What is NSDL?

A bank holds the investor’s money, while the NSDL keeps stocks, shares, bonds, and other classes of securities.

March 02, 2018 5:47 IST | India Infoline News Service
NSDL stands for National Securities Depository Limited. It is India’s oldest and largest depository. The term “depository” refers to the organization meant for holding and safeguarding the securities that are traded in the securities market.
It contains the securities in electronic form as opposed to the previous method of recording paper transactions of shares, bonds, and other financial instruments. The NSDL can be compared to a bank. A bank holds the investor’s money, while the NSDL keeps stocks, shares, bonds, and other classes of securities.
When investors purchase securities, they are automatically credited to the depository account, and when those securities are sold, they are automatically debited from the depository account. Similarly, if a company wants to know about the investor’s information for awarding dividends, rights or any other notification, it will ask the depository about the investor’s details.
Benefits of holding an account in NSDL:
The investors and the companies enjoy numerous benefits due to the NSDL’s holding of financial instruments:
Immediate transfer and registration of securities:
As the securities are held in the electronic form, it is easy to transfer the securities between buyer and seller very easily. Usually, the transfer of securities takes a minimum of 2-4 months, however in electronic form, once the legality of ownership is confirmed the securities are immediately transferred to the buyer’s depository account.
Less paperwork:
As every information is available online, there is very less need for paperwork. All the required information is available with a click of few buttons. There is no need to have an offline record of the securities by the corporate or the investor. Also, there is no risk of theft or loss as there is no risk of the securities getting damaged.
No bad deliveries:
Before the electronic method, the investor has to purchase the securities without the full knowledge of the securities bought. However, the NSDL has made this problem disappear as the information about the securities is fully displayed on the site, and there is no question of them being “under objection.” So the possibility of bad delivery is eliminated.
Non-cash benefit transfer:
NSDL has the option of transferring non-cash benefits such as bonus, rights to the investor’s account. As this operation happens online, there is no need of paperwork, and the transfer happens through a secure payment gateway.
Stamp duty consideration:
Most securities require the need of stamp duty when there is transfer or sale. However, the electronic transfer of securities through the depository method does not require stamp duty.
These are some of the benefits that NSDL offers to its participants, and it also provides three types of services such as:
Basic services:
The NSDL offers basic services such as account maintenance, transfers for trade settlements, nomination and many more. The Depositories Act defines the basic services of the NSDL.
Value-added services:
The NSDL also offers the value-added services of hypothecation, and pledge, lending of stocks, online services such as SPEED-e and IDeAS, distribution of cash/non-cash corporate benefits and many more services. It also includes a system that allows brokers to transfer contract notes to fund managers/custodians via online. This service is called STEADY and has been an NSDL indispensable service since 30th November 2002.
NSDL Consolidated Account Statement (CAS):
NSDL Consolidated Account Statement (CAS) is a statement that offers the investor the information about the securities owned by them. It helps the investor to keep track of their investment portfolio and make informed financial investments in the future.

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