demat final report

8/7/2019 demat final report

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EXECUTIVE SUMMARY

The Indian Financial System has undergone a considerable change in

the recent past. The Financial Sector reforms, along with technological

advancement have integrated international markets, which have

facilitated the scope for uninterrupted mobility of funds in various

financial markets. It has also led to efficient and low-cost transactions

related to securities. This can be seen in the Indian financial sector

reforms also, which started in the early 1990s.

Dematerialization of financial securities is the first sign of financial

reforms in India. Finance Ministry and SEBI realized the need of moreefficient financial system. As a result of this NSDL and CDSL came into

picture. It aims at ensuring the safety and soundness of Indian

marketplaces by developing settlement solutions that increase

efficiency, minimize risk and reduce costs.

The Indian Stock markets have seen a major change with the

introduction of depository system and scrip less trading mechanism.

There were various problems like inordinate delays in the transfer of

share certificates, delay in receipt of securities and inadequate

infrastructure in banking and postal segments to handle a large

volume of application and storage of share certificates .To overcome

these problems physical dealing in securities should be eliminated .

The Indian stock market introduced the system of dematerialization

recognizing the need for scrip less trading.

With the help of Demat and Trading account, buying and selling of

shares has become a much faster and even process than trading with

the assistance of a physical broker. It provides for the assimilation of

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bank, broker, stock exchange and depository participants. This helps to

get rid of the painstaking procedure of investing in stock exchange.

According to the Depositories Act, 1996, an investor has the option to

hold shares either in physical or electronic form .The process of

converting the physical form of shares into electronic form is called

dematerialization or in short demats. The converted electronic data is

stored with the depository from where they can be traded. It is similar

to a bank where an investor opens an account with any of the

depository participants. Depository participant is a representative of

the depository .The DP maintains the investors securities account

balances and intimates him about the status of holdings.

This study involves understanding the various concepts of Demat and

on Line Trading has been submitted to Chetana’s Institute of

Management and Research.

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BANKING SECTOR

The last decade has seen many positive developments in the Indian

banking sector. The policy makers, which comprise the Reserve Bank

of India (RBI), Ministry of Finance and related government and financial

sector regulatory entities, have made several notable efforts to

improve regulation in the sector. The sector now compares favorablywith banking sectors in the region on metrics like growth, profitability

and non-performing assets (NPAs). A few banks have established an

outstanding track record of innovation, growth and value creation. This

is reflected in their market valuation. However, improved regulations,

innovation, growth and value creation in the sector remain limited to a

small part of it. The cost of banking intermediation in India is higher

and bank penetration is far lower than in other markets. India’s

banking industry has strengthened itself significantly as it has to

support the modern and vibrant economy which India aspires to be.

While the onus for this change lies mainly with bank managements, an

enabling policy and regulatory framework will also be critical to their

success.

The Indian banking system is financially stable and resilient to the

shocks that may arise due to higher non-performing assets (NPAs) and

the global economic crisis, according to a stress test done by the

Reserve Bank of India (RBI).

Significantly, the RBI has the tenth largest gold reserves in the world

after spending US$ 6.7 billion towards the purchase of 200 metric

tonnes of gold from the International Monetary Fund (IMF) in November

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2009. The purchase has increased the country's share of gold holdings

in its foreign exchange reserves from approximately 4 per cent to

about 6 per cent.

Following the financial crisis, new deposits have gravitated towards

public sector banks. According to RBI's 'Quarterly Statistics on Deposits

and Credit of Scheduled Commercial Banks: September 2009',

nationalized banks, as a group, accounted for 50.5 per cent of the

aggregate deposits, while State Bank of India (SBI) and its associates

accounted for 23.8 per cent. The share of other scheduled commercial

banks, foreign banks and regional rural banks in aggregate deposits

were 17.8 per cent, 5.6 per cent and 3.0 per cent, respectively.

With respect to gross bank credit also, nationalized banks hold the

highest share of 50.5 per cent in the total bank credit, with SBI and its

associates at 23.7 per cent and other scheduled commercial banks at

17.8 per cent. Foreign banks and regional rural banks had a share of

5.5 per cent and 2.5 per cent respectively in the total bank credit.

Population wise distribution of deposits and credits of

commercial banks of India

2008-2009

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The scheduled commercial banks served 34,709 banked centers. Of these centers, 28,095 were single office centers and 64 centers had

100 or more bank offices.

The confidence of non-resident Indians (NRIs) in the Indian economy is

reviving again. NRI fund inflows increased since April 2009 and

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touched US$ 45.5 billion on July 2009, as per the RBI's February

bulletin. Most of this has come through Foreign Currency Non-resident

(FCNR) accounts and Non-resident External Rupee Accounts. India's

foreign exchange reserves rose to US$ 284.26 billion as on January 8,

2010, according to the RBI's February bulletin.

SWOT ANALYSIS

STRENGTH

• Indian banks have compared favorably on growth, asset quality

and profitability with other regional banks over the last few

years. The banking index has grown at a compounded annual

rate of over 51 per cent since April 2001 as compared to a 27 per

cent growth in the market index for the same period. Bank

lending has been a significant driver of GDP growth and

employment.

• Extensive reach: the vast networking & growing number of

branches & ATMs. Indian banking system has reached even to

the remote corners of the country.

• The government's regular policy for Indian bank since 1969 has

paid rich dividends with the nationalization of 14 major private

banks of India.

• India has 88 scheduled commercial banks (SCBs) - 27 public

sector banks (that is with the Government of India holding a

stake)after merger of New Bank of India in Punjab National Bank

in 1993, 29 private banks (these do not have government stake;

they may be publicly listed and traded on stock exchanges) and31 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by ICRA

Limited, a rating agency, the public sector banks hold over 75

percent of total assets of the banking industry, with the private

and foreign banks holding 18.2% and 6.5% respectively.

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• Foreign banks will have the opportunity to own up to 74 per cent

of Indian private sector banks and 20 per cent of government

owned banks.

WEAKNESS

• PSBs need to fundamentally strengthen institutional skill levels

especially in sales and marketing, service operations, risk

management and the overall organizational performance ethic &

strengthen human capital.

• Old private sector banks also have the need to fundamentally

strengthen skill levels.

• The cost of intermediation remains high and bank penetration is

limited to only a few customer segments and geographies.

• Structural weaknesses such as a fragmented industry structure,

restrictions on capital availability and deployment, lack of

institutional support infrastructure, restrictive labor laws, weak

corporate governance and ineffective regulations beyond

Scheduled Commercial Banks (SCBs), unless industry utilities and

service bureaus.

• Refusal to dilute stake in PSU banks: The government has

refused to dilute its stake in PSU banks below 51% thus choking

the headroom available to these banks for raining equity capital.

OPPURTUNITY

• The market is seeing discontinuous growth driven by new

products and services that include opportunities in credit cards,

consumer finance and wealth management on the retail side,

and in fee-based income and investment banking on the

wholesale banking side. These require new skills in sales &

marketing, credit and operations.

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• With increased interest in India, competition from foreign banks

will only intensify.

• Given the demographic shifts resulting from changes in age

profile and household income, consumers will increasingly

demand enhanced institutional capabilities and service levels

from banks.

• New private banks could reach the next level of their growth in

the Indian banking sector by continuing to innovate and develop

differentiated business models to profitably serve segments like

the rural/low income and affluent/HNI segments; actively

adopting acquisitions as a means to grow and reaching the next

level of performance in their service platforms. Attracting,

developing and retaining more leadership capacity

• Foreign banks committed to making a play in India will need to

adopt alternative approaches to win the “race for the customer”

and build a value-creating customer franchise in advance of

regulations potentially opening up post 2009. At the same time,

they should stay in the game for potential acquisition

opportunities as and when they appear in the near term.

Maintaining a fundamentally long-term value-creation mindset

reach in rural India for the private sector and foreign banks.

• With the growth in the Indian economy expected to be strong for

quite some time- especially in its services sector-the demand for

banking services, especially retail banking, mortgages and

investment services are expected to be strong.

• The Reserve Bank of India (RBI) has approved a proposal from

the government to amend the Banking Regulation Act to permit

banks to trade in commodities and commodity derivatives.

• Liberalization of ECB norms: The government also liberalized the

ECB norms to permit financial sector entities engaged in

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infrastructure funding to raise ECBs. This enabled banks and

financial institutions, which were earlier not permitted to raise

such funds, explore this route for raising cheaper funds in the

overseas markets.

THREATS

• Threat of stability of the system: failure of some weak banks has

often threatened the stability of the system.

• Rise in inflation figures which would lead to increase in interest

rates.

• Increase in the number of foreign players would pose a threat to

the PSB as well as the private players.

• The market is seeing discontinuous growth driven by new

products and services that include opportunities in credit cards,

consumer finance and wealth management on the retail side,

and in fee-based income and investment banking on the

wholesale banking side. These require new skills in sales &

marketing, credit and operations.

• Banks will no longer enjoy windfall treasury gains that the

decade-long secular decline in interest rates provided. This will

expose the weaker banks.

• With increased interest in India, competition from foreign banks

will only intensify.

• Given the demographic shifts resulting from changes in age

profile and household income, consumers will increasingly

demand enhanced institutional capabilities and service levels

from banks.

Introduction to Union Bank of India

ABOUT

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Union Bank is a Public Sector Unit with 55.43% Share Capital held by

the Government of India. The Bank came out with its Initial Public Offer

(IPO) in August 20, 2002 and Follow on Public Offer in February 2006.

Presently 44.57 % of Share Capital is presently held by Institutions,

Individuals and Others.

VISION

To become the bank of first choice in our chosen areas by building

beneficial and lasting relationship with customers through a process of

continuous improvement

MISSION

• A logical extension of the Vision Statement is the Mission of the

Bank, which is to gain market recognition in the chosen areas.

• To build sizeable markets share in each of the chosen areas of

business through effective strategies in terms of pricing, product

packaging and promoting the product in the market.

• To facilitate a process of restructuring of branches to support

a greater efficiency in the retail banking field.

