Difference Between NSDL and CDSL
The process of buying and selling shares is possible in India because of depositories and as an investor, it is important to know about the two functioning depositories.
In India, there are two depositories: National Securities Depositories Ltd (NSDL) and Central Securities Depositories Ltd (CDSL). Both the depositories hold your financial securities, like shares and bonds, in dematerialised form and facilitate trading in stock exchanges. However, to make use of the depositories and start your investing journey, you must open a Demat account and a trading account. You must always remember to open the best Demat account with a reliable stockbroker as it will help you make wise investment decisions.
Understanding depositories and depository participants:
- Both NSDL and CDSL are depositories that maintain ownership records of financial securities. They are linked with investors through Depository Participants (DPs), also called stockbrokers.
- A DP is a depository agent acting as an intermediary between the depository and its clients. DPs are registered with the depository via the relevant provisions of the SEBI Act. You have to open a Demat account with a DP to avail the services of depositories.
- Typically, DPs are stock brokerage firms that provide investors with the service of opening Demat and trading accounts along with providing a trading platform, market reports and other value-added services.
Functioning of Depositories
- Once you start trading, the securities you buy or sell are debited or credited from the depository and reflected in your Demat account.
- Depositories provide information to listed companies about shareholders while facilitating trading transactions. Furthermore, the listed companies approach the depositories to get information about the shareholders to send notifications such as dividend rights, stock splits etc.
What is NSDL?
- NSDL is the oldest and largest depository in India. It commenced operations in 1996 in Mumbai. It was the first depository to provide trading services in electronic format.
- According to data from SEBI, NSDL has around 2.4 crore active investors, with more than 36,123 depository participant service centres across 2,000 cities.
- NSDL is entrusted with the safekeeping of the following financial securities in the electronic format:
- Commercial papers
- Mutual Funds
- NSDL offers a wide range of services, like:
- Dematerialisation services
- Rematerialisation services
- Transfers between depositories
- Off-market transfers
- Lending of securities
- Collateral and mortgage of securities
What is CDSL?
- CDSL started operations in Mumbai in 1999 and is the second-largest depository in the country after NSDL.
- Like NSDL, it provides all services, like holding financial securities in the electronic format and facilitating trade and settlement of orders. All forms of stocks and securities - just like NSDL - are held at this central depository.
- According to data from SEBI, it has more than 5.2 crore active customer accounts with around 21,434 depository participant service centres.
Registration of DPs with NSDL and CDSL:
A stockbroking firm usually selects between the two depositories for registration on the basis of fees and charges, services, and other aspects such as ease of doing business. As an investor, you can check with your DP to know whether they are registered with NSDL or CDSL. Some stockbrokers are also registered with both depositories.
Difference between NSDL and CDSL:
In terms of services to investors, there is no key difference between having a Demat account with a DP registered either with NSDL or CDSL. Both are regulated by SEBI and provide similar trading and investing services. The only difference between both the depositories is their operating markets. While NSDL has National Stock Exchange (NSE) as the primary operating market, CDSL’s primary market is the Bombay Stock Exchange (BSE).
An investor can easily open a Demat account, and a trading account with a DP linked with either of the depositories. While beginning your investment journey in stock markets, always remember to choose a trusted and reliable stockbroker who can provide you with cutting-edge trading platforms and features like a free online Demat account and zero Annual Maintenance Charge (AMC).