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y

Wires assistingthe Financial

Markets &

Banking 

The project contains a brief outlay on some of the

helping hands in the Indian Economy. We have tried to

highlight the various intermediaries & authoritative

bodies along with their functioning. We hope that this

project covers our curricular requirements.

4.6 

Submitted to: Prof i am Gandhi

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Members of Group 10

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INDEX 

Sr.No

Particulars Pageno.

1 National Securities Depository

Ltd.

5

2 Clearing Corporation of India

Ltd.

9

3 National Securities Clearing

Corporation Ltd

12

4 Real Time Gross Settlement 14

5 National Electronic Funds

Transfer

14

6 Society for Worldwide

Interbank Financial

Telecommunication,

20

7 Webilography 25

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Acknowledgement It gives us immense pleasure in presenting our project on topic. 

We would firstly like to thank our institution & sincerely thank

 our principal Sir Prof. A.E.Lakdawala & Vice Principal  Prof. Kamala 

 for providing us support & giving us an opportunity for doing BBI 

 course & completing project.

We would also like to express our profound gratitude to our

 project guide Prof.Jigam Gandhi who has so ably guided our research

 project with his vast fund knowledge, advice & constantencouragement without which this project would have not been

 possible. We candidly appreciate his implicit & valuable contribution

in drawing up this project work.

We take this opportunity to highlight the valuable contribution

 our collogues & especially our parents who have always supported &

encouraged.

We also thank to all those who have helped us & whom we have

 forgotten to mention in this space.

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 5

NSDL {NATIONAL SECURITY

DEPOSITORY LTD}

India had a vibrant capital market which is more than a century old, thepaper-based settlement of 

trades caused substantial

problems like bad delivery

and delayed transfer of title

till recently. The enactment

of Depositories Act in

August 1996 paved the way

for establishment of NSDL,the first depository in India. This depository 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 dematerialised

form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to

support the investors and brokers in the capital market of the country.

NSDL aims at ensuring the safety and soundness of Indian marketplaces

by developing settlement solutions that increase efficiency, minimise

risk and reduce costs. At NSDL, we play a quiet but central role in

developing products and services that will continue to nurture the

growing needs of the financial services industry.

In the depository system, securities are held in depository accounts,

which is more or less similar to holding funds in bank accounts. Transfer

of ownership of securities is done through simple account transfers. Thismethod does away with all the risks and hassles normally associated

with paperwork. Consequently, the cost of transacting in a depository

environment is considerably lower as compared to transacting in

certificates.

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Legal Framework 

As a part of its on-going market reforms, the Government of India

promulgated the Depositories Ordinance in September 1995. Based onthis ordinance, Securities and Exchange Board of India (SEBI) notified

its Depositories and Participants Regulations in May 1996. The

enactment of the Depositories Act the following August paved the way

for the launch of National Securities Depository Ltd. (NSDL) in

November 1996. The Depositories Act has provided dematerialisation

route to book entry based transfer of securities and settlement of 

securities trade.

In exercise of the rights conferred by the Depositories Act, NSDL

framed its ByeLaws and Business Rules.The ByeLaws are approved by

SEBI. While the ByeLaws define the scope of the functioning of NSDL

and its business partners; the Business Rules outline the operational

procedures to be followed by NSDL and its "Business Partners."

Services

Under the provisions of the Depositories Act, NSDL provides various

services to investors and other participants in the capital market like,

clearing members, stock exchanges, banks and issuers of securities.

These include basic facilities like account maintenance,

dematerialisation, rematerialisation, settlement of trades through market

transfers, off market transfers & inter-depository transfers, distribution

of non-cash corporate actions and nomination/ transmission

The depository system, which links the issuers, depository participants

(DPs), NSDL and clearing corporation/ clearing house of stock 

exchanges, facilitates holding of securities in dematerialised form and

effects transfers by means of account transfers. This system which

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facilitates scripless trading offers various direct and indirect services to

the market participants.

NSDL provides special services like pledge, hypothecation of securities,

automatic delivery of securities to clearing corporations, distribution of cash and non-cash corporate benefits (Bonus, Rights, IPOs etc.), stock 

lending, demat of NSC/KVP, demat of warehouse receipts and Internet-

based services such as SPEED-e and IDeAS.

