s!ou d be e ectronica y inked1 -a?ing understood t!e depository system; et us no# ook at t!e organisation and functions of *ationa %ecurities Depository +imited 7*%D+81
3ENE2ITS O2 DEPOSITORY SYSYEM

*o risks associated #it! p!ysica certificates suc! as oss of s!are certificate; &ake securities; Etc1 *o bad de i?ery1 &aster sett ement cyc es1 +o# transaction cost for purc!ase and sa e of securities compared to p!ysica mode1 )ncrease i"uidity of securities Reduction of paper #ork A otment of )PO; 'onus; Rig!ts s!ares etc1 in e ectronic form Wa?ier of stamp duty on transfer of securities )ntimation ike c!ange of address; bank mandate; nomination; re"uest of transmission; re"uired to be gi?en on y to Depository Participant 7DP8 )rrespecti?e of t!e number of companies in #!ic! s!ares !e d1
2aci"itie, #ffere) 5- )e+#,it#r- ,-,te.

Demateria isation Remateria isation E ectronic sett ement of trades in stock eBc!anges connected to depositories1 P edging<!ypot!ecation of demateria iIed securities1 E ectronic credit of securities a otted in pub ic; rig!ts; bonus issue1 *omination faci ity1 &reeIing of DeCmat accounts; so t!at t!e debits from t!e demateria iIation are not permitted1 %er?ices re ated to c!ange of address; nomination; mandate; transmission; etc1 Ot!er ser?ices ?iI1!o ding debt instruments in t!e same demat account1 A?ai ing stock ending<borro#ing faci ity; etc1
Safet- feat*re, i$ t4e )e+#,it#r- ,-,te.

To ensure safety to t!e in?estors t!e fo o#ing measures eBistC %trict norms for becoming depository participantC *et #ort! criteria; %E') appro?a etc1 is mandatory1 DP cannot effect ant debit or credit in t!e demat account of t!e in?estor #it!out t!e ?a id aut!oriIation of t!e in?estor1 Regu ation reconci iation bet#een DP and t!e depositories1 Periodic inspection by Depositories of t!e office of t!e DP and Registrar1 A in?estors !a?e a rig!t to recei?e t!eir statements of accounts periodica y from t!e DP1 )n t!e depository system; t!e depository !o ds t!e in?estor accounts on trust1 T!erefore if t!e DP goes bankrupt t!e creditors of t!e DP #i !a?e no access to t!e !o dings in t!e name of t!e c ients of t!e DP1 Compu sory interna audit of operations of DP by practicing company secretary of t!e c!artered accountant e?ery "uarter1 /arious procedures for backup and safe keeping of data at a t!e e?e s1
%E') !as made compu sory trading of s!ares of a t!e companies isted in %tock EBc!ange in demat form #1e1f G January G33G1 -ence; if t!e in?estor #ants to trade in respect of t!e companies; #!ic! !a?e estab is!ed connecti?ity #it! *%D+ > CD%+; !e may !a?e to open a beneficiary account1
3e$eficiar- acc#*$t
A beneficiary account is an account opened by t!e in?estor or a broker #it! a DP of !is c!oice; to !o d s!ares in demateria iIed form and undertake scrip ess trading1
I$9e,t#r c#$tacti$/ t4e )e+#,it#r-
Working of Depository system T!e in?estor must open a demat account #it! a Depository Participant1 Opening a demat account #it! a DP is simi ar to opening an account #it! bank1 T!e se ection of DP is to be done by t!e in?estor based on fee payab e; proBimity; ser?ice e?e s; etc1
D#c*.e$t, re?*ire) f#r #+e$i$/ )e.at acc#*$t

&or demat account opening t!e fo o#ing documents are re"uired to be gi?enC Demat account opening form du y fi ed1 Address proof1 P!otograp! )dentity proof
Ot4er f#r.a"itie, i$ De.at acc#*$t #+e$i$/

Once a demat account is opened; t!e in?estor must sign an agreement #it! t!e DP1 T!e in?estor #i be a otted an account no1 kno#n as c ient identity1 T!e c ient identity number a ong #it! t!e DP identity number forms a uni"ue combination1 'ot! t!ese numbers s!ou d be "uoted in a t!e future dea ing #it! Depositories <DP <RTA <Company1 -o#e?er in case of CD%+ t!ere is no DP identity and t!e 1ECdigit C ient identity itse f is a uni"ue number1 T!e in?estor must co ect forms ike demateria iIation re"uest form 7DR&8; De i?ery instruction s ips etc1
Certai$ +#i$t, t# 5e c#$,i)ere) 04i"e #+e$i$/ De.at acc#*$t

Demat account cannot be opened in t!e name of t!e partners!ip firms; as a partners!ip firm is not a ega entity1 -o#e?er; a demat account can be opened in t!e name of t!e partners1 Demat account cannot be opened in t!e name of t!e -(&1 )t !as to be opened in t!e name of t!e 0arta of t!e -(&1 )n t!e case of a minor; t!e depository account s!ou d be opened in t!e name of t!e minor and t!e guardian=s name s!ou d be mentioned1 T!e guardian #i sign as signatory on be!a f of t!e minor1 )n?estor can open any number of DP accounts #it! any number of DP=s1 -o#e?er; in?estor !as to incur cost for eac! of suc! account1)n?estor must open different Demat accounts for s!ares !e d in different combination of names1 A ternati?e y in?estor can submit t!e certificate for Demat a ong #it! transposition form1
Mi$i.*. 5a"a$ce #f ,ec*ritie,$ re?*ire) t# 5e .ai$tai$e) i$ De.at acc#*$t

T!ere is no minimum ba ance re"uired to be maintained in a Demat account and an in?estor can e?en maintain ni ba ance1 Ot!er steps t!e in?estor s!ou d take T!e in?estor s!ou d inform !is DP of any c!ange in !is address; bank account; nomination; etc1 immediate y upon c!ange t!ereof1
C4ar/e, f#r De.at acc#*$t #+e$i$/ a$) #t4er )e+#,it#r- tra)i$/

T!e depository does not c!arge any fee direct y from t!e in?estors1 T!e depository c!arges on y t!e DP=s1 -o#e?er; t!e DP is free to c!arge its c ients for t!e ser?ices offered1 T!e c!arges of DP=s a so ?ary1
St#c1 e@c4a$/e, c#$$ecte) t# t4e De+#,it#rie, f#r De.at tra)i$/

At present t!e fo o#ing 13 stock eBc!anges are connected to t!e DepositoriesC *ationa %tock EBc!ange T!e %tock EBc!ange $umbai Ca cutta %tock EBc!ange De !i %tock EBc!ange +ud!iana %tock EBc!ange 'ang ore %tock EBc!ange O?er t!e counter stock eBc!ange of )ndia $adras %tock EBc!ange )nter connected %tock EBc!ange A!medabad %tock EBc!ange1
Mar1et tra)e a$) #ff .ar1et tra)e

Trade done and sett ed t!roug! a stock eBc!ange and c earing corporation is market trade1 Trade done pri?ate y #it!out t!e in?o ?ement of t!e %tock 'roker of %tock EBc!ange is off market trade1
3*-i$/ a$) ,e""i$/ #f ,4are, 5- t4e i$9e,t#r T!e in?estor can buy and se s!ares on y t!roug! a stockbroker and not t!roug! a DP1 DP !e ps in de i?ering t!e s!ares against a sa e transaction or recei?ing t!e s!ares for a purc!ase transaction1
C#r+#rate 5e$efit,
Corporate benefit is a corporate e?ent1 )t can be cas! corporate benefit ike di?idend; interest; etc1or nonCcas! corporate benefits ike rig!ts; bonus etc1 W!en any corporate e?ent suc! as rig!t or bonus or di?idend is announced for a particu ar security; depository #i gi?e t!e detai s of a c ients !a?ing e ectronic !o dings in t!at security as of t!e record date to t!e RTA<Company #i t!en ca cu ate t!e corporate benefits due to a t!e s!are!o ders1 T!e disbursements of cas! benefits suc! as di?idend<interests #i be done by t!e RTA<Company direct y to t!e s!are!o ders1 *onCcas! benefits #i be distributed t!roug! depository by crediting t!e entit ed "uantity of s!ares into s!are!o ders demat account1
Direct cre)it #f ,4are, i$ e"ectr#$ic f#r.=

