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CHAPTER-II

INDUSTRY PROFILE

&

COMPANY PROFILE

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Financial services refer to services provided by the finance industry. The finance industry
encompasses a broad range of organizations that deal with the management of money.
Among these organizations are banks, credit card companies, insurance companies,
consumer finance companies, stock brokerages, investment funds and some government
sponsored enterprises. As of 2004, the financial services industry represented 20% of the
market capitalization of the S&P 500 in the United States.

History of financial services

In the United States

The term "financial services" became more prevalent in the United States partly as a result
of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types of
companies operating in the U.S. financial services industry at that time to merge. Companies
usually have two distinct approaches to this new type of business. One approach would be a
bank which simply buys an insurance company or an investment bank, keeps the original
brands of the acquired firm, and adds the acquisition to its holding company simply to
diversify its earnings. Outside the U.S. (e.g., in Japan), non-financial services companies are
permitted within the holding company. In this scenario, each company still looks
independent, and has its own customers, etc. In the other style, a bank would simply create
its own brokerage division or insurance division and attempt to sell those products to its
own existing customers, with incentives for combining all things with one company.

Banks

A "commercial bank" is what is commonly referred to as simply a "bank". The term


"commercial" is used to distinguish it from an "investment bank", a type of financial
services entity which, instead of lending money directly to a business, helps businesses raise
money from other firms in the form of bonds (debt) or stock (equity).

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Stocks that respond to interest rate moves, coupled with select debt schemes, are likely to be
the winners in 2015, with the Reserve Bank of India expected to start easing its monetary
policy.
Fund managers said economic prospects have improved, but the New Year may be tougher
for equity investors to make money as valuations of many stocks are rich after the broad-
based rally in 2014. Concern over interest rate hike in the US and weak global crude oil
prices may also keep investors on.

India is among the top-performing emerging markets in 2014. So far in 2014, the Sensex has
gained 34%. Smaller companies have fared even better, with the BSE Mid Cap index
surging 56% and the BSE Small Cap Index jumping 75%.

Though the falling crude prices have improved the prospects of the Indian economy, India
may not be spared if there is an emerging market sell-off. "On the global front, oil exporting
nations could face problems, and there could be a global risk aversion.

Market participants consider probable interest rate cuts by the Reserve Bank of India (RBI)
as the biggest trigger for the economy and the markets. The extent of monetary policy
easing would determine the strength of rally in shares of the so-called interest rate-sensitive
sectors such as banks, auto, real estate and bonds.

Fund managers said debt funds could offer good returns in the coming year as a fall in
interest rates could lead to an appreciation in bond prices. With wholesale price inflation
coming at nil for November, expectations of interest rate cuts as early as in the March
quarter are high. "Shortterm rates can fall more than long-term rates. We expect consumer
inflation to be in the range of 5-5.5%, and expect RBI to cut interest rates by 50 basis points
in 2015," said Dhawal Dalal, executive V-P and head (fixed income), DSP BlackRock
Mutual Fund. If interest rates fall by 50 basis points, investors could see a 5% capital
appreciation on their long-term gilt fund portfolio.

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Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2013, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for
two consecutive years now vis-a-vis equities, shows an analysis of their price movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid anticipated
tapering over last several months combined with FII investment in Indian stocks.
"This movement has been equally true for global markets as 2013 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.

In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of about
12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets,
including stocks in Indian markets. However, assurance by the Fed about planned and
staggered tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2014 due to
continued strength of the US dollar and benign in the second half. By that time, elections too
would have taken place. A combination of domestic and international factors point to a
bumper closing of Indian markets in 2014 with double-digit percentage growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and
16 per cent, respectively, in 2013.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly USD
20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore (USD 24.37
billion).

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Evolution

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East
India Company was the dominant institution in those days and business in its loan securities
used to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers
recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a
disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850
could only be sold at Rs. 87).

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874,
found a place in a street (now appropriately called as Dalal Street) where they would
conveniently assemble and transact business. In 1887, they formally established in Bombay,
the "Native Share and Stock Brokers' Association" (which is alternatively known as " The
Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it
was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

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Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.
After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares,
which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom
between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta Stock
Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the way in India
with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel
Company Limited in 1907, an important stage in industrial advancement under Indian
enterprise was reached.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with
100 members. However, when boom faded, the number of members stood reduced from 100
to 3, by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated. In
1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange
Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the
Punjab Stock Exchange Limited, which was incorporated in 1936.

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Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.

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Post-independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore Exchange
was closed during partition of the country and later migrated to Delhi and merged with
Delhi Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well established
exchanges, were recognized under the Act. Some of the members of the other Associations
were required to be admitted by the recognized stock exchanges on a concessional basis, but
acting on the principle of unitary control, all these pseudo stock exchanges were refused
recognition by the Government of India and they thereupon ceased to function.

Thus, during early sixties there were eight recognized stock exchanges in India (mentioned
above). The number virtually remained unchanged, for nearly two decades. During eighties,
however, many stock exchanges were established: Cochin Stock Exchange (1980), Uttar
Pradesh Stock Exchange Association Limited (at Kanpur, 1982), and Pune Stock Exchange
Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock
Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh
Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989),
Bhubaneswar Stock Exchange Association Limited (1989), Saurashtra Kutch Stock
Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990)
and recently established exchanges - Coimbatore and Meerut.

The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital of
listed companies. The remarkable growth after 1985 can be clearly seen from the Table, and
this was due to the favouring government policies towards security market industry.

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Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend paying,
growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market
capitalization of atleast Rs.100 million and having more than 20,000 shareholders are,
normally, put in the specified group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivery
transactions "for delivery and payment within the time or on the date stipulated when
entering into the contract which shall not be more than 14 days following the date of the
contract" : and (b) forward transactions "delivery and payment can be extended by further
period of 14 days each so that the overall period does not exceed 90 days from the date of
the contract". The latter is permitted only in the case of specified shares. The brokers who
carry over the outstandings pay carry over charges (cantango or backwardation) which are
usually determined by the rates of interest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell securities for
his clients on a commission basis and also can act as a trader or dealer as a principal, buy
and sell securities on his own account and risk, in contrast with the practice prevailing on
New York and London Stock Exchanges, where a member can act as a jobber or a broker
only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.

