Click to edit Master subtitleITS REGULATION DEMAT ACCOUNT AND style

DEPOSITORY SYSTEM IN INDIA

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Depository system in India

q A depository is an organisation which

holds securities of investors in electronic form at the request of the investors through a Depository Participant. A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor and provides depository services.

q Minimum networth Rs.100 crore q National Securities Depositories Limited.

(NSDL)

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Bank vs Depository
Depository Bank 1. Funds Securities

Transfer securities between accounts on 2. Transfer between accounts on the theinstruction of the account holder instruction of the BO account holder Facilitates transfertransfer without 3. Facilitates the of ownership without having to handle securities having to handle money Facilitates safekeeping of securities
1. Facilitates safekeeping of money
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Advantages of Depository System

q No risk of loss/theft/fraud of

shares.
q No stamp duty on transfer. q Reduced transaction cost. q No delay in transfers. q Reduce paper work. q Fast and speedy transaction.
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Functions of Depository system

q Dematerialisation q Account Transfer q Transfer and Registration: q CorporateActions q PledgeandHypothecation q Linkages with Clearing System

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Key features of Depository system

q Multi-Depository System q Depository services through

depository participants
q Dematerialisation q Fungibility q Registered Owner/ Beneficial

Owner
q Free Transferability of shares
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What is a Demat Account?

q The termDemat, inIndia, refers to a

dematerialised account for individual Indian citizens to trade in listed stocks ordebentures, required forinvestorsby The Securities Exchange Board of India (SEBI).
q n a demat account,sharesand

securities are held electronically

q A Demat Account is opened by the

investor while registering with aninvestment broker(or sub broker) 4/14/12

Advantages of Demat
A demat account reduces brokerage

charges, makes pledging/hypothecation of shares easier, enables quick ownership of securities on settlement resulting in increased liquidity, avoids confusion in the ownership title of securities, and provides easy receipt of public issue allotments or IPOs.
It also helps avoid bad deliveries

caused by signature mismatch, 4/14/12 postal delays and loss of certificates

Demat Benefits
The benefits are enumeratedas

follows:
q It's a safe and convenient way to hold

securities
q Immediate transfer of securities q There is no stamp duty on transfer of

securities
q Elimination of risks associated with

physical certificates such as bad delivery, fake securities, delays, thefts

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Benefit to the Company

The depository system helps in

reducing the cost of new issues due to lower printing and distribution costs. It increases the efficiency of the Benefit to the Investor and the registrars and transfer agents The depository system reduces risks of the in holding Secretarial Department involved physical certificates, e.g., loss, theft, mutilation, forgery, company. It provides better facilities etc.It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to for communication and timely services investors. It helps avoid bad delivery problems due to withshareholders,investorsetc. signature differences, etc.It ensures faster payment on sale
of shares. No stamp duty is on transfer of shares. Benefitsacceptability paid liquidity of securities. It to Brokers provides more and It reduces risks 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. 4/14/12

Disadvantages of Demat
q Trading in securities may become uncontrolled in

case of dematerialized securities.

q 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 to investors.

q The role of key market players in case of

dematerialized securities, such as stock-brokers, needs to be supervised as they have the capability of manipulating the market.
q Multiple regulatory frameworks have to be

conformed to, including the Depositories Act, Regulations and the various By-Laws of various 4/14/12 depositories.

Regulation of a demat account

q Is a demat account a must? q Where do I begin? Look for a DP to have an account

with.
Get your documents in place q How many shares you need to

have to open an account?

q What will it cost? q Can I nominate?
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