)n t!e pub ic<Rig!t issue app ication form of depository e igib e companies; t!ere #i be a pro?ision for t!e in?estor to indicate t!e manner in #!ic! !e #ants t!e securities a otted to !im1 E?en in t!e case of bonus issue t!e in?estor is gi?en an option for getting t!e s!ares
Working of Depository system a otted in p!ysica or e ectric form1 T!e in?estor must mention !is c ient )D1 *umber and DP )D *o1
A)9a$ta/e #f /etti$/ a""#t.e$t i$ e"ectr#$ic f#r.=

%E') !as announced t!at t!e s!ares of a t!e companies going in for pub ic issue #i !a?e to be compu sori y sett ed in demat form by a !a?e !ig!er i"uidity1 )n case of Discrepancies in corporate benefits t!e in?estor can approac! !is DP #!o in turn #i contact t!e RTA<Company for c arifications regarding a otment of securities1 C earing members; C earing corporations and ot!er intermediaries cannot !a?e ?oting rig!ts in respects of t!e s!ares !e d in poo account1 &urt!er t!e c earing member or c eaning corporation is a so responsib e for distribution of bonus; rig!t and ot!er corporate benefits ying in !is account to t!e in?estor1 in?estors1 )t is; t!erefore; ad?antageous for an in?estor to prefer t!e a otment in demat form; so t!at t!e s!ares
Me$ai$/ #f Tra$,ferA Tra$,.i,,i#$ a$) Tra$,+#,iti#$

Tra$,fer Depository is e ectronica y inked to depository participants; issuer company or Registrar > transfer agent and t!e c earing corporation< c earing !ouse of t!e stock eBc!ange1 T!is is done in order to faci itate sett ement of trades and to perform a dai y; reconci iation of a t!e account ba ances !e d #it! depository1 T!us; an integrated system is set up for maintenance of in?estor accounts1 Tra$,.i,,i#$ )n t!e case of transmission; t!e c aimant #i !a?e to fi a transmission re"uest form; supported by documents ike deat! certificates; etc1 T!e DP; after ensuring t!at t!e app ication is genuine; #i transfer securities to t!e demat account of t!e c aimant1 &or t!is purpose c aimant must !a?e a depository account1 T!e major ad?antage in transmission of demateria iIed !o dings is t!e transmission forma ities for a securities !e d #it! t!e DP can be comp eted in
Working of Depository system one go; un ike in t!e case of s!are certificate; #!ere t!e c aimant #i !a?e to interact #it! eac! RTA<Company1
Tra$,+#,iti#$ )n case of transportationCcumCdemateria iIation; t!e in?estor can get t!e securities demateria iIed in t!e same account if t!e names appearing on t!e certificate matc! #it! t!e names in #!ic! t!e demat account !as been opened but are in a different order; by submitting t!e security certificate a ong #it! t!e transportation form and t!e Demateria isation re"uest form:7DR&8 to t!e DP1
P"e)/i$/ P edging of demateria iIed securitiesA P edging demateria iIed securities is easier and more ad?antageous as compared to p edging p!ysica securities1 T!e procedure as fo o#s 'ot! borro#er 7p edger8 as #e as t!e ender 7p edgee8 must !a?e depository account1 T!e p edger must initiate t!e p edge by submitting to !is DP t!e detai s of t!e securities to be p edged in a standard format1 T!e p edge s!ou d confirm t!e re"uest t!roug! !is DP1
Once t!is is done t!e securities are p edged1 A financia transactions bet#een t!e p edger and t!e p edgee are !and ed outside t!e depository system1
Pr#ce)*re f#r t4e c"#,*re #f +"e)/e

After t!e borro#er !as repaid t!e oan; t!e borro#er can re"uest for a c osure of p edge by instructing !is DP in a prescribed format1 T!e ender on recei?ing t!e repayment #i instruct !is DP confirmed t!e c osure of t!e p edge1
C4a$/e #f ,ec*ritie, #ffere) i$ a +"e)/e

)f t!e p edger 7 ender8 agrees; t!e in?estor may c!ange t!e securities offered in a p edge1 N#.i$ati#$ %!ares !e d in p!ysica as #e as e ectronic form can be nominated1 *omination can be made on y by indi?idua s !o ding beneficiary accounts on t!eir o#n be!a f eit!er sing y or joint y1 On indi?idua s; society; trust; body corporate ;partners!ip firm; 0arta or -indu undi?ided &ami y; !o der of po#er of attorney cannot nominate1 *omination is permitted for accounts #it! joint !o der; but in case of deat! of any of t!e joint !o der; t!e securities #i be transmitted to t!e sur?i?ing !o der7s8 on y in t!e e?ent of deat! of a t!e joint !o ders; t!e securities #i be transmitted to t!e nominee1 On y an indi?idua can be a nominee1 A nominee s!a not be a society; trust; body corporate; partners!ip firm; karta of -indu undi?ided &ami y or a po#er of attorney !o der1 A minor cannot nominate eit!er direct y or t!roug! its guardian1 A minor can be a nominee1 )n suc! a case; t!e guardian #i sign on be!a f of t!e nominee and in addition to t!e name and p!otograp! of t!e nominee; t!e name; address and t!e p!otograp! of t!e guardian must be gi?en1%eparate nomination cannot be made for eac! security1 *omination can be made Demat account #ise and not security #ise1 T!e in?estor must fi in and submit to !is DP t!e nomination form1 T!e account !o der; *ominee and t#o #itnesses must sign t!is form and t!e nameK address and p!otograp! of t!e nominee must be submitted1 T!e nomination can be c!anged anytime by t!e account !o der by fi ing up t!e re?ised nomination form and submitting it to t!e DP1 T!e account !o der; *ominee and t#o #itnesses must sign t!is form and t!e nameK address and p!otograp! of t!e nominee must be submitted1 )n case of joint !o ders; a joint !o ders must sign1 De.at #f )e5t i$,tr*.e$t
Working of Depository system Debt instrument can a so be !e d in demat form1 )nstruments ike bond; debentures; commercia papers; certificates of deposit; etc1 irrespecti?e #!et!er t!ese instruments are isted<un isted<pri?ate y p aced or e?en issued to a sing e !o der can be demateria iIed1 Commercia paper can a so be kept in demat form1 As per R') $onetary and credit po icy N banks; &inancia )nstitutions; primary Dea ers and sate ite dea ers are directed to con?ert t!eir outstanding in?estment in commercia papers in script form; into Demat form1 T!e abo?e entities !a?e a so been directed to make fres! in?estment in commercia paper on y in demat form1 'onds and debentures can a so kept in demat form1 )n its midterm re?ie# of t!e monetary and credit po icy R') !as mentioned t!at banks and financia institutions s!a make in?estment in debentures and bonds on y in demat form1 Any ne# instrument can be issued direct y in demateria iIed form #it!out recourse to printing of eit!er etter of a otment or certificates1 %ecurities #i be direct y credit into t!e demat accounts of t!e in?estor by t!e depositories on receipt of a otment detai s from RTA<Company1 T4e i$9e,t#r $ee) $#t #+e$ ,e+arate )e.at acc#*$t f#r )e.at #f )e5t i$,tr*.e$t. T!e procedure of demateria iIation of debt instrument is same as t!at carried out for e"uity s!ares1 )n order to demateria iIed !is<!er certificatesK an in?estor #i !a?e to first open a demat account #it! a DP and t!e a re"uest for t!e demateria iIation of certificates by fi ing up a demateria iIation re"uest form 7DR&8; #!ic! is a?ai ab e #it! DP and submitting t!e same a ong #it! t!e p!ysica certificates1 T!e in?estor !as to ensure t!at before t!e certificates are !anded o?er to t!e DP for demat; !e marks 9%urrendered for Demateria iIation: on t!e face of t!e certificates1 Account opening Demat<Remat Account $aintenance Custody Transaction; etc1
B$#0i$/ #f ,ec*ritie, 5a"a$ce i$ )e.at acc#*$t
Working of Depository system T!e in?estor is pro?ided #it! a transaction statement by !is DP at regu ar inter?a s1 'ased on t!at t!e in?estor #i kno# !is security ba ances1
Recei9i$/ Tra$,acti#$ ,tate.e$t 5- i$9e,t#r T!e DP #i send a transaction statement once in a "uarter if t!ere is no transaction during t!e "uarter1 )f t!ere are any transactions DP #i send t!e statements #it!in fifteen days of t!e transaction1 2reeCi$/ #f )e.at acc#*$t T!e depository system pro?ides t!e faci ity to freeIe t!e demat account for any debits or for bot! debits and credits1 )n an account; #!ic! is 9free Ied of debits:; no debits #i be permitted from t!e account; ti in?estors1 Sta$)i$/ i$,tr*cti#$ t# DP T!e in?estor can gi?e one time standing instruction to !is DP to recei?e a t!e credits coming to !is depository account automatica y1 -o#e?er; t!e in?estor cannot gi?e standing instruction for any debits in !is account1 t!e time it is defreeIe1 T!is is in additiona security feature of t!e
Acce,, #f i$9e,t#r acc#*$t, 5- a"" DPD,