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Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to many
functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly long
settlement periods and benami transactions, which affected the small investors to a great
extent. To provide improved services to investors, the country's first ringless, scripless,
electronic stock exchange - OTCEI - was created in 1992 by country's premier financial
institutions - Unit Trust of India, Industrial Credit and Investment Corporation of India,
Industrial Development Bank of India, SBI Capital Markets, Industrial Finance Corporation
of India, General Insurance Corporation and its subsidiaries and CanBank Financial
Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded on
the OTCEI are classified into:

 Listed Securities - The shares and debentures of the companies listed on the OTC
can be bought or sold at any OTC counter all over the country and they should not
be listed anywhere else

 Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded

 Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange. The
difference is that the delivery and payment procedure will be completed within 14 days.

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Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:

 OTCEI has widely dispersed trading mechanism across the country which provides
greater liquidity and lesser risk of intermediary charges.

 Greater transparency and accuracy of prices is obtained due to the screen-based


scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the investor
gets to know the exact price at which s/he is trading.

 Faster settlement and transfer process compared to other exchanges.

 In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency investors
are gradually becoming aware of the manifold advantages of the OTCEI.

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National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock
market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions and
corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper, certificate
of deposit, etc.

There are two kinds of players in NSE:

(a) trading members and

(b) participants.

Recognized members of NSE are called trading members who trade on behalf of themselves
and their clients. Participants include trading members and large players like banks who take
direct settlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism
which adopts the principle of an order-driven market. Trading members can stay at their
offices and execute the trading, since they are linked through a communication network.
The prices at which the buyer and seller are willing to transact will appear on the screen.

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When the prices match the transaction will be completed and a confirmation slip will be
printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as follows:

 NSE brings an integrated stock market trading network across the nation.

 Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the
securities.

 Delays in communication, late payments and the malpractice’s prevailing in the


traditional trading mechanism can be done away with greater operational efficiency
and informational transparency in the stock market operations, with the support of
total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors
will not be interested in capital market operations. And capital market being one of the
major source of long-term finance for industrial projects, India cannot afford to damage the
capital market path. In this regard NSE gains vital importance in the Indian capital market
system.

Preamble

Often, in the economic literature we find the terms ‘development’ and ‘growth’ are used
interchangeably. However, there is a difference. Economic growth refers to the sustained
increase in per capita or total income, while the term economic development implies
sustained structural change, including all the complex effects of economic growth. In other
words, growth is associated with free enterprise, where as development requires some sort
of control and regulation of the forces affecting development. Thus, economic development
is a process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like India to
take the country in the path of economic development to attain economic growth.
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Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels of
income, saving and investment. However, increasing the rate of capital formation in India is
beset with a number of difficulties. People are poverty ridden. Their capacity to save is
extremely low due to low levels of income and high propensity to consume. Therefor, the
rate of investment is low which leads to capital deficiency and low productivity. Low
productivity means low income and the vicious circle continues. Thus, to break this vicious
economic circle, planning is inevitable for India.

The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is
very vital. In India, a large portion of the economy is non-monitised; the product, factors of
production, money and capital markets is not organized properly. Thus the prevailing price
mechanism fails to bring about adjustments between aggregate demand and supply of goods
and services. Thus, to improve the economy, market imperfections has to be removed;
available resources has to be mobilized and utilized efficiently; and structural rigidities has
to be overcome. These can be attained only through planning.

In India, capital is scarce; and unemployment and disguised unemployment is prevalent.


Thus, where capital was being scarce and labour being abundant, providing useful
employment opportunities to an increasing labour force is a difficult exercise. Only a
centralized planning model can solve this macro problem of India.

Further, in a country like India where agricultural dependence is very high, one cannot
ignore this segment in the process of economic development. Therefore, an economic
development model has to consider a balanced approach to link both agriculture and
industry and lead for a paralleled growth. Not to mention, both agriculture and industry
cannot develop without adequate infrastructural facilities which only the state can provide
and this is possible only through a well carved out planning strategy.

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Planning History of India

The development of planning in India began prior to the first Five Year Plan of independent
India, long before independence even. The idea of central directions of resources to
overcome persistent poverty gradually, because one of the main policies advocated by
nationalists early in the century. The Congress Party worked out a program for economic
advancement during the 1920’s, and 1930’s and by the 1938 they formed a National
Planning Committee under the chairmanship of future Prime Minister Nehru. The
Committee had little time to do anything but prepare programs and reports before the
Second World War which put an end to it. But it was already more than an academic
exercise remote from administration. Provisional government had been elected in 1938, and
the Congress Party leaders held positions of responsibility. After the war, the Interim
government of the pre-independence years appointed an Advisory Planning Board. The
Board produced a number of somewhat disconnected Plans itself. But, more important in the
long run, it recommended the appointment of a Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at all,
while millions of refugees crossed the newly established borders of India and Pakistan, and
while ex-princely states (over 500 of them) were being merged into India or Pakistan. The
Planning Commission as it now exists, was not set up until the new India had adopted its
Constitution in January 1950.

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Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

 To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation’s requirement.

 To formulate a plan for the most effective and balanced use of the country’s
resources.

 Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each stage.

 To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political situation,
should be established for the successful execution of the Plan.

 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

 To appraise from time to time the progress achieved in the execution of each stage of
the Plan and recommend the adjustments of policy and measures that such appraisals
may show to be necessary.

 To make such interim or auxiliary recommendations as appear to it to be appropriate


either for facilitating the discharge of the duties assigned to it or on a consideration
of the prevailing economic conditions, current policies, measures and development
programs; or on an examination of such specific problems as may be referred to it
for advice by Central or State Governments.

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The long-term general objectives of Indian Planning are as follows:

 Increasing National Income

 Reducing inequalities in the distribution of income and wealth

 Elimination of poverty

 Providing additional employment; and

 Alleviating bottlenecks in the areas of : agricultural production, manufacturing


capacity for producer’s goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum.
High priority to economic growth in Indian Plans looks very much justified in view of long
period of stagnation during the British rule

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COMPANY PROFILE

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PROFILE OF THE BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in
the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994.
The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995..

OVERVIEW OF THE INDUSTRY

HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain the
market leader in mortgages. Its outstanding loan portfolio covers well over a million
dwelling units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its housing related
credit facilities. With its experience in the financial markets, a strong market reputation,
large shareholder base and unique consumer franchise, HDFC was ideally positioned to
promote a bank in the Indian environment.
As on March 31, 2014 the authorized share capital of the Bank is Rs. 550 crore. The paid-up
capital as on the said date is Rs 479,81,00,870/- ( 2399050435 ) equity shares of Rs. 2/-
each). The HDFC Group holds 22.64 % of the Bank's equity and about 16.97 % of the
equity is held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 34.11 % of the
equity is held by Foreign Institutional Investors (FIIs) and the Bank has 4,22,314
shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.

