National Securities Depository Limited
The National Securities Depository Limited, jisse NSDL bola jata hai, is the platform where most of the securities which are held in dematerialised form, are present. Yeh CDSL, or the Central Depositories Services India Ltd ka judwa bhai hai.
NSDL and CDSL dono government registered hai. Aaj ke podcast mein, we are going to figure out what exactly a depository is… and then we will shift our focus on NSDL specifically.
Depositories are “places'' where shares, debentures, mutual funds and other stock market instruments are stored. Of course aaj toh, shares are stored in electric form, lekin pehle jab share trading mein log share certificates trade karte the depositories were places to safely store ones shares. Both depositories, NSDL and CDSL were incorporated by SEBI, that is the securities exchange bureau of India.
NSDL jo hai khaas NSE, yaani ke the national stock exchange ka depository hai. As you know we have two stock exchanges in India - the Bombay Stock Exchange, that is BSE and the NSE. NSDL is used by the latter.
A little bit of history, logistics and statistics: NSDL was founded back in 1996 and its promoter is IDBI Bank. NSDL was formed as a direct outcome of the National Depositories Act, passed in 1996. As of January this year, it was reported that NSDL had 19,638,964 registered demat account holders. On its website, NSDL proudly states that it is present in nearly every corner of the country. Likha hai ki, NSDL demat account holders exist in 99.23% of all pincodes in the country, according to its website. Yeh bhi likha hai ki NSDL ka average of 3,983 account openings every day since its launch hai.
NSDL ke paas 276 registered depository participants hain, that it also refers to as business partners. Aap soch rahe honge - depository partners kaun hote hai?
Chaliye ek choti kahani se let’s get a clear picture of the concepts of depository and depository provider. Thode time pehle, obviously COVID ke pehle, Main Bangkok ke chatuchak market mein goom raha tha. Kuch kharidne layak nahi dikhayi diya lekin achanak mujhe ek peti dikhayi di jis me bahut mast caps the. I’m a collector of rare caps so I went and picked one up to have a closer look, but before I could even touch the fabric, a woman came running out of nowhere, yelling wildly and threw a stick at me. Before I started yelling too, trying to defend myself and asking why she was hitting me.
Woh thai mein chilla rahi thi aur mai English mein. A crowd gathered - Thailand menu bhi logo ko maar-peet dekhne ka shauk hai“I was just looking at caps,” I kept saying, “Why would you attack me?” An English-speaking vendor broke the argument up. Usne mujhe batata ki the lady’s stack of caps was not actually her own. She only stored other people’s goods. And he explained to the lady that I was looking to buy a cap (aunty ko laga ki mai cap churane ki koshish kar raha tha). Aunty jo hai is the equivalent of a depository for the shops of that market. The shops themselves represent the depository providers - these shops each offered little stalls to vendors selling various items within a given category - several shirt vendors within one shop; several pet vendors in one shop; several fairy light owners within one shop and so on…. the vendors are thus the equivalent of the traders who have demat accounts at some depository provider or the other.
The NSDL provides a buffet of services to Depository Providers and thus indirectly provides these services to traders. Chaliye dekhte hai top 7 benefits; Flexible, modern, state-of-the-art technology to make the business of storing and trading shares smooth. Constant innovation is part of its promise. Safety of the marketplace - the NSDL is tasked with ensuring that all settlements are carried out with as little risk as possible, with maximum security and with full efficiency.
Quick turnaround is part of the NSDL’s promise to its DPs and their demat account holders. Settlement occurs on the second day from the day that the trade was made with the goal of ensuring quicker turnover and higher liquidity for traders.
The NSDL is very serious about keeping investors informed and in the loop. Periodic statements of holdings and transactions are sent to investors. The transfer of non-cash benefits NSDL ke kaaran abhi bilkul asaan hai, kyuki direct credit ki suvidha bhi de dete hai. Isse delays aur certificate loss ka problem eliminate ho jata hai .
Of course paperless system ke hazaar benefits hai: brokerage charges kam hai because the broker’s back office costs reduces since all securities are held electronically; bad deliveries kam ho jate hai; overall prices mein bhi errors kam rehte hai, convenience zyaada rehti hai aur portfolio management process bhi asaan ho jata hai due to ease-of-access. Change of details jaise ki address pehle ekdam problematic rehta tha, but NSDL allows for investors to update the same with their DP, who then goes on to share the update with all the fund houses or companies where the investor holds any securities.
Selling securities on behalf of a minor is less inconvenient - court order ki zaroorat nahi rehti to do so, if one is registered with one of the NSDL’s DPs.
Yaad rakhna NSDL can hold your shares and securities safely and it can eliminate the risk of loss of shares due to theft, disaster or mutilation. Lekin this is the extent to which it can protect you. NSDL aapko nahi bacha sakta if you make poor trading decisions or predictions that turn out to be wrong. The stock market is an unpredictable universe. Be sure to trade with caution and to consider your risk appetite before investing.
Now you have a clear picture of how and where your demat-account-held shares are actually stored and the name and nature of the platform that secures your securities.
Doston, that’s all we had in today’s podcast, lekin why let the learning stop? Check out our other podcasts, or learn more about markets on our website www.angelone.in
Tab tak ke liye, alvida. See you in the next podcast!