A DP cannot access t!e in?estors account of any ot!er DP1T!e DP can access on y t!ose in?estors accounts ser?iced by t!em1 &urnis!ing of bank account particu ars in DP Detai s of bank account of t!e c ient; inc uding t!e FCdigit code number of t!e bank and branc! appearing on t!e $)CR c!e"ue issued by t!e bank !a?e to be gi?en to t!e DP at t!e time of account opening1 Companies use t!is information for printing t!em on di?idend<interest #arrants etc1; to pre?ent its misuse1 )n case t!e c ient #is!es to c!ange t!is bank account detai s; !e can do so by submitting t!e c!ange in #riting to t!e DP1
Pr#ce)*re #f c"#,*re #f )e.at acc#*$t

An in?estor can c ose a demat account by gi?ing an app ication in prescribed form1 )n case t!ere is any ba ance in t!e demat account soug!t to be c osed; t!e fo o#ing steps are necessaryC 11 G1 Remateria isation of a securities standing to t!e credit of t!e demat account at t!e time Transferring t!e ba ance to t!e credit of anot!er demat account ; #it! t!e same
of making t!e app ication for t!e c osure1 participant or #it! a different participant1
De.ateria"iCati#$ Demateria iIation is t!e process of con?ersion of s!ares or ot!er securities !e d in p!ysica form into e ectronic form1
W!om to approac!
T4e i$9e,t#r .*,t a++r#ac4 4i) DP f#r De.ateria"iCati#$ T!e s!ares t!at an in?estor can demateria iIe
T!e in?estor can demat t!e s!ares of any company t!at !as estab is!ed connecti?ity #it! *%D+ or CD%+
Ste+, i$9#"9e) i$ )e.ateria"iCati#$

11 )n?estor must submit re"uest form and s!are certificate to DP1
G1
Working of Depository system DP #i c!eck #!et!er security is a?ai ab e for Demat1 )n?estor must deface t!e s!are punc! t#o !o es on across t!e face of t!e certificate1
certificate by stamping 9surrendered for demateria iIation: and DP #i t!e name of t!e company and #i dra# t#o para e ines 51 D1 41
DP enters t!e Demat re"uest in t!eir system to be sent to t!e depository1 DP dispatc!es t!e p!ysica certificates a ong #it! t!e DR& to t!e RTA< Company1 Depository records t!e detai s of t!e system and for#ards t!e re"uest to Registrar and demateria iIed1 t!em1 t!e concerned RTA Company on recei?ing t!e p!ysica documents ?erifies re"uest and c!eck
transfer agent or issuer i1e1 t!e company #!ose s!ares are soug!t to be
Once t!e RTA<Company finds t!at s!ares are in order; demateria iIation of securities is e ectronica y confirmed to t!e depository E1
Depository credits t!e demateria iIed securities to t!e beneficiary account of t!e in?estor and intimates t!e DP e ectronica y1 T!e DP issues transaction to t!e c ient1 a statement of
Si/$i$/ #f t4e )e.at re?*e,t f#r. i$ ca,e #f ;#i$t 4#")er,

A joint !o ders s!ou d sign t!e DR&1 C#.+a$- i)e$tificati#$ $*.5er f#r )e.at +*r+#,e, Once t!e company is admitted in t!e depository system; t!e depository a ots an )%)*1 T!is number is uni"ue for eac! security of t!e company t!at is admitted in t!e depository1 $entioning of t!e )%)* in t!e DR& T!e )%)* s!ou d be mentioned in t!e DR&1T!is to certain eBtent ensures t!at t!e security mentioned in t!e DR& is t!e one #!ic! t!e in?estor intends to demateria iIe1 Distinguis!ing bet#een part y paidCup s!are and fu y paid up s!ares in t!e depository Parties paid up s!ares and fu y paid up s!ares are identified by separate )%)*=s 7)nternationa security identification number81 T!ese are a so traded separate y at t!e stock eBc!anges1 T!e company issues ca notices to t!e beneficia !o ders of part y paid up securities in t!e e ectronic form1 T!e detai s of suc! beneficia !o ders #i be pro?ided to t!e RTA<company #i automatica y con?ert t!e part y paid up s!ares to fu y paid s!ares1
Re.ateria"i,ati#$ Remateria isation is con?ersion of e ectronic !o dings into p!ysica certificate form1 Ste+, i$9#"9e) f#r Re.ateria"i,ati#$ T!e in?estor must fi up a remat form 7RR&8 and gi?e it to t!e DP1 T!e DP #i for#ard t!e re"uest depository after ?erifying t!at t!e s!are!o der !as necessary ba ances1 Depository in turn #i intimate t!e RTA<Company #i print t!e certificate and dispatc! t!e same to t!e in?estor1 E"ectr#$ic ,ett"e.e$t #f t4e Tra)e, Procedure for se ing demateria iIation securities in t!e stock eBc!anges is simi ar to t!e procedure for se ing p!ysica securities )nstead of de i?ering p!ysica securities to t!e broker; t!e in?estor must instruct !is<!er DP to debit !is<!er demat account #it! t!e number of securities so d by !im<!er and credit broker=s c earing account1 Pr#ce)*re f#r ,e""i$/ ,ec*ritie, i, /i9e$ 5e"#0= broker1 )n?estor gi?es instruction to DP to debit !is account and credit t!e brokers 7c earing account poo 8 account1 'efore t!e payCinCday1 )n?estor=s broker transfers t!e securities to c earing corporation1 T!e broker recei?es payment from t!e stock eBc!ange 7C earing Corporation81 T!e in?estor recei?es payment from t!e broker for t!e sa e in t!e same manner payment is recei?ed for a sa e in t!e p!ysica mode1 )n?estor se s securities in any of t!e stock eBc!ange inked to depository t!roug! a
Pr#ce)*re f#r +*rc4a,e #f )e.ateria"iCe) ,4are, T!e procedure or buying demateria iIed securities in stock eBc!anges is simi ar to t!e procedure for buying p!ysica securities1 )n?estor may gi?e a one time standing instruction to recei?e credits into !is <!er account or may gi?e separate in !e prescribed format1 T!e transaction re ating to purc!ase of securities are summariIed be o#1 )n?estor purc!ases securities in any of t!e stock eBc!anges connected to depository instruction eac! time
t!roug! a broker1 'roker recei?es payment from in?estor=s1 'roker arranges payment to c earing corporation1 'roker recei?es credit of securities in c earing account on t!e payout day1 'roker gi?es instruction to DP to debit c earing account and credit c ient=s account1 )n?estor recei?es s!ares in !is account1 T!e in?estor s!ou d ensure t!at t!e broker transfer t!e securities purc!ased to !is account; before t!e book c osure1 )f t!e securities remain in t!e c earing account of t!e broker; t!e company may gi?e corporate benefits to t!e broker1 T!erefore; t!e in?estor !as to co ect benefits from t!e broker1
DI22ERENCE 3ETWEEN 3ANB AND DEPOSITORY 'A*0 A ocates account number1 -o ds funds in accounts $inimum ba ance re"uired1 &unctions t!roug! branc!es1 )ssues account statement > pass book1 C!arges c!arges1 commission< ser?ice DEPO%)TOR. A ocates c ient )D number1 -o ds securities in accounts1 *orma y no minimum ba ance re"uired1 &unctions participants1 )ssues account statement i1e1 t!roug! depository
statement of !o ding and statement of transactions1 Depository Participant c!argesA o Account c osing fee o Demat and Remat fee o Transaction fee 7buy; se ; off market8 Pro?ides interest to t!e account !o ders1 o Custody c!arges )n future; t!roug! stock ending; it #i be possib e to earn income on Depository Account1 opening and
S#.e i.+#rta$t Pr#ce,,e, i$ )e+#,itar- ,-,te.