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MANAGEMENT
Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th
July 2010. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS
officer, Mr. Vasudev has had an illustrious career in the civil services and has held several
key positions in India and overseas, including Finance Secretary, Government of India,
Executive Director, World Bank and Government nominee on the Boards of many
Companies.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years
and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of


experience in public policy, administration, industry and commercial banking. Senior
executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional
expertise of the management team and the overall focus on recruiting and retaining the best
talent in the industry, the bank believes that its people are a significant competitive strength.

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BOARD OF DIRECTORS

Mr. C.M. Vasudev, Chairman


Mr. Keki Mistry
Mrs. Renu Karnad
Mr. Arvind Pande
Mr. Ashim Samanta
Mr. Chander Mohan Vasudev
Mr. Gautam Divan
Dr. Pandit Palande
Mr. Aditya Puri, Managing Director
Mr. Harish Engineer, Executive Director
Mr. Paresh Sukthankar, Executive Director
Mr. Vineet Jain (upto 27.12.2018)

REGISTERED OFFICE

HDFC Bank House,


Senapati Bapat Marg,
Lower Parel,
Website: www.hdfcbank.com

HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has three key business
segments

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Wholesale Banking Services
The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small & mid-sized corporates and agri-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking
services, including working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior
product delivery / service levels and strong customer orientation, the Bank has made
significant inroads into the banking consortia of a number of leading Indian corporates
including multinationals, companies from the domestic business houses and prime public
sector companies. It is recognised as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock exchange
members and banks.

Retail Banking Services


The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and delivered
to customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, NetBanking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind needs
of customers who seek distinct financial solutions, information and advice on various
Investment avenues. The Bank also has a wide array of retail loan products including Auto
Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It
is also a leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in association
with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well.

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Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and market risk on
this investment portfolio

Awards and Achievements - Banking Services

It is extremely gratifying that our efforts towards providing customer convenience have
been appreciated both nationally and internationally.

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". We realised that only a single-minded focus on product quality and service
excellence would help us get there. Today, we are proud to say that we are well on our way
towards that goal.

It is extremely gratifying that our efforts towards providing customer convenience have
been appreciated both nationally and internationally.

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2014

Businessworld- - Best Large Bank


PwC India Best - Fastest Growing Large Bank
Banks Survey
2014
Asiamoney FX - Best Domestic Provider of FX options
Poll 2014 - Best Domestic Provider of FX products & Services
- Best Domestic Provider of FX research & market coverage
- Best Domestic provider for FX Services

The Asian Strongest Bank in India in the Asian Banker 500 (AB 500) Strongest Bank by Balance
Banker Sheet Ranking 2014
Dun & - Best Bank - Managing IT Risk (Large Banks)
Bradstreet - - Best Bank - Mobile Banking (Large Banks)
Polaris - Best Bank - Best IT Team (Private Sector Banks)
Financial
Technology
Banking
Awards 2014
Forbes Asia Fab 50 Companies List for the 8th year
BrandZ TM Top India's Most Valuable Brand
50 Most
Valuable Indian
Brands study by
Millward Brown
Asiamoney Best of Best Domestic Banks - India
Dun & Best Corporate in Banking Sector
Bradstreet -
Manappuram
Finance Limited
Corporate
Award 2014

25
2013

IBA Innovation Most Innovative use of Technology


Awards

Dun & Bradstreet - Best Private Sector Bank Technology Adoption


Polaris Financial - Best Private Sector Bank Retail
Technology Banking - Overall Best Private Sector Bank
Award 2013

Institutional Investor - Best Bank in Asia


- Mr. Aditya Puri - Best CEO

Forbes Asia Fab 50 Companies List for the 7th year

Sunday Standard Best - Best Private Sector Bank: Large


Banker Awards - Safest Bank: Large
- Mr. Aditya Puri: Top Achiever

UTI Mutual Fund


CNBC TV 18 Financial
Advisory Awards 2012 Best Performing Bank - Private

26
Corporate Governance:
The bank was among the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL).

The rating provides an independent assessment of an entity's current performance and an


expectation on its "balanced value creation and corporate governance practices" in future.
The bank has been assigned a 'CRISIL GVC Level 1' rating, which indicates that the bank's
capability all its stakeholders while adopting sound corporate governance practices is the
highest.

We are aware that all these awards are mere milestones in the continuing, never-ending
journey of providing excellent service to our customers. We are confident, however, that
with your feedback and support, we will be able to maintain and improve our services.

Technology:
HDFC Bank operates in a highly automated environment in terms of information technology
and communication systems. All the bank's branches have online connectivity, which
enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch
access is also provided the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. The Bank's
business is supported by scalable and robust systems which ensure that our clients always
get the finest services we offer. The Bank has prioritized its engagement in technology and
the internet as one of its key goals and has already made significant progress in web-
enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging
its market position, expertise and technology to create a competitive advantage and build
market share.

27
Mission and Business Strategy:

Our mission is to be "a World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology, service
levels, risk management and audit & compliance. The objective is to build sound customer
franchises across distinct businesses so as to be a preferred provider of banking services for
target retail and wholesale customer segments, and to achieve a healthy growth in
profitability, consistent with the Bank's risk appetite. We are committed to do this while
ensuring ethical standards, professional integrity, corporate governance and regulatory
compliance.
Our business strategy emphasizes the following:

 Increase our market share in India’s expanding banking and financial services
industry by following a disciplined growth strategy focusing on quality and not on
quantity and delivering high quality customer service.

 Leverage our technology platform and open scaleable systems to deliver more
products to more customers and to control operating costs.
 Maintain our current high standards for asset quality through disciplined credit risk
management.
 Develop innovative products and services that attract our targeted customers and
address inefficiencies in the Indian financial sector.
 Develop innovative products and services that attract our targeted customers and
address inefficiencies in the Indian financial sector.
 Continue to develop products and services that reduce our cost of funds.
 Focus on high earnings growth with low volatility.