• To sustain the mission objective through harnessing technology

driven banking and delivery channels.

• To promote confidence and commitment among the staff

members, to address the expectations of the customers

efficiently and handle technology banking with ease.

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HISTORY

In the year 1919, the Union Bank of India underwent a registration

process as a limited company in Mumbai. Our Father of the nation

'Mahatma Gandhi' had done the inauguration of this bank. In 1947, UBI

had 3 branches in Mumbai and one in Saurashtra. In1975, it was

assigned the status of the national bank by the government. At that

point of time, it was managing 240 branches across 28 states.

In its journey, UBI witnessed mergers with a private sector bank called

Belgaum Bank and then Miraj State Bank. On the request of RBI, it

acquired Sikkim Bank, which had 8 branches in the North-east at that

time.

In the year 2007, Union Bank of India made its presence felt in the

international arena by opening representative offices in the

destinations of United Arab Emirates, Abu Dhabi, Shanghai and Peoples

Republic of China. Besides, it chose Hong Kong as the destination to

open its very first branch outside India.

PRODUCTS AND SERVICES

UBI offers its customers a wide range of the services and products,

consisting of:

Personal Banking

• Accounts & Deposits – cumulative deposit scheme, deposit

reinvestment certificate, monthly income scheme, union flexi-

deposit, senior citizens scheme, multi gain savings account, no

frills saving account, union super salary account, union classic

current account

• Retail Loans – union cash, union home, union health, union miles,

union education, union top up, EMI calculator, union smile

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• Cards - Classic / Silver / Gold, Corporate Credit Cards, Add-On

Cards

• Insurance & Investment – mutual fund, union healthcare

•

Demat – demat accounts, online share trading

NRI Banking

• Remittance - Union E-Remit, Nostro Details for Remittance

• Savings & Deposits - NRO Non Resident Ordinary A/c Scheme,

NRE Non Resident External Rupee, RFC, FCNR(B), Union Unfixed,

Foreign Currency Deposit

• Loan & Services – house loans, foreign currency loans, loans

against deposit, immovable property, and shares or debenture

• Payments - Union Bill Pay

Corporate Banking

• CMS - Union Speed, Union Centralized Debits/Credits, Union

Prompt

• E-Tax - Customs and Direct taxes, DGFT, Central Excise and

Service Tax

• Trade Finance – trade finance for exporters, trade finance for

importers, foreign currency loans, correspondent banking

• Insurance - Non life Insurance – Corporate Agency, Insurance-

Corporate Agency

• Syndication of Loans

• MSME Banking

• Loans & Policies

Internet Banking

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• Account Information

• Transfer of Funds

• Bills

•

Requests• Mails

• Trade

• Limits

• Currency

• Uploads

• Customization

• Financial enquiries

• Non Financial enquiries

DEMAT SERVICES

Union Bank of India offers the power of the value-added, service-

oriented Demat account-Union Demat. Union Bank is Depository

participant of Central Depository Services Ltd.

To carter to individual needs as diverse as your portfolio, Union Demat

will empower you with hassle-free, fast and accurate electronic

transactions. Plus you get Union Bank's quality service which you are

used to, at all times.

Demat Activity includes:

• Opening and maintaining of Demat Accounts

• Dematerialization

• Rematerialisation

• Purchases

• Sales

• Pledging and Unpledging

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• Safe custody

Union bank of india along with four broking firms provide online trading

services. They are:

1. Sharekhan

2. Religare

3. IDBI

4. EMKAY

INVESTMENT PATTERN IN INDIA

Investment and financial planning in India has been successful to

a very large extent, as is evident from the fact that in the present

scenario, India is the 5th largest economy of the world.

The market in India offers very high potential for earning and growth in

all the spheres of business. All this has been possible due to the proper

financial and investment planning in India. The Ministry of finance

regulates all the investment and financial planning in India. It is this

ministry that formulates all the rules and regulations that are to be

followed for financial investment in the country.

The National Common Minimum Program was formulated by the

government of India, for planning investments and finances in India.

This program had identified certain sectors which must be given more

emphasis in order to boost investments and economic growth of the

country. The National development council is an agency which had

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been set up by the Indian government in order to boost financial and

investment planning in India.

Many individuals find investments to be fascinating because they can

participate in the decision making process and see the results of their

choices. Not all investments will be profitable, as investors will not

always make the correct investment decisions over the period of years;

however, one should earn a positive return on a diversified portfolio. In

addition, there is a thrill from the major success, along with the agony

associated with the stock that dramatically rose after one sold or did

not buy. Both the big fish one catches and the fish that get away can

make wonderful stories.

Investing is not a game but a serious subject that can have a major

impact on investor's future well being. Virtually everyone makes

investments. Even if the individual does not select specific assets such

as stock, investments are still made through participation in pension

plan, and employee saving programme or through purchase of life

insurance or a home. Each of this investment has common

characteristics such as potential return and the risk you must bear. The

future is uncertain, and you must determine how much risk you are

willing to bear since higher return is associated with accepting more

risk.

The individual should start by specifying investment goals. Once these

goals are established, the individual should be aware of the mechanics

of investing and the environment in which investment decisions are

made. These include the process by which securities are issued and

subsequently bought and sold, the regulations and tax laws that have

been enacted by various levels of government, and the sources of

information concerning investment that are available to the individual.

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An understanding if this financial background leads to three important

general financial concepts that apply to investing. Today the field of

investment is even more dynamic than it was only a decade ago. World

event rapidly-events that alter the values of specific assets the

individual has so many assets to choose from, and the amount of

information available to the investors is staggering and continually

growing. Furthermore, inflation has served to increased awareness of

the importance of financial planning and wise investing.

Investment options available in India

With a control free economy, supported by expert banking facilities,

Indian capital market offers a plethora of investment options both for

residents and NRIs. As per the investment plan an investor should

thoughtfully select the best option available in the capital market that

meets their requirements.

While some plans accrue short term profits some are long term

deposits. The first step towards investing in Indian market is to

evaluate individual requirements for cash, competence to undertake

involved risks and the amount of returns that the investor is expecting.

• Investments in Bank Fixed Deposits (FD)

Fixed Deposit or FD accrues 8.5% of yearly profits, depending on

the bank's tenure and guidelines, which makes it's widely sought

after and safe investment alternative. The minimum tenure of FD is

15 days and maximum tenure is 5 years and above. Senior citizens

are entitled for exclusive rate of interest on Fixed Deposits.

• Investments in Insurance policies

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Insurance features among the best investment alternative as it

offers services to indemnify your life, assets and money besides

providing satisfactory and risk free profits. Indian Insurance Market

offers various investment options with reasonably priced premium.

Some of the popular Insurance policies in India are Home Insurance

policies, Life Insurance policies, Health Insurance policies and Car

Insurance policies.

Some top Insurance firm in India under whom you can buy

insurance scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz,

Birla Sunlife, HDFC Standard Life, Reliance Life, Max NewYork Life,

Metlife, Tata AIG, Kotak Mahindra Life, ING Life Insurance, etc.

• Investments in National Saving Certificate (NSC)

National Saving Certificate (NSC) is subsidized and supported by

government of India as is a secure investment technique with a lock

in tenure of 6 years. There is no utmost limit in this investment

option while the highest amount is estimated as Rs 100. The

investor is entitled for the calculated interest of 8% which is

forfeited two times in a year. National Saving Certificate falls under

Section 80C of IT Act and the profit accrued by the investor stands

valid for tax deduction up to Rs 1, 00,000.

• Investments in Public Provident Fund (PPF)

Like NSC, Public Provident Fund (PPF) is also supported by the

Indian government. An investment of minimum Rs 500 and

maximum Rs 70, 000 is required to be deposited in a fiscal year.The prospective investor can create it PPF account in a GPO or head

post office or in any sub-divisions of the centralized bank.

PPF also falls under Section 80C of IT Act so investors could gain

income tax deduction of up to Rs 1, 00,000. The rate of interest of

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PPF is evaluated yearly with a lock in tenure of maximum 15 years.

The basic rate of interest in PPF is 8%.

• Investments in Stock Market

Investing in share market yields higher profits. Influenced by

unanticipated turn of market events, stock market to some extent

cannot be considered as the safest investment options. However, to

accrue higher gains, an investor must update himself on the recent

stock market news and events.

• Investments in Mutual Funds

Mutual Fund firms accumulate cash from willing investors and invest

it in share market. Like stock market, mutual fund investment are

also entitled for various market risks but with a fair share of profits.

• Investments in Gold Deposit Scheme

Controlled by SBI, Gold Deposit Scheme was instigated in the year

1999. Investments in this scheme are open for trusts, firms and

HUFs with no specific upper limit. The investor can deposit invest

minimum of 200 gm in exchange for gold bonds holding a tariff free

rate of interest of 3% - 4% on the basis of the period of the bond

varying with a lock in period of 3 to 7 years. Moreover, Gold bonds

are not entitled of capital gains tax and wealth tariff. The sum

insured can be accrued back in cash or gold, as per the investor's

preference.

• Investments in Real Estate

Indian real estate industry has huge prospects in sectors like

commercial, housing, hospitality, retail, manufacturing, healthcare

etc. Calculated realty demand for IT/ITES industry in 2010 is

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estimated at 150mn sq.ft. around the chief Indian cities. Termed as

the "money making industry", realty sector of India promises annual

profits of 30% to 100% through real estate investments.

• Investments in Equity

Private Equity is expanding at a fast pace. India acquired US $13.5

billion in 2008 under equity shares and featured among the top 7

nations in the world. In 2010, the total equity investment is

predicted to increase up to USD 20 billion. Indian equities promise

satisfactory returns and have more than 365 equity investments

firms functioning under it.

• Investments in Non Resident Ordinary (NRO) funds

Investing in domestic (NRO) is one of the best investment

alternatives for NRIs who wish to deposit their income accrued

abroad and maintain it in Indian rupees. The deposited amount

along with the interest is completely repatriable. Investment can be

done in Indian financial institutions including the Non Banking

Finance Companies which are listed with RBI. The interest returns

accrued on in this account is entitled under IT Act and is subject to

30% tax reduction at source including the appropriate surcharge

and education cess. The NRI investor can repatriate up to USD 1

million every year, for genuine reasons, by forfeiting valid tariffs.

