Basic services of NSDL
According to the provisions of the Depositories Act, there are various services are provided by NSDL to brokers, banks, investors, stock exchanges, and security issuers participants in the Indian Financial Market.
To avail of these services, an investor needs to open an account with DPs. There are three types of depository accounts.
- Beneficiary account
- Clearing member account and
- Intermediary account.
Following are some basic service provided by the above accounts:
- Under the service, an investor needs to deface the certificates and surrender them to the DPs.
- DP intimate to NSDL and sends all required certificates to the concerned authority of NSDL.
- Once the authorized issuer verifies the claim, the confirmation is received than the securities are submitted in the depository account of an investor by NSDL.
2. Rematerialization: It is a process under which the securities are held in electronic form and converted it into a physical certificate.
- Firstly, the investor is required to submit a rematerialization request to the concerned DP.
- Thereafter the DP blocks the holding of the investor by submitting the rematerialization request in the system.
- Specific holdings of the investors are blocked only to the extent to which the rematerialization request is received.
- The DPs send the request form to the NSDL along with request form to the concerned issuer for confirmation.
- Once the receiving of the request form, the concerned issuer prints the certificate and dispatches them to the client.
- Thereafter the NSDL updated with the same information and transaction is processed.
3. Market Transfer: An investor can deal with the securities held by them in the dematerialized format.
4. Off-Market Transfer: Any trades which are not settled via the clearing house of exchange is an Off-Market Trade. Delivery of securities from sub-broker or trade-for- trade transactions are some examples of Off-Market.
5. Inter-depository transfer: When the transfer of securities is from an account in one depository to an account of another depository called inter-depository transfer.
6. Transmission: Under this service, the transmission is a devolution of shares to another instead of self. This is an operation by law under the case of bankruptcy, death, marriage, and inheritance, etc.
7. Corporate Actions: These are the benefits in the form of dividends, bonus share, right issue, etc, which are given by the companies to the investors.
1. SMS Alerts: NSDL offers an SMS Alert facility for all demat account holders where they can receive all transactions directly from NSDL. It is free of cost service offered by NSDL to investors.
2. Automatic Delivery out Instructions: If an investor wants to move its security from Clearing Members Pool to Clearing Members Delivery Account automatically based on the net delivery obligations of its Clearing Members. Such instructions on the investor’s behalf have to be authorized by clearing corporations. The clearing corporations to execute all the auto transactions on behalf of the investors.
3. Pledge or Hypothecation of securities: For availing loan or credit facility, securities held in a depository account can be pledged. Both the borrower (pledger) and the lender (pledgee) should have an account in the NSDL depository for pledging securities.
4. Dividend Distribution: Dividend distribution facility provides by NSDL to all shareholders in the form of dividends as a form of corporate cash benefits.
5. Lending and borrowing: Under the service, an intermediary requires the approval of NSDL and authorized under the Securities Lending scheme, 1997 with SEBI.
6. Public issue: A statement issued by SEBI that all respective trades of public shares will be held in Demat form only.
Benefits of NSDL
a) Elimination of risk related to physical certificates: When securities are held in a dematerialized form then there is no risk involved. Risks such as physical wear and tear, risk of theft, destruction, and fire, etc. It also saves the cost of issuing duplicate copies of a certificate.
b) Fastest registration and transfer of securities: Once the investor has purchased security, and the security has been credit into the investor’s account and he became the legal owner of the security. It means that there is no need to send the transaction receipt to the registrar for changing the ownership which is time-consuming like the traditional physical system. It also reduces the risk of delay in transfer.
c) Stamp duty: Securities are transferred via depositories through electronic mode so there is no need to paying stamp duty. In also addition, there is no need for stamp duty in case of transfers of equity shares, debts instruments, bonds, and mutual funds.
d) Less in Paperwork: There is less paperwork involved due to online transactions. So, there is no required to maintain the number of documents for the transactions.
e) No risk of bad deliveries: NSDL has eliminated the issue of bad deliveries. In the NSDL, there is no required to examine the assets before purchasing because NSDL holds securities in a dematerialized format. Hence, there is no chance of bad deliveries.
f) Faster settlement process: NSDL provides a faster method of settling transactions. Settlements in the NSDL is done on the second working day from the day of trade. It also enables faster turnover for the investors and improves liquidity for the investor.
g) Faster disbursal of non-cash corporate benefits: Under the benefit, NSDL facilitates direct credit of corporate benefits in non-monetary forms of shares, bonds, and debentures. It also provides the facility of a quick and safe way to transfer these funds.
h) Periodic statements: In the NSDL the periodic statement of accounts receives by an investor via email. Periodic statement of account which containing the status of holding are provided to the investors and detail of transactions that have taken place.
i) Ease in updating of investor’s detail: An investor would have to update its details the same in every company in which he is invested. All information can be updated online, simply by uploading the required KYC documents at the DPs. The data is updated everywhere immediately and there is no required to inform every company separately.
j) Simple process for the sale of securities held on behalf of minor: As guardian of a minor, don’t need the permission of the court for a deal in securities which have been invested on behalf of the minor in the Demat account.
k) Ease process of transmission: If an investor decided to transfer their securities of ownership then the investor can provide the required documents to the DPs, and the details for the same are immediately updated. In the database of all the companies. It eliminating the traditional system in which an investor will have to individually communicate to all the companies where they hold the shares.