28
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of
1,725 branches spread in 771 cities across India. All branches are linked on an online real-
time basis. Customers in over 500 locations are also serviced through Telephone Banking.
The Bank's expansion plans take into account the need to have a presence in all major
industrial and commercial centres where its corporate customers are located as well as the
need to build a strong retail customer base for both deposits and loan products. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has branches in the
centres where the NSE/BSE have a strong and active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's
ATM network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

AIMS:
 Continuous effort to improving the services.
 Evaluating individual skill trough training and motivations.
 Total involvement through participant’s management activities.
 Creating healthy and safe environment.
 Social development.
Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis &
Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed
Deposit programmed has been rated 'CARE AAA (FD)' [Triple A] by CARE, which
represents instruments considered to be "of the best quality, carrying negligible investment
risk." CARE has also rated the bank's Certificate of Deposit (CD) programmed "PR 1+"
which represents "superior capacity for repayment of short term promissory obligations".
Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA (ind)"
rating to the Bank's deposit programmed, with the outlook on the rating as "stable". This
rating indicates "highest credit quality" where "protection factors are very high".

29
Corporate Governance Ratin

The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent
assessment of an entity's current performance and an expectation on its "balanced value
creation and corporate governance practices" in future. The bank was assigned a 'CRISIL
GVC Level 1' rating in January 2007 which indicates that the bank's capability with respect
to wealth creation for all its stakeholders while adopting sound corporate governance
practices is the highest.

30
CHAPTER-III

LITERATURE REVIEW

31
The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges. It recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access to
investors from all across the country on an equal footing. Based on the recommendations,
NSE was promoted by leading Financial Institutions at the behest of the Government of
India and was incorporated in November 1992 as a tax-paying company unlike other stock
exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act,
1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000.

The following years witnessed rapid development of Indian capital market with introduction
of internet trading, Exchange traded funds (ETF), stock derivatives and the first volatility
index - IndiaVIX in April 2018, by NSE.

August 2018 saw introduction of Currency derivatives in India with the launch of Currency
Futures in USD INR by NSE. Interest Rate Futures was introduced for the first time in India
by NSE on 31st August 2009, exactly after one year of the launch of Currency Futures.

With this, now both the retail and institutional investors can participate in equities, equity
derivatives, currency and interest rate derivatives, giving them wide range of products to
take care of their evolving needs.

32
NSE Milestones:

November 1992 Incorporation

April 1993 Recognition as a stock exchange

May 1993 Formulation of business plan

June 1994 Wholesale Debt Market segment goes live

November 1994 Capital Market (Equities) segment goes live

March 1995 Establishment of Investor Grievance Cell

April 1995 Establishment of NSCCL, the first Clearing Corporation


Introduction of centralised insurance cover for all trading
June 1995 members

July 1995 Establishment of Investor Protection Fund

October 1995 Became largest stock exchange in the country

April 1996 Commencement of clearing and settlement by NSCCL

April 1996 Launch of S&P CNX Nifty

June 1996 Establishment of Settlement Guarantee Fund


Setting up of National Securities Depository Limited, first depository in
November 1996 India, co-promoted by NSE

November 1996 Best IT Usage award by Computer Society of India


Commencement of trading/settlement in dematerialised securities
December 1996

December 1996 Dataquest award for Top IT User

December 1996 Launch of CNX Nifty Junior

February 1997 Regional clearing facility goes live

November 1997 Best IT Usage award by Computer Society of India


Promotion of joint venture, India Index Services & Products Limited
May 1998 (IISL)

May 1998 Launch of NSE's Web-site: www.nse.co.in

33
July 1998 Launch of NSE's Certification Programme in Financial Market

August 1998 CYBER CORPORATE OF THE YEAR 1998 award

February 1999 Launch of Automated Lending and Borrowing Mechanism

April 1999 CHIP Web Award by CHIP magazine

October 1999 Setting up of NSE.IT

January 2000 Launch of NSE Research Initiative

February 2000 Commencement of Internet Trading

June 2000 Commencement of Derivatives Trading (Index Futures)

September 2000 Launch of 'Zero Coupon Yield Curve'


Launch of Broker Plaza by Dotex International, a joint venture between
November 2000 NSE.IT Ltd. and i-flex Solutions Ltd.

December 2000 Commencement of WAP trading

June 2001 Commencement of trading in Index Options

July 2001 Commencement of trading in Options on Individual Securities

November 2001 Commencement of trading in Futures on Individual Securities

December 2001 Launch of NSE VaR for Government Securities

January 2002 Launch of Exchange Traded Funds (ETFs)


NSE wins the Wharton-Infosys Business Transformation
May 2002 Award in the Organization-wide Transformation category

October 2002 Launch of NSE Government Securities Index

January 2003 Commencement of trading in Retail Debt Market

June 2003 Launch of Interest Rate Futures

August 2003 Launch of Futures & options in CNXIT Index

June 2004 Launch of STP Interoperability

August 2004 Launch of NSE’s electronic interface for listed companies

March 2005 ‘India Innovation Award’ by EMPI Business School, New Delhi

34
June 2005 Launch of Futures & options in BANK Nifty Index

December 2006 'Derivative Exchange of the Year', by Asia Risk magazine

January 2007 Launch of NSE – CNBC TV 18 media centre

March 2007 NSE, CRISIL announce launch of IndiaBondWatch.com

June 2007 NSE launches derivatives on Nifty Junior & CNX 100

October 2007 NSE launches derivatives on Nifty Midcap 50


Introduction of Mini Nifty derivative contracts on 1st January 2018
January 2018
Introduction of long term option contracts on S&P CNX Nifty Index
March 2018

April 2018 Launch of India VIX

April 2018 Launch of Securities Lending & Borrowing Scheme

August 2018 Launch of Currency Derivatives

August 2009 Launch of Interest Rate Futures

NSE Nifty:

The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index for
large companies on the National Stock Exchange of India. S&P CNX Nifty is a well
diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety
of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later
on, it came to be owned and managed by India Index Services and Products Ltd. (IISL),
which is a joint venture between NSE and CRISIL. IISL is India's first specialized company
focused upon the index as a core product. IISL have a consulting and licensing agreement
with Standard & Poor's (S&P), who are world leaders in index services.

CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect
the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N'

35
stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-
based Standard & Poor's Financial Information Services.