Demateria iIation Remateria iIation )nitia pub ic offers Trading > sett ements1 On $arket transactions Off market transactions )nter Depository transactions
Demateria iIation Process

P!ysica %ecurities O E ectronic &orm1
PreCre"uisitesA L Demat Account #it! any DP of t!e Depository1 L )%)* for t!e securities a?ai ab e #it! t!e Depository1 L )n?estor s!ou d be registered !o der for t!e securities in t!e books of t!e company1
Re.ateria"iCati#$
Remateria iIation or remat is a compi er optimiIation #!ic! sa?es time by recomputing a ?a ue instead of oading it from memory1 )t is typica y tig!t y integrated #it! register a ocation; #!ere it is used as an a ternati?e to spi ing registers to memory1 )t #as concei?ed by Preston 'riggs; 0eit! D1 Cooper; and +inda TorcIon in 1FFG1Remateria iIation #orks by keeping track of t!e eBpression used to compute eac! ?ariab e; using t!e concept of a?ai ab e eBpressions1 %ometimes t!e ?ariab es used to compute a ?a ue are modified; and so can no onger be used to remateria iIe t!at ?a ue1 T!e eBpression is t!en said to no onger be a?ai ab e1 Ot!er criteria must a so be fu fi ed; for eBamp e a maBimum comp eBity on t!e eBpression used to
Working of Depository system remateria iIe t!e ?a ueK it #ou d do no good to remateria iIe a ?a ue using a comp eB computation t!at takes more time t!an a oad1 (sa y t!e eBpression must a so !a?e no effects1
Remateria iIation process

E ectronic &orm O P!ysica %ecurities
I$itia" +*5"ic #ffer,

An initia pub ic stock offering 7)PO8 referred to simp y as an PofferingP or Pf otation;P is #!en a company 7ca ed t!e issuer8 issues common stock or s!ares to t!e pub ic for t!e first time1 T!ey are often issued by sma er; younger companies seeking capita to eBpand; but can a so be done by arge pri?ate yCo#ned companies ooking to become pub ic y traded1
Working of Depository system )n an )PO t!e issuer may obtain t!e assistance of an under#riting firm; #!ic! !e ps it determine #!at type of security to issue 7common or preferred8; best offering price and time to bring it to market1 An )PO can be a risky in?estment1 &or t!e indi?idua in?estor; it is toug! to predict #!at t!e stock or s!ares #i do on its initia day of trading and in t!e near future since t!ere is often itt e !istorica data #it! #!ic! to ana yIe t!e company1 A so; most )POs are of companies going t!roug! a transitory gro#t! period; and t!ey are t!erefore subject to additiona uncertainty regarding t!eir future ?a ue1 T!e first sa e of stock by a pri?ate company to t!e pub ic1 )POs are often issued by sma er; younger companies seeking t!e capita to eBpand; but can a so be done by arge pri?ate y o#ned companies ooking to become pub ic y traded1 )n an )PO; t!e issuer obtains t!e assistance of an under#riting firm; #!ic! !e ps it determine #!at type of security to issue 7common or preferred8; t!e best offering price and t!e time to bring it to market1A so referred to as a Ppub ic offeringP1 )POs can be a risky in?estment1 &or t!e indi?idua in?estor; it is toug! to predict #!at t!e stock #i do on its initia day of trading and in t!e near future because t!ere is often itt e !istorica data #it! #!ic! to ana yIe t!e company1 A so; most )POs are of companies going t!roug! a transitory gro#t! period; #!ic! are subject to additiona uncertainty regarding t!eir future ?a ues1
I$itia" +*5"ic #ffer, +r#ce,,
Tra)i$/ E ,ett"e.e$t,
Transfer of securities in< out of t!e Demat A<c can arise in t!e fo o#ing instancesA &or eBecution of Off $arket Transactions1
Working of Depository system &or sett ing On $arket Transactions1 &or )nter depository transactions1
Off Mar1et Tra$,acti#$,

Transaction done on person to person basis #it!out going t!roug! stock eBc!ange mec!anism1 PreCre"uisitesA Transfer of securities from one 'O A<c to anot!er 'O A<c1 'ot! A<c=s are #it! same Depository t!oug! #it! different DPs1 *eit!er buyer=s A<c nor se er=s A<c is #it! c earing !ouse<c earing corporation1
Off market transaction process
O$ Mar1et Tra$,acti#$
Trades done by in?estors t!roug! stock eBc!ange mec!anism and sett ed using same stock eBc!ange mec!anism1
Working of Depository system se er as #e as buyer account is #it! C-<CC
)nter Depository Transactions1

