final demat project

7/29/2019 final demat project

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Innovations in banking and

insurance

Dematerialization service

Presented by:

Jyothsna ail (01)Jinal joshi (16)

Pallavi venkatesh (32)

Assigned by:

Mrs. Arthi kalyanaraman.


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Vision of Banks in India

The banking scenario in India has already gained all the

momentum, with the domestic and international banks

gathering pace. The focus of all banks in India has shifted

their approach to 'cost', determined by revenue minus

profit. This means that all the resources should be used

efficiently to better the productivity and ensure a win-win

situation. To survive in the long run, it is essential to

focus on cost saving. Previously, banks focused on the

'revenue' model which is equal to cost plus profit. Post

the banking reforms, banks shifted their approach to the

'profit' model, which meant that banks aimed at higher

profit maximization.

Focus of banks in India

The banking industry is slated for growth in future with a

more qualitative rather than quantitative approach. The

total assets of all scheduled commercial banks by end-

March 2010 is projected to touch Rs 40,90,000 crore. This

is going to comprise around 65% of GDP at current

market prices as compared to 67% in 2002-03. The

bank's assets are estimated to grow at an annual


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composite rate of growth of 13.4% during the rest of the

decade as against 16.7% between 1994-95 and 2002-03.

Barring the asset side, on the liability perspective, therewill be huge additions to the capital base and reserves.

People will rely more on borrowed funds, pace of deposit

growth slowing down side by side. However, advances

and investments would not see a healthy growth rate.

Future challenges of Banks in

India

The Indian banks are hopeful of becoming a global brand

as they are the major source of financial sector revenueand profit growth. The financial services penetration in

India continues to be healthy, thus the banking industry is

also not far behind. As a result of this, the profit for the

Indian banking industry will surely surge ahead. The profit

pool of the Indian banking industry is probable to

augment from US$ 4.8 billion in 2005 to US$ 20 billion in

2010 and further to US$ 40 billion by 2015. This growth

and expansion pace would be driven by the chunk of

middle class population. The increase in the number of


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private banks, the domestic credit market of India is

estimated to grow from US$ 0.4 trillion in 2004 to US$ 23

trillion by 2050. Third largest banking hub of the globe by

2040 - is that vision too far away?

Definition

Demat account is a safe and convenient means of holding

securities just like a bank account is for funds. Today,

practically 99.9% settlement (of shares) takes place on

demat mode only. Thus, it is advisable to have a

Beneficiary Owner (BO) account to trade at the

exchanges.

Meaning of Dematerialization

Dematerialization is a process by which physical

certificates of an investor are converted into electronic

form and credited to the account of the depository

participant. Dematted securities do not have any

certificate numbers or distinctive numbers and are dealtonly in quantity, i.e., the securities are replaceable.

Investors can dematerialize only those certificates that

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


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securities admitted for dematerialization. These are:

shares, scripts, 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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Object Of Demat System

India has adopted this system in which book entry is done

electronically. It is the system where no paper is involved.

Physical form is extinguished and shares or securities are

held in electronic mode. Before the introduction of the

depository system by the Depository Act, 1996, the

process of sale, purchase and transfer of shares was a

huge problem and the safety perspective was zero.

Demat Options

Banks score over others Around 200 depository

participants (DPs) offer the demat account facility. Acomparison of the fees charged by different DPs is

detailed below. But there are three distinct advantages of

having a demat account with a bank quick processing,

accessibility and online transaction. Generally, banks

credit your demat account with shares in case of

purchase, or credit your savings accounts with the

proceeds of a sale on the third day. Banks are also

advantageous because of the number of branches they

have. Some banks give the option of opening a demat


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account in any branch, while others restrict themselves to

a select set of branches. Some private banks also provide

online access to the demat account. So, you can check on

your holdings, transactions and status of requests

through the net banking facility. A broker who acts as a

DP may not be able to provide these services.

Bank Account Vs Demat

Account

Bank Account Vs Demat Account (*AQB - Average Quarterly Balance)

S.