OVERVIEW OF DEMAT SERVICES

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Dematerialization is the process of converting the physical form of

shares into electronic form and an Issuer/RTA, is an entity giving credit

to demat account. Prior to dematerialization the Indian stock markets

have faced several problems like delay in the transfer of certificates,

forgery of certificates etc. Dematerialization helps to overcome these

problems as well as reduces the transaction time as compared to the

physical segment.

Demat account is just like a bank account where actual money is

replaced by shares. Just as a bank account is required if we want to

save money or make cheque payments, we need to open a demat

account in order to buy or sell shares. A Demat Account holds portfolio

of shares in electronic form and obviates the need to hold shares in

physical form. The account offers a secure and convenient way to keep

track of shares and investments without the hassle of handling

physical documents that get mutilated or lost in transit. The Securities

and Exchange Board of India (SEBI) mandates a demat account for

share trading involving more than 500 shares.

Benefits of Demat Account

• Eliminates risks associated with physical certificates such as bad

delivery, fake securities, delays, forgery, counterfeiting, thefts

and loss due to fire.

• Reduces brokerage charges

• Pledging/Hypothecation of shares is easier

• Enables quick ownership of securities on settlement thereby

resulting in increased liquidity

• Reduction in paperwork involved in transfer of securities

• Demat account obviates the need to pay stamp duty (in case of

physical shares, 0.5 per cent stamp duty is payable).

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• There is no odd lot problem. Even one share can be bought or

sold.

• Investors can dematerialize only those certificates that are

already registered in their names and are in the list of securities

admitted for dematerialization. These are: shares, scrips, stocks,

bonds, debentures, stock or other marketable securities of a like

nature in or of any incorporated company or other body

corporate, units of mutual funds, rights under collective

investment schemes and venture capital funds, commercial

paper, certificate of deposit, securities debt, money market

instruments and unlisted securities, underlying sharing of

American Depository Receipts and Global Depository Receipts

issued to non-resident holders.

Dematerialization is the process of converting physical holdings into

electronic form with the depository wherein the share certificates are

shredded and corresponding entry of the number of shares is done in

the opened with the depository.

The securities held in dematerialized form are fungible; that is, they do

not bear any notable feature like distinctive number, folio number or

certificate number. Once shares get dematerialized, they lose their

identity in terms of share certificate distinctive numbers and folio

numbers.

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DEPOSITORY SYSTEM AND DEPOSITORY

PARTICIPANTS (DP)

Depository, in very simple terms, means a place where something is

deposited for safekeeping. A depository is an organization which holds

securities of a shareholder in an electronic form and facilitates the

transfer of ownership of securities on the settlement dates. The

depository system revolves around the concept of paperless or scrip

less trading because the shares in the depository are held in the form

of electronic accounts, i.e. in dematerialized form.

A Depository is a provider for holding and transacting securities in

electronic form. A depository functions somewhat similar to a

commercial bank. There are two types’ of depositories operating in our

country. They are as follows:

• NSDL (National Securities Depository Ltd.)

• CDSL (Central Depository Services Ltd.)

National Securities Depository Limited (NSDL)

NSDL is a public limited company incorporated under the Companies

Act, 1956. The first and largest depository in India established in

August 1996 and promoted by institutions of national stature

responsible for economic development of the country has since

established a national infrastructure of international standards that

handles most of the securities held and settled in dematerialized form

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in the Indian capital market. Four renowned institutions participate in

it:

• Unit Trust of India (UTI),

• Industrial Development Bank of India (IDBI),

• National Stock Exchange of India (NSE),

• State Bank of India (SBI)

UTI is the largest mutual fund of India and IDBI is the largest

development bank, NSE is the largest stock exchange of India and SBI

is the largest commercial bank of India having clearing facility. HDFC

and Citibank also share in this system. NSDL is managed by Board of

directors headed by a managing director. It is governed by its bye-laws

and its business operations are regulated by business rules. NSDL

interfaces with the investors through players or business partners.

Constituents of depository compromises of:

• Clearing corporation,

• Brokers,

• Clearing members,

• Registrar and Transfer Agents (RTA),

• Company or issuer,

• Stock exchange,

• Bank depository participant and

• Investors.

All are electronically linked to the main depository for the settlement of

trades and to perform a daily reconciliation of all accounts held withNSDL.

Central Depository Service (India) Limited (CDSL)

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Second agency is CDSL - Central Depository Service (India) Limited.

Main functions of this agency are centralized database and accounting.

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly

with leading banks such as State Bank of India, Bank of India, Bank of

Baroda, HDFC Bank, Standard Chartered Bank, and Union Bank of India

and Centurion Bank. This agency is set up with the object to keep in

mind to accelerate growth of scrip less trading, with major thrust of

individual participation and creating competitive environment,

responsible to the users’ interests and demands to enhance liquidity.

CDSL aims to retain the entire data of the investors in the central

database of CDSL.

It has opted for it with the following objectives:

• Within time information is available to issuers/registrar’s and

share transfer agents.

• Companies can monitor critical holdings, e.g., holding of FIIs and

FIs, investment companies, etc., by using up the parameters

through their front end terminals. There is no other database in

the system to reconcile.

• No additional security or storage cost of data or critical database

residing at the front-end terminals with the issuers/registrars.

Recover only the annual maintenance charges.

• CDSL signed a memorandum of understanding with NSDL for

inter-depository connectivity. Presently, more than half the

business of depositories is handled by this agency. Role of both

these agencies has become very vital after SEBI’s declarationthat there would be no deals in physical form and only dealing to

happen in market through demat accounts.

Main Depository Players are

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a) Depository (new NSDL and CDSL)

b) Issuer companies/Registrars of transfer agent (RTA)

c) Depository participant (DP)

d) Investors

e) Brokers (clearing members (CM)

An R&T agent acts as a third-party on behalf of a fund house and

has a vital role to play. It has a wide network through which it helps

investors with their transactions, for example, getting the forms of

various fund houses, transacting with fund houses or providing account

statements. An R&T agent also provides technology-based services like

online transaction or account statement facilities. It acts as single-

window system for investors.

An R&T agent also helps investors with information on various

corporate actions like details on new fund offers, dividend distributions

or even maturity dates of investments. This information is also

available with the fund houses, but an R&T Agent is a one-stop shop

for all the information. Investors can get information about his various

investments into different schemes of different fund house at a single

place.

A Depository Participant (DP) is an agent of the depository

and provides depository services to investors. To avail the services of

the depository, the investor has to open a demat account with a DP.

The DP is the link between the investor and depository. While the DP

processes the instructions of the investor, the account and recordsthereof is maintained with depository. A DP is thus a "service centre"

for the investor.

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Issuer of Securities Corporate / Companies which issue any kind of

security are known as 'Issuer' in the depository system. Only those

securities, which are admitted into the CDSL system are available for

dematerialization to the holders of such securities or can be allotted in

electronic record form by the issuer. Securities include shares,

debentures, bonds, commercial paper (C.P.), and certificate of deposits

(C.D.), pass through certificates (PTCs), government securities and

mutual fund units. Both listed and unlisted securities can be admitted

into the depository system. Depository functions as the central

accounting and record keeping office in respect of the securities

admitted by issuer companies.

It is mandatory for all listed companies to have their securities

admitted for dematerialisation with both the depositories viz CDSL &

NSDL. It is however desirable that all securities are admitted on both

the depositories so that investors having account with any of the

depositories can acquire that security.

Before the admission of any security into the depository system, it is

necessary for the issuer to establish an electronic connectivity with

depository either directly or through a registrar and transfer agent

(RTA), who has already established connectivity with CDSL.

Clearing Members (CMs) are the members of the Clearing

Houses/Clearing Corporations who facilitate settlement of trades done

on stock exchanges. They could be a broker or custodian registered

with SEBI as such is an important intermediary in the capital marketand an essential link in the depository system.

The various categories of CMs are:

• Trading members

26



• Custodians

• Subsidiary companies formed by regional stock exchanges to

facilitate their members to trade on BSE/NSE.

While beneficial owners may have their demat accounts on any of

both the depositories it is mandatory on the part of CM to have a

demat CM account with both the depositories.

CM's main activity is to facilitate pay-in/pay-out of securities to/from

Stock Exchanges/Clearing House/Clearing Corporations either on their

own behalf or on behalf of their clients. The securities which are due

for delivery can be delivered directly from client's account (depending

on whether exchange provides this facility) or through CMs to the

Stock Exchanges/Clearing House/Clearing Corporations Account.

Similarly, pay-out of securities can be delivered directly to client's

account on the basis of information given to Clearing House by the

CMs or to CMs A/c.

Compulsory settlement of trades in demat, introduction of 'T+2' rolling

settlement, higher volume of securities traded daily requires

monitoring of CMs demat account on continuous basis. In order to

facilitate smooth functioning for CMs CDSL has introduced a special

Depository Participant Type i.e. CM DP. Members of the Stock

Exchange, Mumbai and Calcutta Stock Exchange who have

participated in the equity of CDSL can register as CM DP at

concessional rate of deposit.

A CDSL CM DP can derive the following benefits:

• He can continuously monitor the deliveries received for pay-in

or from pay-out, their movement and subsequent reconciliation

of trade settlements very easily.

• Can subsequently reduce cost of his operations for himself as

27



well as for his clients.

• By offering one stop services to clients both in respect of

trading and depository services, not only he increases his

business but can effectively monitor client a/c position and

insulate from failure in settlement.

Custodians provide custodial services which are quite different from

depositories. A custodian is an intermediary who keeps the scrips of

the clients in custody or is the keeper of the clients. A custodian is not

only a safe keeper of share certificates and a trustee of the same but

also provides ancillary services such as physical transfers of share

certificates, collecting dividends and interest warrants, and conforming

to transfer regulations. Besides these, it updates clients on their

investment status. To claim benefits on behalf of its clients, a

custodian keeps a track of book closures, record dates, and bonus and

rights shares. For rendering these services, custodians charge a fee of

one percent of the total volume transactions.