NSDL has also set-up a facility that enables brokers to deliver contract

notes to custodians and/or fund managers electronically. This facility

called STEADY (Securities Trading - information Easy Access and

DeliverY) was launched by NSDL on November 30, 2002. STEADY is

a means of transmitting digitally signed trade information with

encryption across market participants electronically, through Internet.

Joining NSDL 

NSDL carries out its activities through service providers like Depository

Participants (DPs), Issuing companies and their Registrars and Share

Transfer Agents, Clearing corporations/ Clearing Houses of Stock 

Exchanges. These entities are called business partners in NSDLterminology. These entities need to get integrated into NSDL depository

system to be able to provide various services to the investors and

Clearing Members.

The investor can obtain depository services through a depository

participant of NSDL. Just as one opens a bank account in order to avail

of the services of a bank, an investor opens a depository account with a

depository participant in order to avail of depository facilities.

A clearing member can open a special account in the depository system

for the purpose of settling trades done on stock exchanges. The clearing

account enables the clearing member to receive securities from its

clients for delivery to the Clearing House/Clearing Corporation as pay-

in, and to distribute the pay-out to its clients received from the Clearing

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House/Clearing Corporation.

Issuer can make dematerialization services available to their

shareholders by signing an agreement to that effect with NSDL. After

the agreement is entered into, an electronic link is established betweenNSDL, Issuer or its R & T Agent.

The clearing corporations/houses of stock exchanges also have to be

electronically linked to the depository in order to electronically receive

securities delivered by clearing members towards pay-in and to give out

securities to clearing members towards pay-out.

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Clearing Corporation of India (CCIL)

The Clearing Corporation of India Ltd. (CCIL) was set up in April, 2001

for providing exclusive clearing and settlement for transactions inMoney, GSecs and Foreign Exchange. The prime objective has been to

improve efficiency in the transaction settlement process, insulate the

financial system from shocks emanating from operations related issues,

and to undertake other related activities that would help to broaden and

deepen the money, debt and forex markets in the country. The company

commenced operations on February 15, 2002 when the Negotiated

Dealing System (NDS) of RBI went live. CCIL started providing the

settlement of forex transactions since November 2002. CCIL launched

the Collateralised Borrowing and Lending Obligation (CBLO) in

January 2003, a money market product based on Gilts as collaterals. It

has developed a forex trading platform “FX-CLEAR” which went live

on August 7, 2003. CCIL has started the settlement of cross-currency

deals through the CLS Bank from April 6, 2005. At the request of RBI,

CCIL developed and currently manages the NDS-OM and NDS-CALL

electronic trading platforms for trading in the government securities and

call money. It has also developed the NDS-Auction module for Treasury

Bills auction by RBI. CCIL has received the ISO/IEC 27001:2005

certification from M/s Det Norsk Veritas in 2006 for securing its

information assets.

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CCIL has introduced many innovative products/tools like ZCYC, Bond

and T-Bills indices, Sovereign Yield Curve, Benchmark reference rates

like CCIL-MIBOR/MIBID and CCBOR/CCBID, etc. CCIL regularly

comes out with many publications for the benefit of the marketparticipants. 

Clearcorp Dealing Systems (India) Limited (Clearcorp), a wholly

owned subsidiary of CCIL, was incorporated in June, 2003 to facilitate,

set up and carry on the business of providing dealing systems/platform

in Collateralised Borrowing and Lending Obligation(CBLO), Repos and

all money market instruments of any kind and also in foreign exchange,

foreign currencies of all kinds. Clearcorp has been set up to facilitate

CCIL to segregate its other activities from the Clearing & Settlement

activity, a risk bearing activity. Accordingly, the Shareholders of CCIL

at their meeting held on June 4, 2003 resolved to transfer the activities of 

the Company relating to Forex Dealing Platform and Collateralised

Borrowing and Lending (CBLO) dealing platform to Clearcorp and the

same has been made operational from January 1, 2004.

Future

Clearing Corporation of India has continuously extended its frontiers

from the settlement of trades in the outright and repo segment of fixed

income market and FOREX trades to developing trading platforms for

transactions in the outright, FOREX and money market. CBLO, the

money market instrument developed by CCIL has been able to capture

significant volumes in the money market. Trading on this platform has

been extended to Non-NDS members also. Cross-currency trades have

been taken for settlement by CCIL through the CLS Bank. It has been

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the constant endeavor of CCIL to fulfill market requirements and

expectations.