No.Basis Of Differentiation Bank Account Demat Account

1.Form of

Holdings/DepositsFunds Securities

2. Used for Safekeeping of money Safekeeping of shares

3. Facilitates Transfer of money Transfer of shares


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(without actually handling

money)

(without actually handling

shares)

4. Where to open A bank of choiceA DP of choice (can be a

bank)

5.Requirement of PAN

NumberNot Mandatory

Mandatory (effective from

April 01, 2006)

6.Interest accrual on

holdings

Interest income is subject

to the applicable rate of

interest

No interest accruals on

securities held in demat

account

7.Minimum balance

requirement

AQB* maintenance is

specified for certain bank

accounts

No such requirement

8.Either or Survivor

facility

Available Not available

S.

No.BASIS OF SIMILARITY PARTICULARS

1. Security and ConvenienceBoth are very safe and convenient means of

holding deposits/securities

2. Number of accountsNo legal barrier on the number of bank or

demat accounts that can be opened

3.Transfer of deposits

(funds or securities)

Funds/securities are transferred only at the

instruction of the account holder


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4.Physical transfer of

money/securities

Physical transfer of money/securities is not

involved

5. Nomination Facility Available

Fees Involved

There are four major charges usually levied on a demat

account: Account opening fee, annual maintenance fee,

custodian fee and transaction fee. All the charges varyfrom DP to DP.

Account-opening fee


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Depending on the DP, there may or may not be an

opening account fee. Private Banks, such as HDFC

Bank and UTI Bank, do not have one. However,

players such as ICICI Bank, Globe Capital, Karvy

Consultants and the State Bank of India to do so. But

most players levy this when you re-open a demat

account, though the Stock Holding Corporation offers

a lifetime account opening fee, which allows you to

hold on to your demat account over a long period.

This fee is refundable.

Annual maintenance fee

This is also known as folio maintenance charges, and

is generally levied in advance.

Custodian fee

This fee is charged monthly and depends on the

number of securities (international securities

identification numbers ISIN) held in the account. It

generally ranges between Rs 0.5 to Rs 1 per ISIN permonth. DPs will not charge custody fee for ISIN on

which the companies have paid one-time custody

charges to the depository.


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Transaction fee

The transaction fee is charged for crediting/debiting

securities to and from the account on a monthlybasis. While some DPs, such as SBI, charge a flat fee

per transaction, HDFC Bank and ICICI Bank peg the

fee to the transaction value, subject to a minimum

amount. The fee also differs based on the kind of

transaction (buying or selling). Some DPs charge only

for debiting the securities while others charge for

both. The DPs also charge if your instruction to

buy/sell fails or is rejected. In addition, service tax is

also charged by the DPs.

In addition to the other fees, the DP also charges a

fee for converting the shares from the physical to the

electronic form or vice-versa. This fee varies for both

demat and remat requests. For demat, some DPs

charge a flat fee per request in addition to the

variable fee per certificate, while others charge only

the variable fee.

For instance, Stock Holding Corporation charges Rs

25 as the request fee and Rs 3 per certificate as the

variable fee. However, SBI charges only the variable


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fee, which is Rs 3 per certificate. Remat requests

also have charges akin to that of demat. However,

variable charges for remat are generally higher than

demat. Some of the additional features (usually

offered by banks) are as follows. Some DPs offer a

frequent trader account, where they charge frequent

traders at lower rates than the standard charges.

Demat account holders are generally required to pay

the DP an advance fee for each account which will be

adjusted against the various service charges. The

account holder needs to raise the balance when it

falls below a certain amount prescribed by the DP.

However, if you also hold a savings account with the

DP you can provide a debit authorization to the DP

for paying this charge. Finally, once you choose your

DP, it will be prudent to keep all your accounts with

that DP, so that tracking your capital gains liability is

easier. This is because, for calculating capital gains

tax, the period of holding will be determined by the

DP and different DPs follow different methods. For

instance, ICICI Bank uses the first in first out (FIFO)

method to compute the period of holding. The proof

of the cost of acquisition will be the contract note.


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The computation of capital gains is done account-

wise.

Opening a Demat Account

To start dealing in securities in electronic form, one needs

to open a demat account with a DP of his choice. An

investor already having shares in physical form should

ensure that he gets the account opened in the same set

of names as appearing on the share certificate; otherwise

a new account can be opened in any desired pattern bythe investor.

Getting started

Choose a DP

Fill up an account opening form provided by DP, and

sign an agreement with DP in a standard format

prescribed by the depository.


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DP provides the investor with a copy of the agreement

and schedule of charges for his future reference.

DP opens the account and provides the investor with aunique account number, also known as Beneficiary

Owner Identification Number (BO ID).