Even though depositories have been set up, there is a need forcustodians as they act as complements to depositories. The volume of

transactions by fund managers is so large that custodial services are

imminent. With depositories in existence, their volume of paper work

has not only reduced but most of them also act as depository

participants. Custodians provide the infrastructure facilities which

provide the post-issue and post-trade and settlement work.

Custodians are clearing members but not trading members. They are

involved in the process of clearing. They settle trades on behalf of

other trading members. A trading member may assign a particular

trade to a custodian for settlement. If the custodian confirms to settle

the trade, then the clearing corporation assigns that particular

28



obligation to the custodian who is then required to settle it on the

settlement day.

Beneficial Owner is a person in whose name a demat account is

opened with DP for the purpose of holding securities in the electronic

form and whose name is recorded with DP.

ISIN (International Securities Identification Number) is

the unique identification number given to each security of an issuer at

the time of admitting such security in the depository. Different

securities issued by the same issuer will have different ISINs.

Services provided by a DP

• Dematerialization

• Rematerialization

• Maintaining records of holdings in electronic form

• Settlement of trades i.e. on-market and inter-depository

•

Settlement of off-market trades i.e. transactions between BOsentered outside the stock exchange and therefore occurs

between BO and BO or BO and CM.

• Facilitating electronic credit in respect of securities allotted by

issuers under IPO or otherwise.

• Receiving on behalf of demat account holders non-cash

corporate benefits which can bonus shares or rights issue.

• Pledging of dematerialized securities & facilitating loans against

shares.

• Un-pledging of shares

• Freezing of the demat account for debits, credits, or both.

29



The Depository system has the following benefits to

different groups:

Benefit to the Country

The depository system helps the capital market to be more liquid,

attracting more foreign investors and is in compliance with

international standards, as it creates efficient and risk free trading

environment. It minimizes the settlement risks and frauds in carrying

out transactions in capital markets and thus can restore faith of

investors in capital markets. It helps to reduce delay in trading

practices creating investor friendly atmosphere in the capital markets.

Benefit to the Company

The depository system helps in reducing the cost of new issues due to

less printing and distribution cost. It increases the efficiency of the

registrars and transfer agents and the Secretarial Department of the

company. It provides better facilities for communication and timely

services with shareholders, investor etc.

Benefit to the Investor

The depository system reduces risks involved in holding physical

certificated, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer

settlements and reduces delay in registration of shares. It ensures

faster communication to investors. It helps avoid bad delivery problem

due to signature differences, etc. It ensures faster payment on sale of

shares. No stamp duty is paid on transfer of shares. It provides more

acceptability and liquidity of securities.

Benefit to Brokers

30



The depository system reduces risk of delayed settlement. It ensures

greater profit due to increase in volume of trading. It eliminates

chances of forgery – bad delivery. It increases overall of trading and

profitability. It increases confidence in investors.

OPENING OF AN ACCOUNT

Objectives:

• By opening a demat account with a DP of CDSL, investors can

carry out the following activities:

• Convert the physical securities held by them in to electronic form

by way of dematerialization.

• Deliver (sell)/receive (buy) securities in demat account for trades

done on stock exchanges or for any other reason.

• Receive securities in electronic form in case of Initial Public

Allotment or Corporate Action, such as: Rights Issues, Bonus

Issues, Stock-spilt, Mergers, Acquisitions, and Amalgamations.

• Obtain statement of securities held in their demat account.

• Pledge the securities held in the demat account.

• Rematerialize securities held in the demat form.

Documents required to be submitted by the Investor

while opening an account:

For Individuals:

RESIDENTS (INDIANS)

1. Proof of Identity

2. Passport

3. Voter’s Id Card

4. Driving License

5. PAN card with photograph

31



6. Identity Card/document with applicant’s photo, issued by-

• Central/State Government and its Departments,

• Statutory/Regulatory Authorities,

•

Public Sector Undertakings,• Scheduled Commercial Banks,

• Public Financial Institutions,

• College affiliated to universities,

• Professional Bodies such as ICAI, ICWAI, ICSI, Bar

Council, etc, to their Members,

• Credit Cards/Debit Cards with photographs issued by

banks.7. Proof Of Address: (Any one)

• Correspondence Address:

• Electricity Bill (not more than 2 months old)

• Leave & License Agreement/ Purchase Agreement/Office Address

Certificate from Employer

Permanent Address:• Ration card

• Passport

• Voter ID card

• Driving License

• Bank Passbook Statement

• Cancelled Cheque

• Latest Union Bank Statement

Imp: Permanent Address information about the 2nd and 3rd holders is

to be obtained (if any)

32



• A POA holder cannot open a demat A\C on behalf of the BO and

BO can give POA subsequently.

• Sections not relevant to a particular type of BO should be

marked NOT APPLICABLE (N.A)

NON-RESIDENTS

1. PAN card

2. Passport Size photo

3. Proof of Identity: Passport/Driving License

4. Foreign Address

5. Proof of local address, if any

6. NRI a/c cheques

7. NRI a/c Statement-latest

8. FEMA Declaration

9. POA, if any

10. Declaration to inform the DP regarding change of address

11. Change of status from NRI to Resident and vice-versa

It is the responsibility of the NRI to inform the change of status to the

DP with whom he/she has opened the demat account. Subsequently, a

new demat account in the resident status will have to be opened,

securities should be transferred from the NRI demat account to

individual resident account and then the NRI demat account should be

closed.

COMPANY

1. Company PAN card

2. Authorized Signatories Pan Card

3. Director’s Photo (passport size)

4. Certified copy of Articles of Association

33



5. Certified copy of Memorandum of Association

6. List of authorized signatories with signatories attested by

Company Secretary or any other Director on company’s letter

head

7. Resolution for Demat a/c and operation mandate on letter head

signed by CS/MD

8. Current a/c cheque book

9. Latest Bank Statement

HINDU UNDIVIDED FAMILY (HUF)

1. PAN card of HUF

2. PAN card of Karta

3. Photo of Karta

4. Passbook of HUF

5. Declaration by Karta giving details of family members of the

HUF- with their names, DOB, sex &relationship with the Karta

and signatures of the co-partners.

6. Karta should sign the AOF and the declaration under the stamp

of HUF

7. HUF cannot be opened with Joint Holders

No nomination is allowed

Account administration and maintenance

The main objective of account administration & maintenance is to

allow DPs to make additions, modifications/deletions to the details

submitted by the BO at the time of account opening. Additions,deletions and modifications should be done only against written

instructions from the BO.

34



DEMATERIALZATION OF SHARES

Dematerialization is the process, which enables BOs to convert their

existing holdings of securities in physical form to electronic form and

hold the same in their accounts with DP.

According to the Depositories Act, 1996, an investor has the option to

hold securities either in physical or electronic form. However, SEBI has

notified that settlement of trades in listed securities should take place

only in the demat mode. Although, trades up to 500 shares can be

settled in physical form, physical settlement is virtually not taking

place for the apprehension of bad delivery on account of mismatch of

signatures, forgery of signatures, fake certificates, etc.

Procedure for Dematerialization:

1. Open a demat account with a DP.

2. Fill in a Demat Request Form (DRF) in triplicate and submit the

same with the physical certificate(s) to the DP for

dematerialization.

3. The DP shall verify all the particulars filled in the DRF by the BO.

The following should be checked before accepting the DRF:

35



4. Whether the securities intended for dematerialization have been

admitted in CDSL. If the securities intended for dematerialization

are not admitted in CDSL, the DP shall return the same to BO.

5. Whether the certificate details (no. of shares, return, distributive

numbers, ISIN, folio no, quantity) mentioned on the DRF and on

the certificates enclosed, tally.

6. Whether the name(s) of the account holder(s) and the name(s)

on the shares certificates appearing on the certificates tally

exactly with those recorded under the BO account maintained

with CDSL. (In case the names are matching, but order of the

names is not the same, then the transposition-cum-demat (TRF)

form has to be filled and should be attached with the

documents).

7. Whether all the holders have signed the DRF and the signature of

the account holders’ tally with those recorded by the DP.

8. If there is any discrepancy in any of the details, the DP shall get

it rectified and duly authenticated by all the holders.

9. The error free DRF shall be taken up for further processing by the

DP.

10. If the DRF is complete in all respects, then the DP should

give an acknowledgement to the BO. A separate DRF has to be

used for each ISIN

11. The DP shall capture the details from the DRF &

Certificates in the CDSL system and shall generate the Demat

Request Number (DRN).

12. A demat confirmation letter is sent as an

acknowledgement to the BO. The demat confirmation letter

signed by the DP officials along with the original share

certificates & DRF is sent to the RTA.

36



13. DP defaces and sends the certificates to the

Issuer/Registrar who credits an equivalent number of securities

in the demat account, maintained by BO.

14. The DP must dispatch the physical documents to the

issuer/RTA within 7 day from the date of receiving physical

documents from the BO.

15. After receiving the physical documents, Issuer/RTA shall

compare these documents with the electronic data. If the details

do not tally between the electronic and physical request, the

Issuer/RTA shall inform the DP. The DRF and the certificates shall

be sent back to the DP under the Rejection Memo, specifying the

reason for rejection.

16. The Issuer/RTA should complete processing of the demat

request within 15days of receiving the physical documents. The

Bo’s account is credited for the number of securities confirmed

by the Issuer/RTA.

17. The reasons under which an Issuer/RTA can reject a

dematerialization request shall be provided in the CDSL system

from time to time.

18. The DP shall arrange to return the certificates along with

the rejection letter sent by the Issuer/RTA to the concerned BO

within 7 days from receipt of rejected certificates.

19. If the demat request is not processed by the Issuer/RTA within 21

days after it has been set up on the system, then the DP should

follow up with the Issuer/RTA.

20. If the DP does not get the documents within 30 days from

the date of rejection by the Issuer/RTA, then the DP should follow

up with the Issuer/RTA.