Towards this end, CCIL plans to consider acceptance of Forward Tradesfrom trade date itself for guaranteed settlement from the existing

settlement of these trades under the Spot window. CCIL, in consultation

with market users, has finalized the business model, including the risk 

management processes, for settlement of OTC trades in Rupee

Derivative Products (Interest Rate Swaps and Forward Rate

Agreements). 

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NSCCL

The National Securities Clearing Corporation Ltd. (NSCCL), a wholly

owned subsidiary of NSE, was incorporated in August 1995. NSCCL

commenced clearing operations in April 1996. It was set up with the

following objectives:

  to bring and sustain confidence in clearing and settlement of 

securities;

  to promote and maintain, short and consistent settlement cycles;

  to provide counter-party risk guarantee, and

  to operate a tight risk containment system.

NSCCL carries out the clearing and settlement of the trades executed in

the Equities and Derivatives segments and operates Subsidiary General

Ledger (SGL) for settlement of trades in government securities. It

assumes the counter-party risk of each member and guarantees financial

settlement. It also undertakes settlement of transactions on other stock 

exchanges like, the Over the Counter Exchange of India.

Clearing & Settlement by NSCCL: 

NSCCL carries out the clearing and settlement of the trades executed in

the equities and derivatives segments of the NSE, It operates a well-

defined settlement cycle and there are no deviations or deferments from

this cycle. It aggregates trades over a trading period, nets the positions to

determine the liabilities of members and ensures movement of funds and

securities to meet respective liabilities. At the end of each trading day,

concluded or locked-in trades are received from NSE by NSCCL.NSCCL determines the cumulative obligations of each member and

electronically transfers the data to Clearing Members (CMs). All trades

concluded during a particular trading period are settled together. A

multilateral netting procedure is adopted to determine the net settlement

obligations(delivery/receipt positions) of CMs. NSCCL then allocates or

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assigns delivery of securities inter se the members to arrive at the

delivery and receipt obligation of funds and securities by each member.

Settlement is deemed to be complete upon declaration and release of 

pay-out of funds and securities. On the securities pay-in day, delivering

members are required to bring in securities to NSCCL. On pay-out day,the securities are delivered to the respective receiving members.

Exceptions may arise because of short delivery of securities by CMs,

bad deliveries or company objections on the pay-out day.

NSCCL has set up the Settlement Guarantee Fund (SGF) through

contributions of its trading members. The SGF is intended primarily to

guarantee completion of settlement up to the normal pay-out for trades

executed in the regular market and will not act as guarantee for companyobjection cases i.e., replacement of bad paper or payment of its

equivalent financial value.

The SGF therefore ensures that the settlement is not held up on account

of failure of trading members to meet their obligations and all market

participants (trading members, custodians, investors, etc.) who have

completed their part of the obligations are not affected in any manner

whatsoever.

The securities are put up for auction by the NSE on account of non-

delivery of securities by the selling trading member to ensure that the

buying trading member receives the securities due to him. The non-

delivery by the trading member could arise on account of short delivery,

bad deliveries not rectified and company objections not rectified by

them. The Exchange purchases the requisite quantity in the Auction

Market and gives them to the buying trading member. If the shares could

not be bought in the auction i.e., if shares are not offered for sale in the

auction, the transactions are squared up as per SEBI Guidelines. As per

the Guidelines in force, the transaction is squared up at the highest price

on the NSE from the relevant trading period till the close-out day or at

20% above the last available trading price on the NSE, whichever is

higher.

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Real Time Gross Settlement

Real time gross settlement systems (RTGS) are funds transfer systems

where transfer of money or securities takes place from one bank to

another on a "real time" and on "gross" basis. Settlement in "real time"

means payment transaction is not subjected to any waiting period. The

transactions are settled as soon as they are processed. "Gross settlement"

means the transaction is settled on one to one basis without bunching or

netting with any other transaction. Once processed, payments are final

and irrevocable.