%E') 7Depository and participants8 Regu ations; 1FFE re"uires depositories to be inter connected1 %ecurities a?ai ab e for demateria iIation on bot! depositories1 Debit< credit instructions !a?e to gi?en on interCdepository de i?ery or receipts forms to t!e DP=s of se er and t!e buyer1 T!ese instructions are eBc!anged on ine for eac! day bet#een t!e depositories1
Nati#$a" Sec*ritie, De+#,it#r- Li.ite)
Working of Depository system )n a span of about nine years; in?estors !a?e s#itc!ed o?er to e ectronic QdematR sett ement and *ationa %ecurities Depository +imited 7*%D+8 stands at t!e centre of t!is c!ange1 )n order to pro?ide "ua ity ser?ice to t!e users of depository; *%D+ aunc!ed a certification programme in depository operations in $ay 1FFF1 T!is certification is conducted using *C&$ infrastructure created by *%E and is ca ed P*%D+ C Depository Operations $odu eP1 T!e programme is aimed at certifying #!et!er an indi?idua !as ade"uate kno# edge of depository operations; to be ab e to ser?ice in?estors1 Depository Participants are re"uired to appoint at east one person #!o !as "ua ified in t!e certification programme at eac! of t!eir ser?ice centres1 T!is !andbook is meant to !e p t!e candidates in t!eir preparation for t!e certification programme1 T!is !andbook !as been di?ided into four ?o umes for readersJ con?enience1 T!e first ?o umegi?es an o?er?ie# of t!e )ndian capita market and *%D+ depository system1 T!e second ?o ume dea s #it! admission procedure for different business partners of *%D+; t!eir ob igations; practices; systems and procedures to be fo o#ed by t!em and benefits and safety of depository system1 T!e t!ird ?o ume !e ps in ac"uiring a #orking e?e understanding of certain basic ser?ices offered by *%D+ ike account opening; demateria isation; and transfer of securities and re ated operations1 T!e ast ?o ume dea s #it! specia ser?ices offered by *%D+ ike P edge; %tock +ending and 'orro#ings; Corporate Actions; *ationa %a?ings Certificates < 0isan /ikas Patra 7*%C<0/P8 in demat form; Ware!ouse Receipts; $arket Participants and )n?estor Database 7$AP)*8 and TaB )nformation *et#ork 7T)*81 T!e procedures eBp ained in t!e !andbook are based on t!e Depositories Act; %ecurities and EBc!ange 'oard of )ndia 7Depositories > Participants8 Regu ations and 'ye a#s > 'usiness Ru es of *%D+1 T!e book contains i ustrations; f o# c!arts and c!eck ists for better understanding of ?arious concepts and procedures1 A samp e test paper is gi?en at t!e end of t!e fourt! ?o ume to !e p t!e candidates appearing for *C&$ test form an assessment of t!eir preparedness1 A t!oroug! understanding of t!is !andbook #i form a good base for "ua ifying t!e certification test1
Working of Depository system Readers may ike to ?isit *%D+ #ebsite ###1nsd 1co1in for updates and to kno# t!e ne# procedures introduced or c!anges broug!t about in t!e eBisting procedures1 A feedback form is gi?en at t!e end of t!e fourt! ?o ume1 Readers may gi?e t!eir feedback; #!ic! #i be of great !e p in en!ancing t!e ?a ue of t!is -andbook in its subse"uent editions1 *ationa %ecurities Depository +imited *ationa %ecurities Depository +imited is t!e first depository to be setCup in )ndia1 )t #as incorporated on December 1G; 1FF41 T!e )ndustria De?e opment 'ank of )ndia 7)D')8 C t!e argest de?e opment bank in )ndia; (nit Trust of )ndia 7(T)8 C t!e argest )ndian mutua fund and t!e *ationa %tock EBc!ange 7*%E8 C t!e argest stock eBc!ange in )ndia; sponsored t!e setting up of *%D+ and subscribed to t!e initia capita 1 *%D+ commenced operations on *o?ember 2; 1FFE1 O#ners!ip *%D+ is a pub ic imited company incorporated under t!e Companies Act; 1F4E1 *%D+ !ad a paidup e"uity capita of Rs1 134 crore1 T!e paid up capita !as been reduced to Rs1 23 crore since *%D+ !as boug!t back its s!ares of t!e face ?a ue of Rs1 G4 crore in t!e year G3331 -o#e?er; its net #ort! is abo?e t!e Rs1 133 crore; as re"uired by %E') regu ations1 T!e fo o#ing organisations are s!are!o ders of *%D+ as on $arc! 51; G3341 11 )ndustria De?e opment 'ank of )ndia G1 Administrator of t!e %pecified (ndertaking of t!e (nit Trust of )ndia C DR& 51 *ationa %tock EBc!ange D1 %tate 'ank of )ndia 41 Orienta 'ank of Commerce E1 Citibank *1A1 61 %tandard C!artered 'ank 21 -D&C 'ank +imited F1 T!e -ongkong and %!ang!ai 'anking Corporation +imited 131 Deutsc!e 'ank A1,1 111 Dena 'ank
Working of Depository system 1G1 Canara 'ank Ma$a/e.e$t #f NSDL *%D+ is a pub ic imited company managed by a professiona 'oard of Directors1 T!e dayC today operations are conducted by t!e C!airman > $anaging Director 7C$D81 To assist t!e C$D in !is functions; t!e 'oard appoints an EBecuti?e Committee 7EC8 of not more t!an 14 members1 T!e e igibi ity criteria and period of nomination; etc1 are go?erned by t!e 'yeC+a#s of *%D+ in t!is regard1 3-e:La0, #f NSDL 'yeC+a#s of *ationa %ecurities Depository +imited !a?e been framed under po#ers conferred under section GE of t!e Depositories Act; 1FFE and appro?ed by %ecurities and EBc!ange 'oard of )ndia1 T!e 'yeC+a#s contain fourteen c!apters and pertain to t!e areas isted be o# A 11 %!ort tit e and commencement G1 Definitions 51 'oard of Directors D1 EBecuti?e Committee 41 'usiness Ru es E1 Participants 61 %afeguards to protect interest of c ients and participants1 21 %ecurities F1 Accounts<transactions by book entry 131 Reconci iation; accounts and audit 111 Discip inary action 1G1 Appea s 151 Conci iation 1D1 Arbitration Amendments to *%D+ 'yeC+a#s re"uire t!e appro?a of t!e 'oard of Directors of *%D+ and %E')1
3*,i$e,, R*"e, #f NSDL Amendments to *%D+ 'usiness Ru es re"uire t!e appro?a of *%D+ EBecuti?e Committee and fi ing of t!e same #it! %E') at east a day before t!e effecti?e date for t!e amendments1 &unctions1 NSDL +erf#r., t4e f#""#0i$/ f*$cti#$, t4r#*/4 )e+#,it#r- +artici+a$t, A @ Enab es t!e surrender and #it!dra#a 7demateria isation and remateria isation81 @ $aintains in?estor !o dings in t!e e ectronic form1 @ Effects sett ement of securities traded on t!e eBc!anges1 @ Carries out sett ement of trades not done on t!e stock eBc!ange 7offCmarket trades81 @ Transfer of securities1 @ P edging<!ypot!ecation of demateria ised securities1 @ E ectronic credit in pub ic offerings of companies or corporate actions1 @ Receipt of nonCcas! corporate benefits ike bonus rig!ts; etc1 in e ectronic form1 @ %tock +ending and 'orro#ing1 %er?ices Offered by *%D+ *%D+ offers a !ost of ser?ices to t!e in?estors t!roug! its net#ork of DPsA @ $aintenance of beneficiary !o dings t!roug! DPs @ Demateria isation @ OffCmarket Trades @ %ett ement in demateria ised securities @ Receipt of a otment in t!e demateria ised form @ Distribution of corporate benefits @ Remateria isation @ P edging and !ypot!ecation faci ities @ &reeIing< ocking of in?estorJs account @ %tock ending and borro#ing faci ities of securities to and from t!e depository
2ee Str*ct*re #f NSDL *%D+ c!arges t!e DPs and not t!e in?estors direct y1 T!ese c!arges are fiBed1 T!e DPs in turn; are free to c!arge t!eir c ients; i1e1; t!e in?estors for t!eir ser?ices1 T!us; t!ere is a t#otier fee structure1 I$,+ecti#$A Acc#*$ti$/ a$) I$ter$a" A*)it *%D+ obtains audited financia reports from a its DPs once e?ery year1 *%D+ a so carries out periodic ?isits to t!e offices of its constituents C R>T agents; DPs and c earing corporations N to re?ie# t!e operating procedures; systems maintenance and comp iance #it! t!e 'yeC+a#s; 'usiness Ru es and %E') Regu ations1 Additiona y; DPs are re"uired to submit to *%D+; interna audit reports e?ery "uarter1 )nterna audit !as to be conducted by a c!artered accountant or a company secretary in practice1 T!e 'oard of Directors appoints a Discip inary Action Committee 7DAC8 to dea #it! any matter re ating to DPs c ients; )ssuers and R>T agents1 T!e DAC is empo#ered to suspend or eBpe a DP; dec are a security as ine igib e on t!e *%D+ system; freeIe a DP account and conduct inspection or ca for records and issue notices1 )f a DP is aggrie?ed by t!e action of t!e DAC; it !as t!e rig!t to appea to t!e EC against t!e action of t!e DAC1 T!is !as to be done #it!in 53 days of t!e action by DAC1 T!e EC !as to !ear t!e appea #it!in t#o mont!s from t!e date of fi ing t!e appea 1 T!e EC !as t!e po#er to stay t!e operation of t!e orders passed by t!e DAC1 T!e information on a suc! actions !as to be furnis!ed to %E')1 %ett ement of Disputes A disputes; differences and c aims arising out of any dea ings on t!e *%D+; irrespecti?e of #!et!er *%D+ is a party to it or not; !a?e to be sett ed under t!e Arbitration and Conci iation Act 1FFE1
Tec4$#"#/- a$) C#$$ecti9it- i$ NSDL