Transposition-cum-Dematerialization (TRF)

37



Transposition is “change in order of names”. For example, if the

certificates are in the names of A & B, the same can be lodged for

dematerialization under account held in the name of B & A, by filling

up the DRF and the Transposition Request Form (TPRF). This will

enable the issuer/RTA to transpose the securities in the order of the

names in which the account is opened and then accept the

dematerialization request.

Transmission-cum- Dematerialization

In case of the death of one or more joint holders, the surviving

holder(s) can get the name(s) of the deceased deleted from the

certificate(s) and get them dematerialized by submission of the

following documents:

1. Dematerialization Request Form

2. Notarized copy of the death certificate of the deceased holder(s)

3. Transmission request form (in case of death of one/more of joint

holders)

4. In case of death of the sole holder shares are transferred in the

name of the nominee.

SETTLEMENTSTo enable investors having demat accounts with depository to settle

trades done by them on stock exchanges or transfer securities to any

other demat account within CDSL or with the other depository.

38



In case of sale of securities in demat mode, on receipt of intimation of

execution of trade from the broker, the seller/BO should immediately

issue the Delivery Instruction Slip (DIS) to their DP with whom the

demat account is held, for delivery of securities either directly to the

Clearing Corporation (CC)/Clearing House (CH) or to the Clearing

Member (CM) settlement account, as advised by their broker.

The customer has to fill up DIS by giving settlement no, settlement

type, execution date, name of securities, no of securities.

SETTLEMENTS OF SECURITIES

39

CLEARINGHOUSE/CORPORATION

CUSTOMER/SELLERCLEARINGMEMBER/DEPOSITORYPARTICIPANT

CLEARINGMEMBER/DEPOSITORY

PARTICIPANTCUSTOMER/BUYERPAY-IN of

SECURITIES

PAY-OUT of

SECURITIES



A purchaser of securities can give one-time standing instruction to

his/her DP for receiving securities in his/ her account. This standing

instruction can be given at the time of opening the account or later.

Alternatively, a BO may choose to issue a separate receipt instruction

to his/her DP every time he/she makes a purchase.

On Market and Off Market transaction

40



• Any transaction for sale and purchase of securities executed

through a broker/CM on the stock exchange that is to be settled

through the Clearing Corporation/Clearing House is an On Market

transaction.

• Any transfer of securities which are settled directly between two

BOs having an account with the same depository with or without

the involvement of the broker/CM and the CC/CH are an Off

Market transaction.

Inter-Depository transfer

Any transfer of securities between one DP to other DP is an Inter

Depository transfer.

• It can be done only for securities that are available for

dematerialisation on both the depositories.

• The account in depository can be either a clearing account or a

beneficiary account.

• For debiting the clearing account or the beneficial account, the

form for "Inter-depository delivery instruction" is required to besubmitted by the clearing member/beneficial owner to its DP.

• For crediting the clearing account or the beneficial account, the

standing instruction given for automatically crediting the account

is applicable. In case the standing instructions are not given,

then the form for "Inter-Depository Receipt Instruction" is

required to be submitted by the clearing member/beneficial

owner to its DP.

• As both the depositories are connected to each another, the

batches to effect inter - depository transfers are presently

exchanged on each working day.

• Online transfer of inter depository instructions has commenced

w.e.f December 14, 2002. In the online inter depository transfer

41



(OLIDT) module, Inter Depository Transfer instructions for the

day will be exchanged online between the two depositories.

Thus, the instructions executed by DPs may get settled at

shorter intervals.

• The deadline time for DPs to verify & release Inter Depository

Transfer delivery/ receipt instructions is 6 p.m. on weekdays and

2.30 p.m. on Saturdays.

• The Issuer/Registrar & Transfer Agent is informed about the

transfer by both the depositories and it amends its records

accordingly.

• Government securities cannot be transferred from one

depository to another using this facility.

42

CDSL’S

Depository

Participant

NSDL’S

Depository

Participant

SELLER BUYER



Indication of the Settlement Number at CDSL

Settlement number in CDSL has 13 digits, the 1st 2 digits are the

exchange-id, the next 2 digits are clearing house-id, the next 2 digits

are settlement type, the next 4 digits represent the year and the

remaining 3 digits represent the settlement number of the exchange

on which the transaction has been executed.

Settlement no. for NSE is a 7 digit no which starts from 2010 and same

for BSE which starts from 1011.

Pay-in of Securities

CM can perform pay-in of securities using either of the options given

below:

1. BO level pay-in: option enables the BO to deliver the securities

directly to the CH/CC of the exchanges.

2. CM level pay-in: for using this option, securities have to be

delivered by the BO to the respective CM through off-market

transfers. The CM, in turn, would deliver securities received from

the delivering BO to the CH/CC.

3. CM Can deliver securities to the CC/ CH using the following

modes, which are explained below:

• Normal pay-in

• Auto pay-in

• Early pay-in

Normal pay-in

• DP shall receive a duly filled in DIS for execution of on-market

transactions from the BO/CM.

43



• DP shall verify the same and set-up an on-market transaction,

i.e. set-up a BO obligation confirmation in the CDSL system.

• Seller BO/CM can give on-market instructions to the DP on the

“T” day itself even if no balance is available in the account, as

the available from the seller BO/CM account would be picked up

only at the pay-in deadline time.

• In case of BSE settlements, at the pay-in time, CDSL shall first

earmark the available balances in the accounts for which “on-

market” instructions have been entered.

Part earmarking in case of insufficient balances is permitted.

E.g. if a BO account has 500 shares and an on-market instruction is

entered for 600 shares, available balance of 500 shares will be

earmarked, at the pay-in time.

In case of settlement of trades, done on exchanges other than BSE, the

securities are moved from BO accounts for which on-market settlement

instructions have been given, to their respective CM accounts at the

pay-in deadline time. In case of insufficient balances, available

balances are moved. After this transfer, all available balances in the

CM accounts would be blocked and thereafter, debit takes place.

DP can advise BO/CM to maintain adequate balances in the accounts

from where the on-market instructions are entered before the

scheduled pay-in timings, as specified by the CH/CC of the respective

stock exchanges.

The BO confirmations can be modified or deleted by the DP till the pay-

in time on receipt of instructions from the BO/CM.

Early pay-in

• DP shall receive a duly filled DIS for execution of early pay-in

instructions from the BO/CM.

44



• DP shall verify the DIS and set up an early pay-in instruction in

the CDSL system.

• DP shall ensure that the early pay-in instruction is given from the

CM clearing account or CM principal account or BO account only.

• On set up of early pay-in instruction, the securities are

immediately transferred from the concerned BO/CM account to

the designated early pay-in account maintained with the CC/CH

of exchanges.

• In case balances in the delivering account are in sufficient at the

time of set-up of instruction, the transaction shall fail. DP will

have to set up a fresh early pay-in instruction after the balance is

available in the account.

Pay out of securities

• On payout, securities are delivered by the CC/CH of the

exchanges to the designated CM accounts.

• Alternately, pay-out securities could be directly transferred to the

buying BO account provided the CM gives the BO ID of their

buying client through their respective trading terminals to the

CC/CH.

• DP shall receive the duly filled-in DIS for execution of off-market

transactions from the CM for transfer of securities from their

designated CM accounts (where the payout of securities is

received) to the buying BO account.

• DP shall verify the DIS and set up off-market transactions in the

CDSL system.

• As per SEBI directive, CM must deliver the payout securities to

their buying BO accounts within 1 working day from the day of

payout or such time as may be decided by SEBI from time to

time.

45



• In case the securities are not transferred out within the specified

time period, securities shall be automatically transferred to the

CISA account. The balance in CISA account will attract a penalty

as stipulated by SEBI from time to time.

• Securities in the CISA are not permitted for use for pay-in

purposes directly. They have to be transferred to a CDSL BO

account/ CM principal account/CM clearing member account/BO

a/c with the other depository.

TRANSMISSION

The objective of transmission functionality is to allow the transfer of

title of securities in case of death of an account holder and inheritanceby a successor, as stated by the deceased BO.

The securities are transferred into the account of either the surviving

joint holder(s) or the claimant of the securities.

The process of transmission depends upon whether the Demat account

is held in single or joint names, and the nomination has been made for

the demat account.

A. Demat Account Held in Single name

i. Where nomination has been made:

On death of the sole holder of the Demat Account, if a nomination

has been made by the deceased holder, the nominee can submit

46



the Transmission Form to request transfer of all securities from the

Demat Account of the deceased holder to the Demat Account of the

nominee.

A Demat Account has only one nominee, as joint nominees are not

allowed. If the nominee already has a Demat Account, securities can

be transferred to the same. Otherwise, the nominee needs to open

a new Account.

A nominee is required to submit the following documents:

a. A completed Transmission Form

b. A copy of the Death Certificate of the deceased holder duly

notarized

Closure request &

c. Delivery Instruction Slip (DIS) of the deceased account for

transfer of shares.

ii. Where nomination has not been made:

On death of the sole holder of the Demat Account, if a nomination

has not been made by the deceased holder, the legal heirs or the

legal representatives of the deceased can submit the Transmission

Form to request transfer of all securities from the Demat Account of

the deceased holder to their Demat Account. Legal heirs or the legal

representatives can be one or many as determined by the court.

Securities can be transferred to an existing Demat Account.

Otherwise, they need to open a new Account. Legal heirs or the

legal representatives are required to submit the following

documents:

a) A completed Transmission Form

b) A copy of the Death Certificate of the deceased holder duly

notarized

c) A copy of the probate or letter of administration duly

notarized, where the deceased has left a Will.

47



d) A copy of Succession Certificate duly notarized or an order of

a court of competent jurisdiction, where the deceased has not

left Will.

e) Closure request & DIS of the deceased’s account for transfer

of shares.

B.Demat Account held in joint names:

i. Where there are surviving holders:

On death of any holder of a Demat Account held in joint names, the

surviving holder or holders become entitled to receive securities.

• Where there is a single surviving holder, the Transmission

Form can be submitted by the surviving holder to request

transfer of all securities from the Demat Account jointly held

with the deceased holder to the Demat Account of the single

surviving holder.

