What is NSDL?
The National Securities Depository Limited is a financial entity set up to hold securities in the form of tangible or non-physical certificates. It's like a bank account system, but for securities like bonds and shares, in the form of either tangible or intangible certificates. It was set up with the objective of facilitating fast transfer of securities. Since all transfers are now electronically made, it saves a lot of time that would have been required had the traditional way of exchanging tangible certificates been followed. The NSDL maintains demat accounts, in which financial securities are held in electronic forms.
The benefits of holding a NSDL demat account
1. No bad deliveries: The quality of assets can be easily examined as they are held in electronic form in the demat account.
2. Elimination of physical certificate risks: There is no risk of theft, destruction, damage or mutilation to certificates.
3. Elimination of Stamp Duty: Securities transferred through depositories have no stamp duties.
4. Immediate transfer and registration of securities: Once the security is accredited to the investor's account, he becomes the legal owner of that security. The arduous process of sending it to the company registrar to transfer ownership and all the risks involved with it are eliminated.
5. Faster settlement and more liquidity: In case of NSDL, settlement is done on the 2nd working day from the trade day.
6. Reduced paperwork: Back-office paper-work by brokerages are reduced, and thus the brokerage charges as well. Additionally, it eliminates the need to maintain a number of trail documents for a transaction as it's all electronic.
7. Status reports: Statements of detailing transactions and holdings are provided on a regular basis.
8. Easy transmission and change in investor details: Shares held in the demat account can be easily transmitted by presenting required documentation, and it reflects in databases of all companies where you are registered as owner of securities. Furthermore, investor details can also be changed by providing the documentation and informing the Depository Participants.
Read Here: Difference Between NSDL & CDSL
Services provided by NSDL
1. Basic Services
As per the Depositories Act 1996, basic services including demat account maintenance, transfers for trading accounts settlements and nominations. To avail these services, a depository account with Depository Participants- entities such as banks through whom the services of NSDL reach the investors.
Depository accounts can be of three types-
b) Clearing member, and
c) Intermediary account.
The following services are provided for these accounts-
a) Dematerialization and rematerialization of physical certificates.
b) Market transfer: Trade of securities held in demat form.
c) Off market trade: Trades that are not cleared through the Clearing House of the exchange.
d) Inter-depository transfer: Transfer of securities from one depository to another.
e) Transmission: Devolution of title to shares other than transfer. For example, in case of death.
f) Transmission: Devolution of title to shares other than transfer. For example, in case of death.
2. NSDL CAS (Consolidate Account Statement)
This single statement of all investments in single or joint names enables all subscribers to electronically access their financial assets as part of a single demat account.
3. Value Added Services
a) Hypothecation of securities: For availing credit facilities, the securities can be collateral as long as both borrowers and lenders have NSDL demat accounts.
b) Automatic delivery out instructions.
c) Dividend distribution: Cash corporate benefits such as dividends can be distributed to shareholders
d) Lending and borrowing: Under Securities Lending Scheme 1997, lending and borrowing of securities can be carried out intermediaries registered with SEBI.
e) Allotment of public issues in electronic form.
f) SMS alert: Demat account holders can receive alerts for all transactions at no charge.
- IDeAS (Internet-based Demat Account Statement)
- STEADY (Securities Trading Information Easy Access and Delivery)
- Depository Account Validation (DAN)
- SPICE (Submission of Power of attorney based Instructions for Clients Electronically)
- SIMPLE (Submission of Instruction through Mobile Phone Login Easily)
India's capital market, which is over a century old, was always very active. However, due to paper-based settlements it had some drawbacks such as bad distribution, delayed execution of transition, etc. The Depositories Act, 1996, provided for creation of Security Depositories in India for managing securities. NSDL is India's first & largest depository. Established on 8th November 1996, the primary purpose it serves is handling securities held in the Indian capital market in a dematerialized form, and has been doing it rather well for decades.