S-,te. Vie0 #f NSDL De+#,it#r- S-,te.
Account !o ders 7in?estors8 open account #it! t!e DPs1 T!e account detai s; entered in a computer system maintained by Depository Participants ca ed DP$; are e ectronica y con?eyed to t!e centra system of *%D+ ca ed D$1 Companies #!o !a?e agreed to offer demat faci ity to t!eir s!are!o ders use a computer system ca ed DP$ 7%-R8 to connect to t!e *%D+
Working of Depository system centra system1 DP$ 7%-R8 may be insta ed by t!e company itse f or t!roug! its R>T Agent1 T!is system is used to e ectronica y recei?e demat re"uests; confirm suc! re"uests or to recei?e beneficia o#ner data 7'enpos8 from t!e depository1 %tock eBc!anges recei?e payCin 7recei?ing securities against sa es made by brokers8 or to payout 7gi?ing securities to brokers against t!eir purc!ases8 using a computer system connected to *%D+ ca ed DP$ 7CC81 A t!e computer systems insta ed by DPs 7DP$CDP8; companies 7DP$C%-Rs8; and stock eBc!anges 7DP$CCC8 are connected to *%D+ centra system 7D$8 t!roug! /C%AT 7?ery sma aperture termina 8 or eased ines1 T!ese are co ecti?e y ca ed 'usiness Partner %ystems1 Any transaction conducted by any computer system in t!e *%D+ depository system #!ic! is targetted to reac! any ot!er computer system first gets recorded in D$ and t!en #i reac! t!e target1 *o t#o business partnersJ systems can communicate to eac! ot!er #it!out passing t!roug! t!e D$1 Mai$te$a$ce #f Acc#*$t, at t4e Ce$tra" S-,te. T!e *%D+ centra system kno#n as D$ maintains accounts of a account !o ders in t!e depository system1 A t!e transactions entered at any point in t!e computer system connected to it are first effected in t!e centra system and subse"uent y at t!ese computers1 T!us; t!e centra system of *%D+ !as t!e records of a detai s of e?ery transaction conducted in t!e depository system1 Di,tri5*te) Data5a,e Eac! of t!e computer systems connected to *%D+ system !as its o#n database re ating to its c ients1 T!is !e ps in gi?ing prompt and accurate ser?ice to t!e c ients1 -o#e?er eac! of t!e databases is reconci ed #it! t!e data at t!e centra system e?eryday in order to ensure t!at t!e data in t!e distributed database ta ies #it! t!e centra database1
C#..#$ S#ft0are *%D+ de?e ops soft#are re"uired by depository participants; companies; R>T Agents and c earing corporations for conducting depository operations1 T!us; t!e computer systems used by a t!e entities #i !a?e common soft#are gi?en by *%D+1 -o#e?er; depending on t!e
Working of Depository system business potentia ; branc! net#orks and any ot!er specific features; DPs may de?e op soft#are of t!eir o#n for coCordination; communication and contro and pro?ide ser?ice to t!eir c ients1 %uc! eBc usi?e soft#are is ca ed Pback office soft#areP1 DP$ system gi?en by *%D+ gi?es PeBport and importP faci ity to take out t!e transaction detai s to be used by back office soft#are and to feed in transaction detai s generated from t!e back office soft#are1 C#$$ecti9itT!e computer system used by DPs; companies; R>T Agents and stock eBc!anges may be connected to *%D+ centra system t!roug! /C%AT net#ork or eased ine net#ork1 *%D+ uses *%EJs /C%AT net#ork for t!e connecti?ity purposes1 T!us; /C%ATs used by *%E brokers can connect to *%D+ if t!e soft#are supp ied by *%D+ is used1 /C%AT uses sate ites for communication purposes1 %ome business partners may connect using eased ines pro?ided by $T*+< '%*+1 /C%AT or eased ine connections are ca ed primary connecti?ity1 )f primary connecti?ity fai s for any reason; 'Ps must !a?e t!e abi ity to connect t!roug! ot!er means1 %uc! ot!er means are P%T* ines; )%D* ines; POP ines7norma te ep!one ines8 t!roug! #!ic! t!ey can dia in to t!e *%D+ system and conduct t!eir transactions1
Ce$tra" De+#,it#r- Ser9ice, FI$)iaG Li.ite)
Ce$tra" De+#,itar- Sec*ritie, Li.ite)

A Depository faci itates !o ding of securities in t!e e ectronic form and enab es securities transactions to be processed by book entry by a Depository Participant 7DP8; #!o as
Working of Depository system an agent of t!e depository; offers depository ser?ices to in?estors1 According to %E') guide ines; financia institutions; banks; custodians; stockbrokers; etc1 are e igib e to act as DPs1 T!e in?estor #!o is kno#n as beneficia o#ner 7'O8 !as to open a demat account t!roug! any DP for demateria isation of !is !o dings and transferring securities1 T!e ba ances in t!e in?estors account recorded and maintained #it! CD%+ can be obtained t!roug! t!e DP1 T!e DP is re"uired to pro?ide t!e in?estor; at regu ar inter?a s; a statement of account #!ic! gi?es t!e detai s of t!e securities !o dings and transactions1 T!e depository system !as effecti?e y e iminated paperCbased certificates #!ic! #ere prone to be fake; forged; counterfeit resu ting in bad de i?eries1 CD%+ offers an efficient and instantaneous transfer of securities1 CD%+ #as promoted by 'ombay %tock EBc!ange +imited 7'%E8 joint y #it! eading banks suc! as %tate 'ank of )ndia; 'ank of )ndia; 'ank of 'aroda; -D&C 'ank; %tandard C!artered 'ank; (nion 'ank of )ndia and Centurion 'ank1
CD%+ #as set up #it! t!e objecti?e of pro?iding con?enient; dependab e and secure depository ser?ices at affordab e cost to a market participants1 %ome of t!e important mi estones of CD%+ system areA CD%+ recei?ed t!e certificate of commencement of business from %E') in &ebruary; 1FFF 18 -onourab e (nion &inance $inister; %!ri .as!#ant %in!a f agged off t!e operations of CD%+ on ju y 14;1FFF1 G8 %ett ement of trades in t!e demat mode t!roug! 'O) %!are!o ding +imited; t!e c earing !ouse of '%E; started in ju y 1FFF1 58 A eading stock eBc!anges ike t!e *ationa %tock EBc!ange; Ca cutta %tock EBc!ange; De !i stock EBc!ange; T!e %tock EBc!ange; A!medabad; etc !a?e estab is!ed connecti?ity #it! CD%+1 D8 As at t!e end of Dec G336; o?er 4333 issuers !a?e admitted t!eir securities 7e"uities; bonds; debentures; commercia papers8; units of mutua funds; certificate of deposits etc1 into t!e CD%+ system1
S4are4#")er, #f CDSL
CD%+ #as promoted by 'ombay %tock EBc!ange +imited 7'%E8 in association #it! 'ank of )ndia; 'ank of 'aroda; %tate 'ank of )ndia and -D&C 'ank1 '%E !as been in?o ?ed #it! t!is ?enture rig!t from t!e inception and !as contributed o?er#!e ming y to t!e fruition of
Working of Depository system t!e project1 T!e initia capita of t!e company is Rs113D143 crores1 T!e ist of s!are!o ders #it! effect from 11t! December; G332 is as under1
Sr. No.
Name of shareholders
Val e of holding !in " pees Lacs# 3,825.46 1, 1, 1, 1,5 . . . .
$ terms to total e% it&
1 Bombay Stock Exchange Limited 2 Bank of India 3 Bank of Ba#oda 4 State Bank of India 5 $%&' Bank Limited 6 Standa#d 'ha#te#ed Bank " 'ana#a Bank 8 (nion Bank of India ! Bank of )aha#a*ht#a 1 +he ,amm- and .a*hmi# Bank Limited
36.61 !.5" !.5" !.5" 14.36 ".18 6.45 1.!1 1.!1 1.!1 .!6 22 1 .
"5 . 6"4.46 2 2 2 1 . . . . . 8 )*+,-*.**
11 +he 'a/c-tta Stock Exchange 0**ociation Limited 12 1the#* '('AL
A professional Board of Directors with vast and varied experience in capital markets and banking is at the helm of affairs at CDSL.
3#ar) #f Direct#r,