NSE other indices:


 S&P CNX Nifty
 CNX Nifty Junior
 CNX 100
 S&P CNX 500
 CNX Midcap
 S&P CNX Defty
 CNX Midcap 200

BOMBAY STOCK EXCHANGE:

History:

An informal group of 22 stockbrokers began trading under a banyan tree opposite

the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as the

Bombay Stock Exchange (BSE).In January 1899, the stock exchange moved into the

Brokers’ Hall after it was inaugurated by James M MacLean. After the First World War,

the BSE was shifted to an old building near the Town Hall. In 1956, the Government of

India recognized the Bombay Stock Exchange as the first stock exchange in the country

under the Securities Contracts (Regulation) Act.1995, when it was replaced by an

electronic (eTrading) system named BOLT, or the BSE Online Trading system. In 2005,

the status of the exchange changed from an Association of Persons (AoP) to a full fledged

36
corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and

its name was changed to The Bombay Stock Exchange Limited).

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage of
over 133 years of existence. What is now popularly known as BSE was established as "The
Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition
(in 1956) from the Government of India under the Securities Contracts (Regulation) Act
(SCRA) 1956. BSE's pivotal and pre-eminent role in the development of the Indian capital
market is widely recognised. It migrated from the open out-cry system to an online screen-
based order driven trading system in 1995. Earlier an Association Of Persons (AOP), BSE is
now a corporatised and demutualised entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme,
2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation,
BSE has two of world's prominent exchanges, Deutsche Börse and Singapore Exchange, as
its strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate
sector by providing it with cost and time efficient access to resources. There is perhaps no
major corporate in India which has not sourced BSE's services in raising resources from the
capital market.

Today, BSE is the world's number 1 exchange in terms of the number of listed
companies and the world's 5th in handling of transactions through its electronic trading
system. The companies listed on BSE command a total market capitalization of USD
Trillion 1.06 as of July, 2009. BSE reaches to over 400 cities and town nation-wide and has
around 4,937 listed companies, with over 7745 scrips being traded as on 31st July 09.

37
BSE SENSEX:

The BSE Index, SENSEX, is India's first and most popular stock market benchmark
index. Sensex is tracked worldwide. It constitutes 30 stocks representing 12 major sectors.
The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market
movements and market realities. Apart from the SENSEX, BSE offers 23 indices, including
13 sectoral indices. It has entered into an index cooperation agreement with Deutsche Börse
and Singapore Stock Exchange. These agreements have made SENSEX and other BSE
indices available to investors across the globe. Moreover, Barclays Global Investors (BGI),
at Hong Kong, the global leader in ETFs through its iShares® brand, has created the
exchange traded fund (ETF) called 'iShares® BSE SENSEX India Tracker' which tracks the
SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity
market.
The exchange traded funds (ETF) on SENSEX, called "SPIcE" and Kotak SENSEX
ETF are listed on BSE. They bring to the investors a trading tool that can be easily used for
the purposes of investment, trading, hedging and arbitrage. These ETFs allow small
investors to take a long-term view of the market.
BSE provides an efficient and transparent market for trading in equity, debt
instruments and derivatives. It has always been at par with the international standards. The
systems and processes are designed to safeguard market integrity and enhance transparency
in operations. BSE is the first exchange in India and the second in the world to obtain an
ISO 9001:2000 certification. It is also the first exchange in the country and second in the
world to receive Information Security Management System Standard BS 7799-2-2002
certification for its BSE On-line Trading System (BOLT).

38
BSE continues to innovate. In 2006, it became the first national level stock exchange
to launch its website in Gujarati and Hindi and now Marathi to reach out to a larger number
of investors. It has successfully launched a reporting platform for corporate bonds in India
christened the ICDM or Indian Corporate Debt Market and a unique ticker-cum-screen aptly
named 'BSE Broadcast' which enables information dissemination to the common man on the
street.

In 2006, BSE launched the Directors Database and ICERS (Indian Corporate
Electronic Reporting System) to facilitate information flow and increase transparency in the
Indian capital market. While the Directors Database provides a single-point access to
information on the boards of directors of listed companies, the ICERS facilitates the
corporate in sharing with BSE their corporate announcements.

BSE also has a wide range of services to empower investors and facilitate smooth
transactions:

Investor Services: The Department of Investor Services redresses grievances of


investors. BSE was the first exchange in the country to provide an amount of Rs.1 million
towards the investor protection fund; it is an amount higher than that of any exchange in the
country. BSE launched a nationwide investor awareness programme- 'Safe Investing in the
Stock Market' under which 264 programmer were held in more than 200 cities.

The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen
based trading in securities. BOLT is currently operating in 25,000 Trader Workstations
located across over 359 cities in India.

BSEWEBX.com:

39
In February 2001, BSE introduced the world's first centralized exchange-based
Internet trading system, BSEWEBX.com. This initiative enables investors anywhere in the

world to trade on the BSE platform.

Surveillance:

BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price
movements, volume positions and members' positions and real-time measurement of default
risk, market reconstruction and generation of cross market alerts.

BSE Training Institute:

BTI imparts capital market training and certification, in collaboration with reputed
management institutes and universities. It offers over 40 courses on various aspects of the
capital market and financial sector. More than 20,000 people have attended the BTI

programmers’.

Awards:

 The World Council of Corporate Governance has awarded the Golden Peacock
Global CSR Award for BSE's initiatives in Corporate Social Responsibility (CSR).
 The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and
March 31 2007 have been awarded the ICAI awards for excellence in financial
reporting.
 The Human Resource Management at BSE has won the Asia - Pacific HRM awards
for its efforts in employer branding through talent management at work, health
management at work and excellence in HR through technology

Recently,BSE launched the BSE IPO index that will track the value of companies for
two years after listing. Also, as an investor friendly gesture, Bombay Stock Exchange has
commenced a facility of sending trade details to investors. Moving a step further a new
transaction fee structure for cash equity segment has also been introduced. BSE also

40
launched ‘BSE StAR MF’ Mutual fund trading platform, would enable exchange's members
to use its existing infrastructure for transaction in MF schemes. It is an inclusive model with
two depositories and industry wide participation. BSE also revamped its website; the new
website presents a wide range of new features like ‘Live streaming quotes for SENSEX
companies’, ‘Advanced Stock Reach’, ‘Sensex View’, ‘Market Galaxy’, and ‘Members’.

Drawing from its rich past and its equally robust performance in the recent times, BSE will

continue to remain an icon in the Indian capital market.