• Where there are joint surviving holders, the Transmission

Form can be submitted by them jointly for transfer of

securities to their Demat Account. The Demat Account of the

joint surviving holders should be in the same order as that of

the Demat Account held jointly with the deceased holder.

• For example, where Demat Account was held in the names of

X, Y and Z being the first, second and third holder. If Y

deceased, then securities can be transmitted to X and Z only

if they hold a Demat Account where X is the first holder and Z

is the second holder. Securities can be transferred to an

existing Demat Account.

Otherwise, a new Account needs to be opened.

Surviving holders are required to submit the following documents:


48




notarized

c) Closure request / DIS of the deceased account for transfer of

shares.

ii. Where nomination has been made:

On death of all joint holders of a Demat Account, if a nomination has

been made by the deceased joint holders, the nominee can submit

the Transmission Form to request transfer of all securities to the

Demat Account of the nominee. If the nominee already has a Demat

Account, securities can be transferred to the same. Otherwise, the

nominee needs to open a new Account. A nominee is required to

submit the following documents:



notarized.

c) Closure request / DIS of the deceased account for transfer of

shares.

iii. Where nomination has not been made:

Legal heirs or the legal representatives are required to submit the

following documents:



notarized

c) A copy of the Probate or Letter of Administration duly

notarized, where the deceased has left a Will.

d) A copy of Succession Certificate duly notarized or an order

of a court of competent jurisdiction, where the deceased

has not left Will.

49



e) Closure request / DIS of the deceased account for transfer

of shares.

PLEDGING AND UNPLEDGING

The pledge function provided in CDSL system helps in meeting the

following objectives:

• Allows a BO (pledgor) to use his dematerialized securities as

collateral for a pledge transaction with another BO (pledgee).

• Allows release (unpledging) of the pledged securities when the

pledge obligation, as agreed between the pledgor and the

pledgee, is fulfilled.

• Allows pledgee to invoke (confiscate) the pledged securities, if

the pledgor does not fulfill the pledge obligation, as agreed

between the pledgor and the pledge.

Pre-requisites for carrying out pledge, unpledged and invocation

activities through CDSL system

•

The pledgor and the pledgee must have accounts in CDSL tocreate a pledge. However, the pledgor and the pledgee may

hold accounts through different DPs.

• The accounts should be active

• The pledgor and the pledgee may enter into the pledge

agreement

• Pledgor DP and pledgee DP each shall create at least two users

to implement the maker-checker feature. Make shall initiate thepledge/unpledged/invocation transaction. Checker shall verify

the pledge/unpledged/invocation transaction initiated by the

maker. The same user cannot do initiation and verification of

pledge/unpledged/invocation transaction even though access

rights are given to the user.

50



Procedure for pledging securities

• The pledgor has to fill up the Pledge Request Form (PRF) in

duplicate available with his DP.

• On receipt of the PRF, the pledgor’s DP shall verify that the

securities can be pledged. The DP then sets up a pledge in the

depository system and a unique Pledge Sequence No. (PSN) will

be generated. The PSN number should be recorded on the PRF.

Authorized official of the DP should sign the PRF and stamp it. A

copy of the PRF is then given to the pledgor.

• One copy of PRF (with the PSN) should be sent to the pledgee by

the Pledgor. The Pledgee will then countersign the PRF for

acceptance/ rejection of the pledge request and submit the PRF

to his DP.

• The pledgee’s DP has the facility to access the request on line.

Based on copy of PRF the pledgee’s DP either accepts or rejects

the pledge request.

• If free securities are pledged, then securities are moved from

“free balance” to “pledge balance” and are blocked till the same

are either unpledged or invoked/confiscated.

• If lock-in securities are pledged, then securities are moved from

“lock-in balance” to “pledge balance” and are blocked till the

same are unpledged.

If one wishes to take a loan from a Bank against the security of

physical share, the certificate must be physically lodged with the Bank.

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This action is called a Pledge. In electronic holding one can pledge the

shares by making a request with your DP in favor of any Bank.

Unpledging is the reverse process which takes places when the shares

are unpledged. It can either be initiated by the pledgee or the pledgor.

Invocation (Confiscation)

• The pledgee can invoke (confiscate) the pledged securities

through his DP by filling the Invocation Request Form (IRF) andsubmits it to the DP.

• Invocation can be for full quantity or for part quantity that is

pledged.

• A user with maker access rights shall set up (initiate) the

confiscate request in the system by entering relevant

information. A user with checker rights shall verify the confiscate

request.

• On verifying the confiscate request by the pledgee, if the pledge

is for free balance, then the securities, which were blocked in

pledgor BO’s account for pledge, are transferred to the pledgee

BO’s account.

• If the pledge is for lock-in securities, then confiscate request

cannot be setup till the lock-in period is over.

• After the transaction is verified, CDSL system generates a letter

giving details of the confiscation.

Pledging of shares in order to avail the loan is neither a new concept

for promoters nor for investors. In brief, when the promoters want to

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raise the funds for the personal or the company’s needs, they pledge

their shares with the financial or non-financial institution.

For many years now, lending against shares was a common practice

amongst promoters. As long as share prices were rising, there was

little danger. Lenders such as nonbanking finance companies (NBFCs)

and banks were comfortable doling out such loans. These loans

typically have tenure of between one and three years, and carry a

margin of 2-3 times, which means that the value of the promoters’

shares pledged is 2-3 times the amount of the loan. For the NBFCs and

banks, it’s a low-risk business as they can charge a mark-up of 3-4 per

cent over the prime lending rate. Hence the lender has to ensure thathis market risk is covered as the shares being pledged should be liquid

enough to ensure recovery of dues from the borrower.

Before the Satyam debacle, there were no disclosure norms made by

the SEBI (Securities and Exchange Board of India) for the promoters to

disclose their pledged shares. In developed countries like US, not just

promoters but directors too are required to disclose their pledged

shares. In UK this is covered under Insider Trading Regulation. In

developed markets, the pledging of shares by promoters, or insiders,

as collateral for a loan is equivalent to a sale of the stock to the

pledgee.

Bankers or financiers give loan taking the shares as collateral. Hence,

whenever the price of the share come down to a certain level in the

secondary market, the promoter is required to either make some

payment or pledge more shares.

If the promoter cannot do either, the lender keeps the right to sell

pledged shares in the market. Apart from this, promoters always have

the risk of a hostile takeover.

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Hence the certain disclosures were necessary regarding the pledging

of shares by promoters as pledging of shares could result in a change

of ownership if the promoter is unable to redeem those shares by

repaying the loan. This is critical, as many investors consider promoter

holding and management structure of the company as a critical aspect

of their investment decision.

Promoters of many listed companies have raised finances by pledging

their shareholdings. When they pledge their shares, they pledge their

voting rights as well and hence it becomes a risk factor. And

deleveraging of such positions has the potential of deteriorating the

company's valuation. As in the recent times, the Stock prices havebeen on a downtrend for some time due to adverse market conditions.

So when such situation happens, lenders ask for either additional

shares, or margin payment to cover the shortfall.

In the event of promoters being unable to meet these conditions,

lenders dump the shares in the market to recover their dues. As the

sale of these pledged shares usually happens in huge quantities, it has

a cascading impact on the stock price. However, till now the

information regarding the pledging of the shares by the promoters was

not made public, as there were no rules mandating them to do so. The

pledging of shares by promoters was not considered a major issue in

the bull market, as nobody thought that the market could slide so

rapidly. The non-availability of cheaper money in recent months has

made the buying back of the pledged shares by promoters difficult.

While promoters try to raise the money, even though for the

development of the business of the Company, they should not get into

the habit of pledging all shares at one go. As when they pledge the

shares, the market is high but if the opposite happens, then there

could be great trouble which can be set off by either pledging more

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shares or through other means. As such a practice could work well in a

rising market but in a falling market that often leads to dilution of

promoter holding in the company whose shares are pledged. In a

falling market, if the value of the collateral falls below the quantum of

the loan taken by promoters, lenders often sell those shares to recover

their loans, partly or fully.

Reasons for opting for pledging of shares by the

promoters

• It can be for either personal needs or business expansion.

Sometimes, promoters collateralise their shares for convertingwarrants into shares.

• When the promoter has exhausted all other sources to raise

funds, he pledges his holding in the company as a last resort,

which is a clear indication that it is not an ideal situation. In

developed markets, the pledging of shares by promoters, or

insiders, as collateral for a loan is equivalent to a sale of the

stock to the pledge.

Pledging of shares by general shareholders and

promoters

• When a shareholder/investor needs loan from bank or financial

institution, he can pledge his shares to them.

• Banks and financial institutions give loan against shares. To avail

such loans any shareholder can pledge shares to the lender. But

unlike promoters, small shareholders are not required to

disclose. For taking a loan against shares, the investors have to

collateralise the physical shares to the bank.

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Pledging of shares or Acquisition

• It would be really interesting to note that pledging of the shares

of listed company and/or exercise of such pledge and acquisition

of such shares would amount to acquisition requiring an open

offer under the SEBI Takeover Regulations or not. The issue thus

has to be examined in two stages - First is, whether at the time

of pledging the shares, there is an acquisition. Second stage is

when the pledge is exercised and the shares transferred to the

name of the pledgee.

•

It may be tempted to believe that the answer is quite clear cut.The first stage of pledge, unless it amounts to unconditional and

full transfer of shares, is not an acquisition of shares attracting

the Takeover Regulations. The second stage would however

clearly amount to an acquisition and thus attract the

Regulations. In support of this, one may point out that

Regulation 3(1)(f) is also explicit in exempting only acquisition

by banks and public financial institutions as pledgee. Arguably,

thus, all other acquisitions as pledges would not be exempted.

Other Acts/Guidelines for pledging of shares

Banking Regulation Act

Under Section 19(2) of the Banking Regulation Act 1949, it is provided

that no banking company shall hold shares in any company whether as

pledgee, mortgagee or absolute owner of an amount exceeding 30% of

the paid-up capital of that company or 30% of its own paid-up capital

and reserves, whichever is less. The shares of any company are taken

as security by the banks and financial institutions in following cases:

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1. Overdraft facility against listed and approved shares of any

public limited company.