.r. S S 'hak r .r. V V "a t .r. / S "edd& .r. .. ". .a&&a .r. .adh 0annan .r. L. /. Aggarwal .r. /rakash ". 0acholia .r. An1an Bar a .r. A. D. .. Chavali .r. A. ". 0 pp swam& 'hai#man )anaging %i#ecto# and 'hief Exec-ti3e 1ffice# Exec-ti3e %i#ecto# Inde4endent %i#ecto# S4on*o# %i#ecto# 5 Bombay Stock Exchange Limited S4on*o# %i#ecto# 5 Bombay Stock Exchange Limited S4on*o# %i#ecto# 5 Bombay Stock Exchange Limited S4on*o# %i#ecto# 2 State Bank of India S4on*o# %i#ecto# 2 Bank of Ba#oda S4on*o# %i#ecto# 2 Bank of India
Ma$a/e.e$t Tea.
.r. V V "a t .r. / S "edd& .r. /ramod Deshpande .r. C&r s 0hambata )anaging %i#ecto# and 'hief Exec-ti3e 1ffice# Exec-ti3e %i#ecto# 'hief +echno/ogy 1ffice# S#.6ice 7#e*ident. B-*ine** %e3e/o4ment8'-##ent/y on de4-tation to '%SL 6ent-#e* Ltd. a* 'E1 9ith effect f#om "21222 6: 6ice 7#e*ident. Info#mation +echno/ogy 6ice 7#e*ident. 0-dit, In*4ection ; 'om4/iance 6ice 7#e*ident. 0cco-nt* ; 0dmini*t#ation 6ice 7#e*ident. B-*ine** %e3e/o4ment 6ice 7#e*ident. 14e#ation* 6ice 7#e*ident. <e9 7#o=ect* 6ice 7#e*ident. Lega/ ; 'om4any Sec#eta#y
.r. 2itendra Chad .s. Na&ana (valekar .r. Bharat Sheth .r. S nil Alvares .r. "amk mar 0. .r. 2ignesh 3andhi .r. Satish B dhakar
2EE STRUCTURE O2 CDSL

'%SL fee* *t#-ct-#e to it* de4o*ito#y 4a#tici4ant* i* a* fo//o9*>

SR.NO.
1 2 3 4 5 6 " 8
Detai", #f C4ar/e,
Acco nt (pening Charges Acco nt .aintenance Charges 'ransaction Charges .arket 4 (ff5.arket 'ransaction Charges Clearing .ember Acco nts C stod& Charges Demat Charges "emat Charges /ledge78&pothecation Charges
CDSL
<IL <IL fo# indi3id-a/* ?*.5 @2 4.a. to 'o#4o#ate* ?*.6@2
66
! 1
9nternet :acilit& 'easi' 9nternet :acilit& 'easiest'
&/at cha#ge of ?*.5 @2 4e# month on ') acco-nt* fo# 4ay2in and 4ay2o-t* #ecei3ed f#om '$ <IL <IL ?*.1 @2 4e# 1 *ec-#itie* o# 4a#t A-antity o# ?*. 1 @2 4e# ce#t. 9hiche3e# i* highe#. 7/edge acce4tance 2 ?*.12@2 4e# #eA-e*t. (n4/edge acce4tance 2 ?*.12@2 4e# #eA-e*t. 7/edge In3ocation 0cce4tance 2<i/ ?*.2 , @2 one time fo# #egi*t#ation ?*.3 , @2 one time fo# #egi*t#ation ?*.1,15 @24.a.fo# #ene9a/ of digita/ *ignat-#e
M#$t4"- c4ar/e, f#r DP, #r it, 5ra$c4e, 0.e.f. 1,t Ma-A !00% 2#r Mai$ DP,= Rs15;333<C per mont! or t!e amount of t!e actua bi for a gi?en mont! #!ic!e?er is !ig!er1 2#r DP:3ra$c4e,= Rs1G;333<C per mont! or t!e amount of t!e actua bi for a gi?en mont! #!ic!e?er is !ig!er1 2ee, f#r C"eari$/ Me.5er, CD%+ co ects on y Rs1 433< C per mont! from its DPs for a C$ eBcept for C$ )n?estors %ecurities Account1 T!e fo o#ing tariff structure #i be effecti?e from We)$e,)a-A A+ri" 01A !008.
$ont! y Transaction bi amount 7SRs1E<Cper transaction8 7in Rs18 $ore t!an Rs114 ak!s $ore t!an Rs1D ak!s and upto Rs114 ak!s $ore t!an Rs11 ak! and upto Rs1D ak!s (pto Rs11 ak!
Rate per Debit Transaction 7in Rs18 D164 4133 4143 E133
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY
Researc! $et!odo ogy refers to searc! of kno# edge 1one can a so define reseac! met!odo ogy as a scientific and systematic searc! for re"uired information on aspecific topic1 T!e #ord researc! met!odo ogy comes from t!e #ord 9ad?ance earner Hs dictionary meaning of researc! as a carefu in?estigation or in"uiry especia y t!roug! researc! for ne# facts in my branc! of kno# edge for eBamp e some aut!or !a?e define researc! met!odo ogy as systemstiIed effort to gain ne# kno# edge1
O3HECTIVES O2 THE STUDY