NEFT ServiceLike RTGS, RBI has introduced another

type of funds transfer system called

NEFT (National Electronic Funds

Transfer). The NEFT Service is useful

for the seamless transfer of funds from

one branch to another without any delay or

procedural hassle. The operations andfunctions of the system are similar to

RTGS. We have become active member of 

NEFT system and introduced a new

product called TMB e-Transfer (NEFT).

NEFT is the most suitable mode of payment for small value payments as

the charges are cheaper and settlement is faster compared to other modes

of payment. RBI has introduced NEFT system mainly to send smallvalue payments at nominal cost. We can send funds from our bank to

other bank, which is a part of NEFT network. So far, 89 banks have

 joined in this system and more than 55225 of their branches are under

this network. More banks are expected to join in the days to come.

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In NEFT, there are 11 hourly settlements (9 am to 7 pm) for a day. In

order to complete the processing cycle on a near real-time basis, RBI has

introduced the concept of return within 2 hours of completion of a batch.

The payment instructions received by RBI within each settlement batch

will be consolidated and distributed to payee's bank after each

settlement. Normally, payment transaction messages reach the receiving

(beneficiary) bank within 15 to 30 minutes from the batch time. Banks

are hard pressed to afford credit to beneficiary accounts immediately or

else return the transactions within two hours of completion of the batch

settlement.

For e.g.: A payment instruction sent to RBI for 12.00 clock settlement

batch, may reach the beneficiary bank by 12.30 P.M. If the beneficiary

bank has STP (Straight Through process) facility, the amount will be

credited immediately. In case, if the beneficiary bank wants to return the

transaction for any reason, they should return the same within 2 PM

batch on the same day.

In order to encourage small value payments through NEFT, we have

fixed nominal charges only. There is no minimum as well as maximumtransfer amount limit. There are no charges for inward payments.

NEFT Outward Charges:

Less than Rs. 1 Lakh: Rs. 5/- per transaction.

1 Lakhs to Rs. 2 Lakhs: Rs. 15/- per transaction.

Above 2 Lakhs: Rs. 25/- per transaction.

For inward remittances, our customers are adviced to instruct their

counterpart to quote correctly the full 15-digit account number for

inward payment to identify the branch and credit their account

immediately. If the message received is without 15-digit account number

it will be rejected and returned automatically.

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QUESTIONS

Q.1. Are all bank branches in the country

part of the NEFT funds transfer

network?

Ans: For being part of the NEFT funds

transfer network, a bank branch has to be NEFT-enabled. As at end-

January 2011, 74,680 branches / offices of 101 banks in the country (out

of around 82,400 bank branches) are NEFT-enabled. Steps are beingtaken to further widen the coverage both in terms of banks and branches

 / offices.

Q.2. Who can transfer funds using NEFT?

Ans: Individuals, firms or corporates maintaining accounts with a bank 

branch can transfer funds using NEFT. Even such individuals, firms or

corporates who do not have a bank account (walk-in customers) can also

deposit cash at the NEFT-enabled branch with instructions to transfer

funds using NEFT. A separate Transaction Code (No. 50) has been

allotted in the NEFT system to facilitate walk-in customers to deposit

cash and transfer funds to a beneficiary. Such customers have to furnish

full details including complete address, telephone number, etc. NEFT,

thus, facilitates originators or remitters to initiate funds transfer

transactions even without the need for having a bank account.

Q.3. Who can receive funds through the NEFT system?

Ans: Individuals, firms or corporates maintaining accounts with a bank 

branch can receive funds through the NEFT system. It is, therefore,

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necessary for the beneficiary to have an account with the NEFT enabled

destination bank branch in the country.

The NEFT system also facilitates one-way cross-border transfer of funds

from India to Nepal. This is known as the Indo-Nepal RemittanceFacility Scheme. A remitter can transfer funds from any of the NEFT-

enabled branches in to Nepal, irrespective of whether the beneficiary in

Nepal maintains an account with a bank branch in Nepal or not. The

beneficiary would receive funds in Nepalese Rupees. A separate

Transaction Code (No. 51) has been allotted in the NEFT system to

facilitate the transfer of funds from India to Nepal. Further details on the

Indo-Nepal Remittance Facility Scheme are available on the website of Reserve Bank of India at

http://rbidocs.rbi.org.in/rdocs/content/pdfs/84489.pdf.