SENSEX calculation Methodology:

SENSEX is calculated using the "Free-float Market Capitalization" methodology,


wherein, the level of index at any point of time reflects the free-float market value of 30
component stocks relative to a base period. The market capitalization of a company is
determined by multiplying the price of its stock by the number of shares issued by the
company. This market capitalization is further multiplied by the free-float factor to
determine the free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index points. This
is often indicated by the notation 1978-79=100. The calculation of SENSEX involves
dividing the free-float market capitalization of 30 companies in the Index by a number
called the Index Divisor. The Divisor is the only link to the original base period value of the
SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index
adjustments arising out of corporate actions, replacement of scrips etc. During market hours,
prices of the index scrips, at which latest trades are executed, are used by the trading system
to calculate SENSEX on a continuous basis.

BSE - other Indices: Apart from BSE SENSEX, which is the most popular stock index in

India, BSE uses other stock indices as well:

 BSE 500

41
 BSE PSU

 BSE MIDCAP

 BSE SMLCAP

 BSE BANKEX

DEPOSITORIES IN INDIA

There are two depositories in India, the “National Securities Depository Limited” and the

“central Depository Services (India) Ltd”. The depositories are regulated by the securities &

exchange board of India ltd. And are governed by the depositories Act, 1996. A client can

open his account with either depository (through a depository participant)since both

depositories are inter-connected to each other and are also connected to both the premier

exchanges, NSE and BSE. Presently, there are 2 depositories in India.

They are:

 NSDL (NATIONAL SECURITIES DEPOSITORY LIMITED)

 CDSL (CENTRAL DEPOSITORY SERVICES (INDIA) LTD.,)

NATIONAL SECURITIES DEPOSITORY LTD. (N S D L)

Although India had a vibrant capital market which is more than a century old, the
paper-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.

42
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, minimize 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. This method 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.

FUNCTION OF NSDL:

The NSDL performs the following function through the depository participants

 Enables the surrender and withdrawal of securities to, and form the depository
(dematerialization and rematerialisation)

 Maintains investor holdings in the electronic form

 Effects settlement of securities traded on the exchanges

 Carries out settlement of trade not done on the stock exchange )off market trades):

 Transfer of securities

 Pledging/hypothecation of dematerialized securities

 Electronic credit in public offering of companies

 Receipt of Non-cash corporate benefits like bonus, right, and so on in electronic


form

 Stock lending and borrowing.

43
SERVICES OFFERED BY NSDL

SERVICES:

NSDL interacts with investors through market intermediaries called Depository


Participants who can be banks, brokers, custodians; institutions etc. through NSDL
commenced operations with just three DPs, within a short time, depository participant
services in most of the major cities and towns across the country.

Basic 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, dematerialization, 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 facilitates scrip less trading offers various direct and indirect services to the
market participants.

44
Account Maintenance:

To avail of the various services offered by NSDL an investor/ a broker/ an approved


intermediary (for lending & borrowing) has to open a NSDL depository account with any of
its DPs.

Depository accounts are of three types:

 Beneficiary account:
An investor who wants to hold securities in dematerialised (demat) form and
receive or deliver securities by inter-account transfers must have a depository account
called beneficiary account with a DP of his choice.

 Clearing member account:

Member brokers of those stock exchanges which have established electronic


connectivity with NSDL need to open a clearing member account, with a DP of his
choice, to clear and settle trades in the demat form. This account is popularly known as
Settlement account or "Pool account". This account is meant only to transfer securities
to and receive securities from the clearing corporation/ house and hence, the member
broker does not have any ownership (beneficiary) rights over the shares held in such an
account.

Further, clearing members of stock exchanges permitting Automatic Lending or


Borrowing Mechanism (ALBM) transactions can request for a "clearing member
ALBM" account to participate in ALBM transactions. These additional CM Accounts
maintained for the purpose of ALBM transactions will have to be necessarily opened
with the clearing house of the concerned stock exchange e.g. a BSE clearing member's

45
"normal clearing member account" could be with a DP XYZ, but his "clearing member
ALBM" account will have to necessarily be with the clearing house of the BSE.

Intermediary account:
Any person choosing to act as an approved 'intermediary' for stock lending and
borrowing needs to open an intermediary account with any DP of his choice. An
intermediary account may be opened with the DP only after the intermediary has
obtained registration from the Securities & Exchange Board of India and with the prior
approval of NSDL. This account is meant only to deposit the securities received from
the lender and lend them to the borrower under stock lending and borrowing scheme.
The intermediary does not have any ownership (beneficiary) rights over the shares held
in such an account.

Various services offered by DPs with respect to these accounts are as


follows:
Standing Instruction Facility:

DP enters the advice for the transfer of securities to or from a beneficial owner's
account only on receipt of instructions from the client. The clients need to give delivery
instruction to transfer securities from their account & receipt instruction to get credit into
their account. However, for ease of operation, a facility of standing instruction is provided
to the clients for receiving securities to the credit of their accounts without any further
instruction from them.

Change in Address:

The client can change his address by submitting the changes in writing to the DP
along with proof of identity, proof of new address with original document of new address
for verification and latest transaction statement received from the DP of the client. The

46
changes conveyed to the DP will be automatically communicated to the companies in which
he is holding shares in dematerialised form.

Bank Account Details:

Details of bank account of the client, including the 9-digit code number of the bank
and branch appearing on the MICR cheques issued by the bank have to given to the DP at
the time of account opening. Companies use this information for printing them on
dividend/interest warrants to prevent its misuse. In case the client wish to change this bank
account details, he can do so by submitting the changes in writing to the DP.

Nomination:

A client can make a nomination of his account in favour of any person by filing the
nomination form with his DP. Such nomination is considered to be conclusive evidence of
the account holder'(s) disposition in respect of all the securities in the account for which the
nomination is made.

TranspositioncumDemat:
This is a facility whereby securities held jointly can be dematerialized in an account
of same joint holders but having different sequence of names. e.g. securities held in joint
names of X and Y can also be dematerialized in an account opened in the names of Y and X
by submitting an additional form called Transposition Form along with Dematerialization
Request Form (DRF) to the DP.

Consolidation of Accounts:

Some clients could have opened multiple accounts to dematerialise their shares held
in multiple combinations & sequence of names. However, they may not need so many
accounts after they have dematerialised their securities and may want to bring all their

47
shareholdings into one or fewer accounts. Using off-market account transfer instruction such
consolidation can be done.