Documents to be attached

Passport size photographs

Proof of residence (POR) - Any one of Photo Ration

Card with DOB / Photo Driving License with DOB /

Passport copy / Electricity bill / Telephone bill

Proof of identity (POI) - Any one of Passport copy /

Photo Driving License with DOB / Voters ID Card /

PAN Card / Photo Ration Card with DOB

PAN card


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DEMATERIALISATION Process

An investor having securities in physical form must get

them dematerialized, if he intends to sell them. This

requires the investor to fill a Demat Request Form (DRF)

which is available with every DP and submit the same

along with the physical certificates. Every security has an

ISIN (International Securities Identification Number). If

there is more than one security than the equal number of

DRFs has to be filled in. The whole process goes on in the

following manner:


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RematerialisationThe process of getting the securities in an electronic

form, converted back into the physical form is known as

Rematerialisation. An investor can rematerialize his

shares by filling in a Remat Request Form (RRF). The

whole process goes on as follows:


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Note:

1. Depository - An organization that facilitates holding

of securities in the electronic form and enables

DPs to provide services to investors relating to

transaction in securities. There are two depositories

in India, namely NSDL and CDSL. As per a SEBI


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guideline, the minimum net worth stipulated for a

depository is Rs.100 crore.

2. NSDL/CDSL - The securities are held in depository

accounts, like the funds are held in bank accounts.

There are two depositories in India namely NSDL and

CDSL. NSDL (National Securities Depository limited)

was established in August 1996 and is the first

depository in India. CDSL (Central Depository

Securities Limited) is the other depository and was

established in 1999.

3. DP (Depository Participant) - A Depository Participant

can be a financial organization like banks, brokers,

financial institutions, custodians, etc., acting as an

agent of the Depository to make its services

available to the investors. There are a total of 538

DPs registered with SEBI, as on March 31, 2006 and

each DP is assigned a unique identification number

known as DP-ID.

Transfer of Shares betweenDPs


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To transfer shares, we need to fill the Depository

Instruction Slip Book (DIS). Firstly we need to check,

whether both Demat account's Depository Participant is

same or not (CDSL or NSDL) If both of them are different,

then we need an INTER Depository Slip (Inter DIS). If they

are same, then we need INTRA Depository Slip (Intra DIS).

1.For example: If we have one Demat account with

CDSL and other Demat account with NSDL, then we

need an Inter DIS.

2.Generally, brokers issue Intra DIS, so do check with

broker.

3.Once we identify the correct DIS, fill the relevant

information like

4. scrip name INE number quantity in words and

figures

5. And submit that DIS for the transfer to the broker

with signatures. The transferor broker shall accept

that DIS in duplicate and acknowledge receipt of

DIS on duplicate copy.

6. Do try to submit that DIS when market is on.

Accordingly, date of submission of DIS and date of

execution of DIS can be same or a difference of one

day is also acceptable.


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7.For transfer, you shall also pay the broker some

charges.

8. Remember: DIS is almost like a cheque book.

Accordingly, it can be misused if issued blank.

Benefits Of Demat Account

A safe and convenient way of holding securities (equity

and debt instruments both).

Transactions involving physical securities are costlier

than those involving dematerialised securities (just like

the transactions through a bank teller are costlier than

ATM transactions). Therefore, charges applicable to an

investor are lesser for each transaction.

Securities can be transferred at an instructionimmediately.

Increased liquidity, as securities can be sold at any

time during the trading hours (between 9:55 AM to

3:30 PM on all working days), and payment can be

received in a very short period of time.

No stamp duty charges.

Risks like forgery, thefts, bad delivery, delays in

transfer etc, associated with physical certificates, are

eliminated.


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Pledging of securities in a short period of time.

Reduced paper work and transaction cost.

Odd-lot shares can also be traded (can be even 1

share).

Nomination facility available.

Any change in address or bank account details can be

electronically intimated to all companies in which

investor holds any securities, without having to inform

each of them separately.

Securities are transferred by the DP itself, so no need

to correspond with the companies.

Shares arising out of bonus, split, consolidation, merger

etc. are automatically credited into the demat account

of the investor.

Shares allotted in public issues are directly credited

into demat account of the applicants in quick time.


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The disadvantages of demat

account:

Trading in securities may become uncontrolled in case of

dematerialized securities.