To understand t!e basic term and process in depositary system1 ,et specific kno# edge about *%D+ and C%D+ and its in?estor pattners1 Pro?ide aducate and desirab e information for t!e readers1 To find out t!at factors or specu ations t!ose are responsib e for creating a negati?e image of D% in t!e mind of in?estor1 ,etiting t!e information about t!e a#areness of depository system1 &ind out t!e satisfactory e?e of t!e in?estors regarding t!is system1
TYPES O2 RESEARCH
ANALYTICAL RESEARCHA )t !as to used facts or information a ready a?ai ab e and ana yIe t!ese to make a critica e?a uation of materia 1 SAMPLE SIIE= Considering t!e constraints it #as decided to conduct t!e study based on samp e siIe of 43 peop e in specific age groups1
METHODS O2 DATA COLLECTION
)n t!e project #ork Primary data secondary data 7bot!8 sources of data !as been usedA 1 PRIMARY SOURCEA ) !a?e gat!ered information about our project from t!e interaction #it! t!e customers of our company i1e1 Re iance $oney1 T!e samp ing met!od used #as basica y con?enience samp ing and most of t!e ca s made #ere co d ca s made on t!e generated database of recipients of ot!er companies1 SECONDARY DATAA T!e secondary data; ) !a?e co ected from t!e ?arious #ebsites of re iance money; ?arious journa s; magaIines etc1
TOOL O2 ANALYSIS
)n t!e project #ork "uantitati?e tec!ni"ue > percentage met!od !as been used1
RESEARCH DESIGN
&or t!e proper ana ysis of data simp e "uantitati?e tec!ni"ue suc! as percentage #ere used1 )t !e p in marketing more accurate genera iIation &rom t!e data a?ai ab e 1T!e data #!ic! #as co ected from a samp e of popu ation #as assumed to be representing entire popu ation #as interested 1
DATA A*A+.%)% A*D )*TERPRETAT)O*
Tues1 18 Are you kno# about Depository systemU A8 .es '8 *o D6 35
Tues1 G8 -a?e you sufficient kno# edge and a#areness about *%D+ or C%D+U A8 .es '8 *o C8 To %ome eBtend A8 .es
'8 *O 1G 14 G5
C8 To some eBtent
Tues1 58 Are you satisfy #it! fee structure of depository systemU A8 .es '8 *o C8 To %ome eBtent
A8 .es '8 *o C8 To some eBtends
16 G6 3E
Tues1 D8 'y #!ic! depository company you make tradingU A8 %!arek!an '8 )ndiabu s C8 Re iance D8 )C)C) direct1com E8 Ot!er
A8 '8 C8 D8 E8 %!arek!an )ndiabu s Re iance )C)C) direct1com Ot!er 36 11 1D 32 13
Tues1 48 )f your se ected trading company increase t!ere annua c!arges #i you go #it! itU A8 .es '8 *o C8 )f c!arges are reasonab e
A8 .es '8 *o C8 )f c!arges are reasonab e
3G GF 1F
Tues1E8 According to you #!ic! one is t!e most important factor for a trading company to en!ance t!e oya ty and customers U A8 Pro?ide maBimum profit '8 Pro?ide tips time to time C8 *o !idden c!arges D8 Ot!er factors
A8 '8 C8 D8 Pro?ide maBimum profit Pro?ide tips time to time *o !idden c!arges Ot!er factors 16 32 12 36
O3SERVATION
To study t!e abo?e Doug!nut; ,rap! and pie c!arts ) obser?e t!at t!e most of t!e peop e of pat!ankot !a?e kno# edge about depository system but t!ey !a?e not a proper and basic kno# edge about t!is ?ast concept on y imited information is t!ere1 According to data ana ysis resu t represent be o#1 After ana ysis of first one "uestion it c ear t!at on y 35 7EM8 respondents are not introduce #it! term depository system but majority is goes #it! yes option D6 7FDM8 1 Data of second "uestion is s!o#s t!at on y 1G respondents !a?e a sufficient kno# edge about C%D+ and *%D+ it means most of respondent !a?e a no or on y itt e bit kno# edge about t!ese t#o terms data says t!at 14 respondents go #it! no and G5 go #it! to some eBtent1 Wit! obser?ation of t!ird "uestion #e find out t!at t!e most of t!e pub ic of pat!ankot are not satisfy #it! present fee structure of depository system1Data represents t!at G6 respondents are not satisfy #!ereas 16 are satisfy and 3E are satisfy on y some eBtents1 T!e obser?ation of t!is "uestion eBp ain t!at t!e s!arek!an trading company is not popu ar in pat!ankot area because on y o6 respondents are make trading #it! it; After t!at )C)C) direct1com comes and get 32 ?otes; re iance get maBimum ?otes 1D and 13 respondents making trading #it! ot!er companies1 )n t!is "uestion its c ear t!at Re iance is popu ar trading company in pat!ankot area1 &ift! one "uestion is basica y inc ude in t!is "uestioner for kno#ing t!e oya ty of pub ic; regarding its trading company1 According to data GF respondents are not s#itc!o?er to ot!er company #!i e its present trading company increase its annua fee1 )t means peop es are satisfy #it! its trading company and oya about it1 +ast "uestion of my "uestioner is ?ery essentia for find t!e factor #!ic! are direct y inf uence t!e amount and oya ty of t!e customer1 Data s!o#s t!at most
Working of Depository system of peop es 7128 rea iIed t!at !idden c!arges are ?ery defau t factor in decreasing t!e number of customers and its oya ty1 W!ereas 16 respondents are says t!at $aBimum profits are t!e main factor; 32 go #it! time to time tips and on y 36 respondents se ect ot!er factors option1
SUGGESTION
RECOMMENDATIONS E SUGGESTIONS
Working of Depository system Regu ar statements of !o dings s!ou d be made a?ai ab e at regu ar inter?a s1 T!e statement of !o dings s!ou d be pro?ided #it! t!e sa e and purc!ase of t!e s!ares1 A#areness of functioning of t!is system s!ou d be spread to t!e pub ic t!roug! ad?ertisement1 C ear picture of t!e deductions made by depository participant or t!e c!arges e?ied on t!e customers s!ou d be pro?ided in b ack and #!ite1 Proper feedback s!ou d be taken into consideration1 &or e1g1 ca s s!ou d be made #!en t!e account is opened1 'ank s!ou d eBpand its net#ork by opening its more branc!es and franc!ise and t!ere s!ou d be easy accessibi ity of ser?ices rendered by a t!is system1 T!e processing of t!e demat account opening s!ou d be made fast1 Aggressi?e efforts s!ou d be made by sa es team to tap t!e potentia customers and to increase t!e customer base1 T!e bank s!ou d aunc! more #e fare sc!emes from time to time1 T!e eCbroking ser?ice s!ou d be introduced1 Customers s!ou d be made a#are about t!e ser?ices ike p!one banking; net banking; bi pay; demateria iIation etc1 an instruction manua te ing about !o# to use t!eir ser?ices can a so be gi?en to t!e customer to make t!ese ad?anced ser?ices more popu ar1
LIMITATION
W!o e area is not co?ered in t!is project so on y 43 respondents are representati?e for comp ete area its not idea data1
T!e study is imited to t!e different sc!emes a?ai ab e under t!e Demat account se ected1
T!e ack of information sources for t!e ana ysis part is a so a imitation of t!is study1
+ess a#reness about t!is system in pub ic is ?ery critica b ock in t!is study1
)n t!is sytem ?ast financia terms are comes in t!is system but peop es are not introduce #it! it so peop es are on y imited kno#e dge about t!is system and not get sufficent profit from t!is system1
CONCLUSION
To conc ude; it can be said t!at t!e researc! findings c ear y re?ea t!e good#i and reputation of depository system among t!e customers1 'ut t!ere is a need to strengt!en t!is depository system by spreading a#areness about t!e ser?ices offered by *%D+; C%D+ and its trading companies t!roug! ad?ertisement and by eBpanding t!e more branc!es of t!is system a o?er t!e country and a so by tapping t!e potentia customers t!roug! inno?ati?e means1
3I3LIOGRAPHY
We5,ite, 000.re"ia.ce.#$e-.c#. 000.icici)irect.c#. 000.,4are14a$.c#. 000.i$)ia5*"",.c#. 000..#$e-c#$tr#".c#. 000.re)iff.c#. Referre) 5##1, 1. 2i$a$cia" i$,tit*ti#$, a$) .ar1et,:L.M.34a"e !. I$9e,t.e$t .a$a/e.e$t:V.B.34a""a &. Re,earc4 .et4#)#"#/-:M#4it /*+taANa9)ee+ A//ar0a" (. 2i$a$cia" ,er9ice,: S4a,4i 1. /*+taA Ni,4a a//ar0a"
ORIGNAL SYNOPSIS
<UESTIONEERIE
Tues1 18 Do you kno# about Depository systemU A8 .es '8 *o Tues1 G8 -a?e you sufficient kno# edge and a#areness about *%D+ or C%D+U A8 .es '8 *o C8 To %ome eBtent Tues1 58 Are you satisfied #it! fee structure of depository systemU D8 .es E8 *o &8 To %ome eBtent Tues1 D8 'y #!ic! depository company do you make tradingU &8 %!arek!an ,8 )ndiabu -8 Re iance )8 )C)C) direct1com J8 Ot!er Tues1 48 )f your se ected trading company increases t!eir annua c!arges #i you go #it! itU D8 .es E8 *o &8 )f c!arges are reasonab e Tues1E8 According to you #!ic! one is t!e most important factor for a trading company to en!ance t!e oya ty and customersU A8 Pro?ide maBimum profit '8 Pro?ide tips time to time C8 *o !idden c!arges D8 Ot!er factors

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1

Working of Depository system

A PROJECT REPORT On Working of

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TO WHOMSOEVER IT MAY CONCERN

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WHAT IS DEPOSTORY SYSTEM

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