Closure of Account:

A client can close a depository account by giving an application in the prescribed


form. In case there is any balance in the account sought to be closed, the following steps are
necessary.

(a) Re-materialization of all securities standing to the credit of the account at the time of
making the application for closure; or

(b) Transferring the balance to the credit of another account opened by the same account
holder(s) either with the same participant or with a different participant.

Freezing of Account:
Account freezing means suspending any further transaction from the depository
account till the account is de-frozen. A depository account maintained with a DP can be
frozen if the DP receives a written instruction in prescribed form from the client. A frozen
account can be de-frozen or re-activated if the client submits written instruction in
prescribed form to the DP.

Special Service:
Depository is a facility for holding securities, which enables securities
transactions to be processed by book entry. In addition it the core services of electronic
custody and trade settlement services to clearing corporations, distribution of cash and non-
cash corporate benefits, stock lending, distribution of securities to allot tees in case of public
issues, internet based services for clearing members ‘SPEED’ & Internet based services for
account holders ‘SPEED-e’.
NSDL has taken the initiative for providing the facility of enabling brokers to deliver
contract notes to custodian / fund managers electronically through its STEADY facility.
STEADY (Securities Trading-Information Easy Access and Delivery) was launched trade

48
information with encryption across market participants electronically and efficiently,
through Internet.
Special Services: Pledge/Hypothecation, Dividend Distribution, Stock Lending
and Borrowing, Public Issues, SPEED-e.
The Certification Program:

Towards this objective, NSDL has launched Certification Programme on


depository. This programme helps the participant to understand and assililate the procedures
to be followed in conducting various transactions in the NSDL depository system. Further,
candidates successfully clearing such a programme would also add to the human resources
pool qualified in depository operations.

Milestones:

August 2009 Demat Accounts cross one crore

August 2018 Launch of Central Recordkeeping Agency (for New Pension System)
May 2018 NSDL and Japan Securities Depository Center sign Information Sharing and
Collaboration Pact
April 2018 NSDL and National Depository Center (Russia) sign Information Sharing and
Collaboration Pact
February 2018 NSDL and Euroclear (Belgium) sign Information Sharing and Collaboration Pact
September 2007 Value of securities held in dematerialised form at NSDL crosses US$ 1 trillion

September 2007 Launch of SMS alert facility for investors


June 2007 NSDL and DTCC (US Depository) sign Information Sharing and Collaboration Pact
January 2007 NSDL and TDCC (Taiwan Depository) sign Information Sharing and Collaboration Pact

November 2006 NSDL completes a decade of depository operations

January 2006 Launch of National Skills Registry by NDML

July 2005 Launch of Tax Information Network - PAN Ledger

49
January 2005 Launch of online upload of Central Excise challan data

October 2004 Intraday production shifting to Disaster Recovery Site


June 2004 Incorporation of NSDL Database Management Limited (NDML) - wholly owned
subsidiary company of NSDL

June 2004 Launch of Online Tax Accounting System (OLTAS)

June 2004 Launch of PAN card services

January 2004 Launch of Tax Information Network (TIN)

January 2004 Launch of IDeAS

November 2003 Introduction of demat of Warehouse Receipts

November 2003 Launch of Market Participants and Investors Database (MAPIN)

October 2003 Demat Accounts cross 6 million

April 2003 Introduction of T+2 Rolling Settlement

December 2002 Demat Accounts cross 5 million

November 2002 Launch of STEADY - An STP initiative by NSDL

April 2002 Introduction of T+3 Rolling Settlement

September 2001 NSDL launches SPEED-e

July 2001 Introduction of T+5 Rolling Settlement and Uniform Settlement Cycle

50
June 2000 98% settlement in demat form

June 2000 Commencement of Demat of Debt Instruments

May 2000 Demat accounts with NSDL cross 2.5 mn

February 2000 NSDL launches internet based service - SPEED - for CMs

May 1999 NSDL launches NCFM - Depository Operations Module

January 1999 Commencement of compulsory trading for retail investors

December 1998 Introduction of Demat of Government Securities

December 1998 Establishment of NSDL branches at Chennai, Delhi & Kolkata

November 1998 Demat accounts with NSDL cross 100,000

April 1998 Demat delivery in physical segment at NSE and BSE

March 1998 Value of securities held in dematerialised form at NSDL crosses US$ 5 bn.

January 1998 Compulsory demat trading for Institutional investors

December 1997 Commencement of Demat trading at BSE

June 1997 Value of securities held in dematerialised form at NSDL crosses US$ 1 bn.

December 1996 Commencement of Demat trading at NSE

51
November 1996 NSDL Inauguration

August 1996 Enactment of Depositories Act

December 1995 NSDL Incorporation

September 1995 Promulgation of Depositories Ordinance


Board of Directors:
1 Dr. R. H. Patil
Chairman Chairman
The Clearing Corporation of India Limited
2 Mr. Gagan Rai Managing Director & CEO
National Securities Depository Limited
3 Mr. Ravi Narain
Managing Director Director
National Stock Exchange of India Limited
4 Mr. Justice B.N. Srikrishna (Retd.)
Former Judge Director
Supreme Court of India
5 Mr. P. P. Vora
Former Chairman & Managing Director Director
Industrial Development Bank of India Limited
6 Mr. Bansi S Mehta
Chartered Accountant, Senior Partner Director
M/s Bansi S. Mehta & Co.
7 Mr. Sudesh Punhani
Former Director (Finance) Director
National Aviation Company of India Limited
8 Mr. Rajiv B. Lall
Managing Director & CEO Director
Infrastructure Development Finance Company Limited
9 Dr. Prakash G Apte
Former Director Director
Indian Institute of Management, Bangalore
10 Mr. R.K. Bansal
Executive Director Director
Industrial Development Bank of India Limited
11 Mr. Ashok Mukand
Deputy Managing Director & CFO Director
State Bank of India
12 Mr. Kaushik Shaparia

52
Managing Director Director
Global Transaction Banking Head, India
Deutsche Bank

Legal Framework:

As a part of its on-going market reforms, the Government of India promulgated the
Depositories Ordinance in September 1995. Based on this 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."