It is incumbent upon the capital market regulator to keep

a close watch on the trading in dematerialized securities

and see to it that trading does not act as a detriment toinvestors. The role of key market players in case of

dematerialized securities, such as stock-brokers, needs to


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be supervised as they have the capability of manipulating

the market.

1. Multiple regulatory frameworks have to be confirmed

to, including the Depositories Act, Regulations and the

various Bye Laws of various depositories. Additionally,

agreements are entered at various levels in the process

of dematerialization. These may cause anxiety to the

investor desirous of simplicity in terms of transactions in

dematerialized securities.

2. However, the advantages of dematerialization

outweigh its disadvantages and the changes ushered in

by SEBI and the Central Government in terms of

compulsory dematerialization of securities is important

for developing the securities market to a degree of

advancement. Freely traded securities are an essential

component of such an advanced market and

dematerialization addresses such issues and is a step

towards the advancement of the market.


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METHODS OFDATA COLLECTION

In the project work Primary data secondary data (both)

sources of data has been used. We took survey of 13

respondents residing in various areas regarding the

demat service popularity and expectation of the

consumer from the online trading service provider. The

details about the respondents and their individual views

are stated in the sample questionnaire sheets.

Primary data collection: In dealing with real life

problem it is often found that data at hand are

inadequate, and hence, it becomes necessary to collect

data that is appropriate. There are several ways of

collecting the appropriate data which differ considerablyin context of money costs, time and other resources at

the disposal of the researcher. Primary data can be

collected either through experiment or through survey.

The data collection for this study was done in the

following manner:

Through questionnaire:- Information to find out the

investment potential and goal was found out through

questionnaire.


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Secondary sources of data: In the secondary sources

of data is used. (Internet)

Analysis of the survey

conducted

1.In which of the financial instrument do you

invest?

Mutual fund

Bond

Shares

Derivative.

Interpretation:


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This shows that although the mutual funds market

is on the rise yet, the most favoured investment

continues to be in the Share Market. So, with a

more transparent system, investment in the StockMarket can definitely be increased.

2.Are you aware of online share trading?

Yes

No

Interpretation:


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With the increase in cyber education, the

awareness towards online share trading has

increased by leaps and bounds.

3. Which Brokerage Company or bank service you

use?

Interpretation:


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Majority of the respondents prefer angel broking

service and there is also demand for local broking

companies.

4.What are the services offered in your demat

account?

Interpretation:

Some of the common services offered by the

customers Demat account are:

Online trading

SMS on each transaction

Up to date information regarding the status

of the account

Providing with monthly statement.

Quotation of the share prices.

5.Is the brokerage rate high low or affordable?

High

Low


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Affordable

Interpretation:

Majority of the respondents feel that their service

provider provide them with affordable brokerage

charges.

6.Are you provided with the necessary advice by

the current service provider?

Yes

No


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Interpretation:

This shows that the respondents are provided

with efficient and on time services and are

really satisfied with it.

7. What are your suggestions for the

improvement in the demat service offered by

your service provider?


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Interpretation:

Some of the most common suggestions given

by the customers are:

They should provide proper guidance to

their customers about demat.

They should provide offers and facilities to

their customers to increase their

attractiveness about demat.

Brokerage rate should remain the same or

be reduced.


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LIMITATION of sample survey.

The study is limited to the different schemes available under

the Demat account of respondents

The lack of information sources for the analysis part.

Geographical locations.

Extreme variability in MARKET.


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Conclusion:

From a long-term perspective, demat in India is of

considerable significance. Not only has the general

trading environment improved and quickened, volumes

too have perked up, even in the demat segment. With

demat taking off, there is now scope for an improvement

in the quality of investor services.

As a consequence of dematerialization, the Indian market

is also well prepared for web-based trading though the

quality of telecom infrastructure and inadequacies in the

banking system-stock exchange linkages may cause

delays. Notably, with regard to the thrust towards

paperless trading, the Indian market managed in three

years what took even the US much longer.

With a high degree of dematerialization a reality, the

stage is set for rolling settlements and web-based

trading. Once these are in place, the Indian market will

have moved closer to the standards in advanced

markets, such as the US. And paperless trading may well

be the catalyst for such a rapid advancement.


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Reference

www.businessmapsofindia.com

www.hinduonet.com

www.appuonline.com

www.legalserviceindai.com

www.wapedia.com

sharemarketbasics.com

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