2. Pledge of shares of listed companies as an additional or

collateral security for a loan or overdraft given against some

other prime security.

Pledge of promoter’s shares in cases of project finance where the loans

and advances are secured by a charge over the entire block of assets

of the borrower and the pledge of shares is taken by the bank to

ensure that the promoter continues to be involved in the project and

does not transfer his interest without the consent or knowledge of the

bank. Such a pledge also enables the lender to sell or dispose of the

securities along with management of the company by exercising the

rights as a pledgee although in practice such rights are rarely

exercised.

Obtaining of loan by NRIs by pledging shares

NRIs can pledge the shares to obtain loan, only after the specific

approval of RBI is received. The application has to be made through

the same bank in which the NRE/NRO account was opened.

Amendment by SEBI

SEBI has come out with new disclosure, in a bid to protect the interest

of existing and potential shareholders, as pledging of shares could

result in a change of ownership if the promoter is unable to redeem

those shares by repaying the loan.

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http://economictimes.indiatimes.com/Market_Analysis/Promoters_will_have_to_disclose_pledging_of_shares/articleshow/4004329.cms#%23



REMATERIALISATIONRematerialisation allows to convert the electronic balances held by the

BO in it’s demat account into physical form. It is the process by which

the securities held in electronic form are converted into paper

securities by the Beneficial Owners.

Procedure

A BO, who wishes to have his dematerialized holdings of securities in

the CDSL rematerialized, will fill in the Rematerialisation Request Form

(RRF), in duplicate, and submit the same to his DP. All the joint holders,

if applicable, should sign the RRF. The POA holder can sign RRF also if

any POA has been given. The POA must be registered with the

issuer/RTA.

1. Sufficient free/lock-in balance should be present in the demat

account.2. Separate remat request should be setup for free shares and lock-

in shares.

3. The ISIN should not be Inactive/ frozen for debits.

4. The BO account should not be closed.

In case of a remat request along with request for change of address, it

should be ensured that it is from the BO only and not from any other

person.

DP should verify the following details, as mentioned in the RRF, with

the BO master maintained with CDSL. The details to be verified are as

follows:

• Name(s) of the Beneficial Owner(s)

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• BO ID

• Address

• ISIN

•

Name of the Issuer• Quantity of securities requested for rematerialisation

• Whether the quantity to be rematerialized is a free balance and

there is no pledge or any other encumbrances attached to it.

• Signature(s) of the Beneficial Owner(s) or POA holder, as

recorded with the DP.

RepurchaseIn case the BO intends to repurchase the units that are available in

demat form in his account, then a repurchase request form has to be

submitted along with the rematerialisation request form. The DP

should ensure that the bank details are entered in the CDSL system. If

bank details are not entered, then the purchaser request may get

rejected.

The details of the RRF shall be captured in the CDSL system and the

Rematerialisation Request Number (RRN) is generated on the same

day or latest by the next working day from the date of receipt of RRF.

When the request is set up, the system generates a RRN for each such

request.

• RRF, which has been set up, can be modified any time before the

same is accessed by the Issuer/RTA (either on-line access or

downloads by Issuer/RTA). Modification of RRN or deletion of RRN

which has already been set up by the DP, but not yet accessed

by the Issuer/RTA, should be authorized by the BO, if the change

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of RRN is as per the RRF submitted by the BO or the deletion of

RRN is to rectify the mistake committed by the DP.

• DPs should exercise caution when selecting the “lot option” i.e.

market lot or jumbo lot, in the CDSL system, as the charges

applicable would vary depending on lot opted for.

• The RRN is noted on the RRF and the same is sent to the

Issuer/RTA. This should be done within two days of receipt of the

RRF. The DP will retain a copy of the RRF for his records and send

the original RRF to the Issuer/RTA. The DP must authorize the

RRF with his seal and signature.

• The DP should follow up with the Issuer/RTA if the remat request

is not honored within the prescribed time limit i.e. within 30 days

and keep on record the follow-up done.

• The Issuer/RTA will electronically intimate the rejection of RRF

and send the rejected RRF along with all the documents for

necessary correction/rectification.

• Where the Issuer/RTA has rejected the RRF, the DP will carry out

the necessary rectification in consultation with the BO, and set

up a fresh remat request.

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FREEZE AND UNFREEZE

Freezing is an action performed on a BO account as a whole or

individual ISIN balances held within a BO account to safeguard the

balances present in the BO account. Freezing represents the

temporary blocking of entire balance or part of the balance in a BO

account or the full BO account as such.

Freeze module enables:

• BOs having accounts with CDSL to freeze their accounts or

balance for a specific ISIN.

• DP to freeze an account based on instructions received from a

statutory authority/regulatory authority.

• CDSL to freeze an account based on instructions received from a

statutory authority/ regulatory authority.

• Release (unfreeze) account/ISIN balances that have been frozen.

Freeze initiated by BO

• The BO shall fill up the FREEZE REQUEST FORM and submit the

same to his DP.

• An authorized official of the DP shall verify that the form is duly

filled and signature (s) of the holder(s) is matching.

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• The freeze request should be entered on the system. A unique

freeze ID is generated by the system. It should be recorded on

the form.

• For freeze with activation type as current, the acknowledgement

letter is generated immediately.

• For freeze to be activated at a future date, the acknowledgement

letter is generated at SOD of the activation date.

• DP should send the acknowledgement letter, duly signed and

stamped by an authorized official of the DP, to the BO.

Freeze initiated by DP for the following reasons:

• Order from statutory/regulatory authority.

• To create lien on balances in BO account after getting approval

from CDSL.

• The DP should ensure that system-generated acknowledgement

is sent to the BO.

• Orders from statutory/regulatory authority/ authorization from

CDSL, the DP should maintain the acknowledgement copy sent to

the BO and record of dispatch of such acknowledgement copy.

Unfreeze initiated by BO:

An authorized official of the DP should verify that the Unfreeze Request

Form received from the BO is filled completely and signature(s) of the

holders are matching before the same is entered in the system.

System generated acknowledgement for unfreeze, duly signed and

stamped by the authorized official of the DP should be sent to the BO.

Unfreeze initiated by DP

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The DP can initiate unfreeze either to clear the lien created on the

balances of the BO or to adhere to the orders from statutory

authority/regulatory authority.

The acknowledgement letter for unfreeze should be duly signed and

stamped by the authorized official of DP and sent to the BO.

All documents/letters received from CDSL/statutory/regulatory

authority, DP should carefully maintain acknowledgement copy of

freeze/unfreeze letters sent to BO.

There are various reasons for which the BO account is freezed.

Every reason has got a code that is to be entered in the system by

concerned person at DP. The reasons are as follows:

1. Beneficiary Owner

2. ITO attachment

3. SEBI directive

4. Disinvestments & Private Deals

5. Court Order

6. PAN verification pending

7. Sole/ 1st holder deceased

8. 2nd holder deceased

9. 3rd holder deceased

10. Order from special recovery officer

11. CBI order

12. FIU-IND requirement

13. In person verification pending

14. Assignment DP closure

15. Minor attained Majority

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16. PAN not recorded

CORPORATE ACTIONS

• The Issuer or its RTA shall intimate CDSL of all corporate actions

simultaneously with the intimation to stock exchanges in case of

listed securities and in case of unlisted securities with prior

notice of seven clear days from the date of corporate action.

• On receiving the intimation as stated above, the details of the

holdings of the Beneficial Owners shall be provided electronically

by CDSL to the Issuer or its RTA as of the cutoff date (relevant to

that particular corporate action ) for the purpose of distribution

of corporate benefits within five working days of the record date

or the book closure date.

• The Issuer or its RTA shall distribute dividend, interest and other

monetary benefits and also ineligible securities directly to the

Beneficial Owners on the basis of the list provided by CDSL.

• The Issuer or its RTA may, if the benefits are in the form of

securities, distribute such benefits to the Beneficial Owners

through CDSL by electronically crediting the account of the

64



concerned Beneficial Owner provided that the newly created

security is an eligible security and has been admitted to CDSL.

• The concerned Beneficial Owner has consented to receive the

newly created securities through CDSL in dematerialised form.

• In such case, the Issuer or its RTA shall provide allotment details

of all Beneficial Owners to CDSL.

• On receipt of allotment details, CDSL shall cause the necessary

credit entries to be made in the account of the Beneficial Owner

concerned.

ONLINE TRADING IN INDIA

Online trading in India is the internet based investment activity that

involves no direct involvement of the broker. There are many leading

online trading portals in India along with the online trading platforms of

the biggest stock houses like the National stock exchange and the

Bombay stock exchange.

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Facilities of the online trading in India

The investor has to register with an online trading portal and get into

an agreement with the firm to trade in different securities

following the terms and conditions listed down on the agreement.

The order processing is done in correct timings as the servers of

the online trading portal are connected to the stock exchanges

and designated banks all round the clock. They can also get

updates on the trading and check the current status of their

orders either through e-mail or through the interface. Brokerages

also provide research content on their websites, such that the

clients can take their own decisions on stocks before investing.

Products and services of the online trading in India:

The major financial products and services of the Online trading in India

are like equities, mutual funds, life insurance, general insurance, loans,

share trading, commodities trading, portfolio management and

financial planning.

Objectives of Present Trading System

• Reduce and eliminate operational inefficiencies inherent in

manual system

• Increased trading capacity in Stock Market Improve market

transparency

• Eliminate unmatched trades and delayed reporting Provide for

on-line and off-line monitoring control and surveillance of the

market.

• Promote fairness and speedy matching Smooth market

operations using technology while retaining the flexibility of

conventional trading practices

• Set up various limits, rules and controls centrally.

66



• Consolidate the trades data on electronic media to interface will

the broker‘s back office system

• Provide public information on scrip prices, indices for all users of

the system

• Provide analytical data for use of Stock Market.