Q.4. Is there any limit on the amount that could be transferred using

NEFT?

Ans: No. There is no limit – either minimum or maximum – on the

amount of funds that could be transferred using NEFT. However, forwalk-in customers mentioned at Q.4 and Q.5 above, including those

remitting funds under the Indo-Nepal Remittance Facility Scheme, the

maximum amount that could be transferred is Rs. 49,999.

Q.5. How does the NEFT system operate?

Step-1 : An individual / firm / corporate intending to originate transfer

of funds through NEFT has to fill an application form providing details

of the beneficiary (like, name of the beneficiary, name of the bank 

branch where the beneficiary has an account, IFSC of the beneficiary

bank branch, account type and account number). The application form

will be available at the originating bank branch. The remitter authorizes

his/her bank branch to debit his account and remit the specified amount

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to the beneficiary. Customers enjoying net banking facility offered by

their bankers can initiate the funds transfer request online. Some banks

offer the NEFT facility even through the ATMs. Walk-in customers will,

however, have to give their contact details (complete address andtelephone number, etc.) to the branch. This will help the branch to

refund the money to the customer in case credit could not be afforded to

the beneficiary’s bank account or the transaction is rejected / returned

for any reason.

Step-2: The originating bank branch prepares a message and sends the

message to its pooling centre (also called the NEFT Service Centre).

Step-3 : The pooling centre forwards the message to the NEFT Clearing

Centre (operated by National Clearing Cell, Reserve Bank of India,

Mumbai) to be included for the next available batch.

Step-4: The Clearing Centre sorts the funds transfer transactions

destination bank-wise and prepares accounting entries to receive funds

from (debit) the originating banks and give the funds to (credit) the

destination banks. Thereafter, bank-wise remittance messages are

forwarded to the destination banks through their pooling centre (NEFT

Service Centre).

Step-5: The destination banks receive the inward remittance messages

from the Clearing Centre and pass on the credit to the beneficiaryaccounts.

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Q.6. What are the other features of NEFT?

Ans: Launched in October 2005, NEFT is an electronic payment system

that uses a secure mode of transferring funds from one bank branch to

another bank branch. NEFT uses the Public Key Infrastructure (PKI)technology to ensure end-to-end security and rides on the INdian

FInancial NETwork (INFINET) to connect the bank branches for

electronic transfer of funds. The participating banks, branch coverage

and transaction volumes have been continuously increasing, which is

reflective of the acceptance and popularity of the NEFT system.

 How RTGS is different from National Electronics Funds

Transfer System (NEFT)? 

 Ans. NEFT is an electronic fund transfer system that operates on

a Deferred Net Settlement (DNS) basis which settles

transactions in batches. In DNS, the settlement takes place with

all transactions received till the particular cut-off time. For 

example, currently, NEFT operates in hourly batches - there areeleven settlements from 9 am to 7 pm on week days and five

settlements from 9 am to 1 pm on Saturdays. Any transaction

initiated after a designated settlement time would have to wait 

till the next designated settlement time. Contrary to this, in the

 RTGS transactions are processed continuously throughout the

 RTGS business hours.

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SWIFT

SWIFT is the Society forWorldwide Interbank Financial

Telecommunication, a member-

owned cooperative through which

the financial world conducts its

business operations with speed,

certainty and confidence. More than

9,000 banking organisations,

securities institutions and corporatecustomers in 209 countries trust us

every day to exchange millions of 

standardised financial messages.

Our role is two-fold. We provide the proprietary communications

platform, products and services that allow our customers to connect and

exchange financial information securely and reliably. We also act as the

catalyst that brings the financial community together to work 

collaboratively to shape market practice, define standards and considersolutions to issues of mutual interest.

SWIFT enables its customers to automate and standardise financial

transactions, thereby lowering costs, reducing operational risk and

eliminating inefficiencies from their operations. By using SWIFT

customers can also create new business opportunities and revenue

streams.

SWIFT has its headquarters in Belgium and has offices in the world's

major financial centres and developing markets. SWIFT provides

additional products and associated services through Arkelis N.V., a

wholly owned subsidiary of SWIFT, the assets of which were acquired

from SunGard in 2010.