Features of Online Trading

The Online Trading is having many features which make it most

suitable for the investors to go for. Some of these features are as

follows:

1. Freedom of Information:

The Internet can provide a new sense of control over your financial

future. The amount of investment information available online is truly

astounding. It's one of the best aspects of being a wired investor. For

the first time in history, any individual with an Internet connection can:

• Know the price of any stock at any time

• Review the price history of any stock in chart format

• Follow market events in-depth

• Receive a wealth of free commentary and analysis about stock

markets and the global economy

• Conduct extensive financial research on any company

2. Control our money:

One of the great appeals of using an online trading account is the fact

that the account belongs to you, and is under your direct control. When

you want to buy or sell stock, you no longer need to call your broker on

the phone; hope that he is in the office to place your order; possibly

argue with the broker about the order; and hope that the transaction is

executed instantly.

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3. Access to the market:

At the most basic level, an online trading account gives you more

agility in buying and selling stocks. This is through sophisticated

information streams, dedicated trading platforms and sophisticated

tools for accessing the markets.

4. Offers greater transparency:

Online trading offers you greater transparency by providing you with

an audit trail. This involves a complete integrated electronic chain

starting from order placement, to clearing and settlement and finally

ending with a credit into your depository account. All these stages are

subject to inspection, thus bringing in transparency into the system.

5. Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as

in this case all short sell orders are squared off at the specified cut-off

time and not allowed to be carried forward.

6. Instant trade order confirmations:

Every trade is confirmed immediately and you will receive an on-

screen confirmation following every trade with full details for your

records. This avoids costly errors that would have been discovered

when it is too late.

7. Integrated Accounts:

Our Bank, Depository and Trading account are integrated for our

convenience.

Various broking houses provide access to many of the popular banks.

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Benefits of Online Trading

1) Less Costly:

The most significant advantage of the online broking is the cost

reduction in the brokerage. Due to the power of the Internet one has

the privilege of becoming the clients of really large brokerages with the

benefits of enjoying the low charges before enjoyed only by the big

players. As the DP account has got linked to the trading account most

players do not charge a minimum transaction cost thus truly allowing

one to buy a single share and achieve meaningful rupee price

averaging whatever be your buying power.

2) Peace of Mind:One can never have complete peace of mind but online investing does

away with the hassles of filling up instruction slips, visits to the broker

for handing over these slips and consequent costs.

3) Keeping Records:

The site one trades on keeps a record of all transactions down to

unexecuted orders and cancelled orders thus keeping one abreast of

all your transactions 24 hours a day. No paperwork means more time

at one’s disposal for research and analysis.

4.) Ease of trade:

69



It is the ease of doing the trade through net, with a click of mouse; one

can buy or sell any share that is dematerialized.

Other than the above-mentioned advantages, Internet trading provides

some additional advantages to the investors, brokers and also helps

the nation to channelize the resources. Net trading would increase

competition in the market hence increase in the bargaining power of

the investors. The entire communication between the investor, broker

and exchange would take place within milliseconds.

Problems of Online Trading

1. Server not found:

This may appear on one’s screens when he is desperately trying to get

out of an unprofitable position. Some of the online sites are providing a

telephone number for use in case their sites are overloaded or their

server down.

2. Connectivity of the Broker with NSE :

Recently ICICI Direct had a connectivity problem with the NSE for two

and half-hours during trading hours. This problem is rare but be alive

to its possibility.

3. Cyber attack:

In the event of a malicious attack on the systems of one’s broker he is

protected only if the company is taking proper precautions against

such attacks and if proper backup is regularly been taken. He may like

to choose a brokerage that has a stated security policy and

contingency plan in place.

4. Non-availability of a seamless interface:

70



As a client one will access the NSE through a server of the online

brokerage and this may involve queuing delays. If a number of client

access the server the server takes its own time sending the orders to

the NSE server. He must check out the seamlessness of this interface

before selecting an online brokerage. The faster the orders are

processed the more seamless is the interface.

5. Margin

If Internet trading alone is not fast and furious enough; many people

are trading on margin. That is where the brokerage firm lends you

money by leveraging his account, allowing him to buy a large amount

of securities by putting up only a small amount of money. He may have

forgotten what he read in the small print of his agreement, but the

brokerage firm has the right to change the maintenance margin

requirements without any warning or notice to him. In fact, the firm

has the right to liquidate his securities holdings (and it can pick and

choose which ones) without any notice to one if he fails to meet the

margin call. And there he was leveraged to the hilt, hoping to hit a

home run when he discovered that he is required to make a large

deposit that he cannot make. The next thing one knows, the firm is

selling off his securities at a point in time that is not the best for him.

These are the perils of trading on margin.

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Competitors

Demat services are provided by all the banks in the country. Therefore,

the competition is immense in the field. This section of the report

focuses on the competitor banks in the Public sector as well as in the

Private sector. Hence, for this comparative study the following banks

are considered:

• State Bank of India

• Punjab National Bank

• ICICI Bank

• HDFC Bank

State Bank of India offers Demat services that would ensure free

transferability of securities with speed, accuracy and security. SBI is

Depository Participant both with - National Securities Depositories

72



Limited (NSDL) and Central Depository Services Limited (CDSL)

through more than 1000 branches

As a customer, one deserves nothing but the very best, which is why

SBI provides new Power Demat Account that offers the following

features:

• Customer Care

• Transact Anywhere

• Statements by E-Mail

• ‘Demat Services’ Online

• Mobile Alerts

•

eZ-Trade@Sbi: Online Trading Facility in alliance with SBI CapSecurities Limited and Motilal Oswal Securities Limited. This

service provides you with a 3-in-1 account which is an integrated

platform of Savings Bank A/c, Demat A/c and Online Trading A/c

to give you a convenient and paper free trading experience.

Punjab National Bank offers depository & online trading services

to its customers through 360 branches spread across 150 centers all

over the country. The online trading facility is being offered in a

strategic alliance with

• SMC

• IDBI

• NETWORTH

With this facility, the customer can trade in securities online anywhere,

anytime without intervention of Bank and/or Broker. The customers

may approach designated branches of PNB for availing three-in-one

account facility under which a deposit account, a demat account and a

trading account will be opened. Those who already have deposit and

73



demat accounts with the Bank, will be required to open a trading

account which will be facilitated by our branch itself on behalf of SMC/

NSBL/ ICMS.

ICICI Bank Demat Services boasts of an ever-growing customer

base of over 16.80 lacs customer base as on 28.02.10 account holders.

In our continuous endeavour to offer best of the class services to our

customers we offer the following features:

• E-Instructions: You can transfer securities 24 hours a day, 7

days a week through Internet & Interactive Voice Response (IVR)

at a lower cost. Now with "Speak to transfer", you can also

transfer or pledge instructions through our customer care officer.

• Digitally Signed Statement: Receive your account statement

and bill by email

• Corporate Benefit Tracking: Track your dividend, interest,

bonus through your account statement.

• Mobile Request: Access your demat account by sending SMS to

enquire about Holdings, Transactions, Bill & ISIN details

• Mobile Alerts: Receive SMS alerts for all debits/credits as well

as for any request which cannot be processed. Dedicated

customer care executives specially trained at our call centre, to

handle all your queries. Countrywide network of over 700

branches, you are never far from an ICICI Bank Demat Services

outlet

HDFC Bank is one of the leading Depository Participant (DP) in the

country with over 8 Lac demat accounts. HDFC Bank Demat services

offers you a secure and convenient way to keep track of your securities

and investments, over a period of time, without the hassle of handling

74



physical documents that get mutilated or lost in transit. HDFC BANK is

Depository participant both with National Securities Depositories

Limited (NSDL) and Central Depository Services Limited (CDSL).

HDFC Bank Ltd provides convenient facility called 'SPEED-e' (Internet

based transaction) whereby account holder can submit delivery

instructions electronically through SPEED-e website (https://speed-

e.nsdl.com). SPEED-e offers secured means of transaction processing

eliminating preparation of instruction slips and submission of the same

across the counter to the depository participant. The 'IDEAS' facility

helps in viewing the current transactions and balances (holdings) of

Demat account on Internet on real time basis.

CONCLUSION

From the analysis made, it is evident that online trading and

Dematerialization has its demerits and merits. The demerits of online

trading are:

• Many banks make the process of opening a Demat account a

cumbersome one by making numerous enquiries about the

customers as the process needs it.

75



• The charges involved in opening a Demat account are soaring.

Even the other associated charges like transaction charge,

statement charges, pledge charges are very high.

• It is also highly influenced by economic factors like recession,

slowdown etc which can have a drastic impact on the investors.

The merits of online trading are:

• Securities can be held safe in a Demat account. This evades the

disadvantage of holding physical share certificates like wear and

tear, damage to securities, loss of securities etc.

• If the investor uses the trading account regularly, then it can

prove to be a fast source of income.

• Demat account also helps the investors to purchase the shares in

primary market.

• Dematerialization eases the process of selling the securities

thereby helping the investor to earn decent income.

Considering that the advantages clearly outweigh the disadvantages, it

is coherent to say that Dematerialization is a positive process which

mobilizes and channelizes the savings of investors into the

development of the industry and thereby the entire economy.

Therefore the investors must be made aware of these benefits that

they will derive on usage of the services and thereby promote the

development of online trading by moving in the right direction.

BIBLOGRAPHY

• Material given by the organization

• www.csdlindia.com

• www.nsdl.co.in

• www.unionbankofindia.com

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http://www.csdlindia.com/

http://www.unionbankofindia.com/

http://www.csdlindia.com/

http://www.unionbankofindia.com/



• www.statebankofindia.com

• www.hdfcbank.com

• www.icicidirect.com

•

business.mapsofindia.com• www.rediff.com/money

• www.financialexpress.com

• www.economicstimes

http://www.statebankofindia.com/

http://www.hdfcbank.com/

http://www.icicidirect.com/

http://www.rediff.com/money

http://www.statebankofindia.com/

http://www.hdfcbank.com/

http://www.icicidirect.com/

http://www.rediff.com/money

demat final report

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