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SWIFT does not hold funds nor does it manage accounts on behalf of 

customers, nor does it store financial information on an on-going basis.

This activity involves the secure exchange of proprietary data while

ensuring its confidentiality and integrity.

Operations centers

The SWIFT secure messaging network is run out of two redundant data

centers, one in the United States and one in the Netherlands. These

centers share information in near real-time. In case of a failure in one of 

the data centers, the other is able to handle the traffic of the complete

network. Currently SWIFT is building a third data center in Switzerland,

which is scheduled to start operating in the second half of 2009. Once

this is completed, data from European SWIFT members will no longer

be mirrored to the US data center. Also called Distributed Architecture 

will partition messaging into two zones, the European messaging zone

and the Trans-Atlantic messaging zone. European Zone messages will

be stored in the Netherlands and in a part of the Switzerland operating

center, Trans-Atlantic Zone messages will be stored in the US and in a

part of the Switzerland operating center that is segregated from the

European Zone messages. Countries outside of Europe were by default

allocated to the Trans-Atlantic Zone but could choose to have theirmessages stored in the European Zone.

SWIFTNet Network

SWIFT moved to its current IP Network infrastructure, known as

SWIFTNet, from 2001 to 2005, providing a total replacement of the

previous X.25 infrastructure. The process involved the development of 

new protocols that facilitate efficient messaging, using existing and newmessage standards. The adopted technology chosen to develop the

protocols was XML, where it now provides a wrapper around all

messages legacy or contemporary. The communication protocols can be

broken down into:

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InterAct  FileAct  Browse 

  SWIFTNet

InterAct Realtime

  SWIFTNet

InterAct Store and

Forward

  SWIFTNet FileAct

Realtime

  SWIFTNet FileActStore and Forward

  SWIFTNet

Browse

Architecture

SWIFT provides a centralized store-and-forward mechanism, with some

transaction management. For bank A to send a message to bank B with a

copy or authorization with institution C, it formats the message

according to standard, and securely sends it to SWIFT. SWIFT

guarantees its secure and reliable delivery to B after the appropriate

action by C. SWIFT guarantees are based primarily on high redundancy

of hardware, software, and people.

SWIFT actually means several things in the financial world:

1. a secure network for transmitting messages between financial

institutions;2. a set of syntax standards for financial messages (for transmission

over SWIFTNet or any other network)

3. a set of connection software and services, allowing financial

institutions to transmit messages over SWIFT network. 

SWIFT services

There are four key areas that SWIFT services fall under within the

Financial marketplace, Securities, Treasury & Derivatives, Trade

Services and Payments & Cash Management. 

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Securities 

  SWIFTNet

FIX

(obsolete)  SWIFTNet

Data

Distribution

  SWIFTNet

Funds

Treasury &

Derivatives 

  SWIFTNet

Accord  SWIFTNet

Affirmation

  SWIFTNet

CLS Third

Party

Service

Cash

Management 

  SWIFTNet

Bulk Payments

  SWIFTNet

Cash

Reporting

  SWIFTNet

Exceptions

Trade Services 

  SWIFTNet

Trade

ServicesUtility

SWIFTNet Mail

SWIFT also offer a secure person-to-person messaging service,

SWIFTNet Mail, which went live on 16 May 2007. SWIFT clients can

configure their existing email infrastructure to pass email messages

through the highly secure and reliable SWIFTNet network instead of the

open Internet. SWIFTNet Mail is intended for the secure transfer of 

sensitive business documents, such as invoices, contracts and

signatories, and is designed to replace existing telex and courierservices, as well as the transmission of security-sensitive data over the

open Internet. Eight financial institutions, including HSBC, FirstRand

Bank, Clearstream, DnB NOR, Nedbank, Standard Bank of South Africa

and Bear Stearns, as well as SWIFT piloted the service.

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 24

1) SWIFT for broker/dealers

2) SWIFT for custodians

3) SWIFT’s CLS Third Party Service 

4) Clearing

5) Derivatives

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Webilography  

1) www.wikipedia.com 

2) www.nsdl.co.in 

3) www.swift.com 

4) www.ccilindia.com 

5) www.rbi.org.in 

6) www.e-investing.in 

7) www.nseindia.com