Depository System - Business Partners:


NSDL carries out its activities through various functionaries called "Business
Partners" who include Depository Participants (DPs), Issuing companies and their Registrars
and Share Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges.
NSDL is electronically linked to each of these business partners via a satellite link through
Very Small Aperture Terminals (VSATs) or through Leased land lines. The entire integrated
system (including the electronic links and the software at NSDL and each business partner's

end) is called the "NEST" [National Electronic Settlement & Transfer] system.

53
Depository Participant (DP):

The investor obtains Depository Services through a DP of NSDL. A DP can be a


bank, financial institution, a custodian, a broker, or any entity eligible as per SEBI
(Depositories and Participants) Regulations, 1996. The SEBI regulations and NSDL bye
laws also lay down the criteria for any of these categories to become a DP.

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 DP in order to avail of depository facilities. Though
NSDL commenced operations with just three DPs, Depository Participant Services are now
available in most of the major cities and towns across the country.

Issuing Companies/ their Registrar & Transfer Agents:

54
Securities issued by issuers who have entered into an agreement with NSDL can be
dematerialised in the NSDL depository. As per this agreement, issuer agrees to verify the
certificates submitted for dematerialization before they are dematerialised and to maintain
electronic connectivity with NSDL.Electronic connectivity facilitates dematerialization,
rematerialisation, daily reconciliation and corporate actions.

PUBLIC ISSUES
Investors have an option to seek allotment of public issues in electronic form. As per
SEBI guidelines trades in shares issued through public issue shall be settled only in demat
form. Therefore, it is advisable that investors seek allotment in demat form.
FEATURES:
Depository system provides facility for allotments of securities directly in to the
depository account of the investors in the dematerialized form

PROCEDURE:
 The Issuer provides an option in the application form to the beneficial owners to
opt for securities either in physical or electronic form.
 The beneficial owner who opts for the electronic securities will indicate. The DP
Id and the beneficial owner account number in the application form and send it to
the issuer/R&T agent.
 The Issuer/R&T agent will issue securities in physical form in respect of those
beneficial owners who do not indicate any choice.
 The Issuer/R&T agent will provide allotment details and the date on which the
necessary credit entries are to be made in the accounts of the beneficial owners
(referred to as execution date) to NSDL.
 NSDL will perform the necessary bookings and the relevant credit entries are
booked in the DPM on the execution date.
 The participant will give the statement of holdings and transaction statement to
the beneficial owners, giving the updated positions after the shares are credited.

55
PRECAUTION:

 The Investor must correctly indicate his client-Id, DP name, DP-Id and
Depository name to ensure that his entitlements are electronically credited into
his account.

SAFETY

NSDL has established backup systems for computer and communication


infrastructure.
NSDL uses hardware, software and communication systems, which conform to industry
standards. Further, the systems are accepted by NSDL only after a rigorous testing
procedure. NSDL’s central systems comprise an IBM mainframe system with a backup
facility and are a remote disaster back up site.
The NSDL hardware, software and communication systems are continuously
reviewed in order to make them more secure. These reviews are a part of an ongoing
exercise wherein security considerations are given as much importance as operational
efficiency.
In addition to the enhancement of the services offered through the depository, NSDL
is also working towards strengthening the systems and procedures to comply with the
stringent international standards, that would further the confidence of the users of the
systems.

56
CHAPTER-IV
DATA ANALYSES AND INTERPRETATION

57
SEBI (Depositories and Participants) (Amendment) Regulations: 2018,

In exercise of the powers conferred by section 30 of the Securities and Exchange Board
of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to
further amend the Securities and Exchange Board of India (Depositories and Participants)
Regulations, 1996, namely:-

1. These Regulations may be called the Securities and Exchange Board of India
(Depositories and Participants) (Amendment) Regulations, 2018.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Depositories and Participants)


Regulations, 1996, in regulation 7, -
(i) for clause (d), the following clause shall be substituted, namely:-
“(d) the sponsor shall, at all times, hold at least fifty-one
per cent. of the equity share capital of the depository;”
(ii) in clause (e), the proviso and the Explanation shall be omitted;
(iii) after clause (e), the following clauses and Explanation shall be
inserted, namely:-
“(ea) no person other than a sponsor, whether resident in India or not, shall at any
time, either individually or together with persons acting in concert, hold more than five per
cent. of the equity share capital in the depository;
Explanation: For the purposes of this clause, -
(i) The expression “person resident in India” shall have the meaning assigned to it in
clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999);
(ii) The expression “persons acting in concert” shall have the meaning derived from
clause (e) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;
“(eb) the combined holding of all persons resident outside India in the equity share
capital of the depository shall not exceed, at any time, forty-nine per cent. of its total equity
share capital, subject further to the following:-

58
(i) the combined holdings of such persons acquired through the foreign direct
investment route is not more than twenty six per cent. of the total equity share capital, at any
time;
(ii) the combined holdings of foreign institutional investors is not more than twenty
three per cent. of the total equity share capital, at any time;
(iii) no foreign institutional investor acquires shares of the depository otherwise than
through the secondary market;
“(ec) no foreign institutional investor shall have any representation in the Board of
Directors of the depository;”

Footnotes:
1. The principal regulations, Securities and Exchange Board of India (Depositories and
Participants) Regulations, 1996 were published in the Gazette of India, Part II on May 16,
1996 vide S.O. No. 345(E).
2. The Securities and Exchange Board of India (Depositories and Participants)
Regulations, 1996, were subsequently amended: –
(a) On February 7, 1997 by SEBI (Depositories and Participants)
(Amendment) Regulations, 1997 vide S.O. No. 91(E).
(b) On September 5, 1997 by SEBI (Depositories and Participants) (Second
Amendment) Regulations, 1997 vide S.O. No. 640(E).
(c) On January 5, 1998 by SEBI (Depositories and Participants) (Amendment)
Regulations, 1998 vide S.O. No. 18(E).
(d) On January 21, 1998 by SEBI (Depositories and Participants) (Second
Amendment) Regulations, 1998 vide S.O. No. 76(E).
(e) On May 20, 1999 by SEBI (Depositories and Participants) (Amendment)
Regulations, 1999 vide S.O. No. 357(E).
(f) On July 7, 1999 by SEBI (Depositories and Participants) (Second Amendment)
Regulations, 1999 vide S.O. No. 546(E).
(g) On September 21, 1999 by SEBI (Depositories and Participants) (Third
Amendment) Regulations, 1999 vide S.O. No. 775(E).

59
a) On December 26, 2000 by SEBI (Depositories and Participants) (Amendment)
Regulations, 2000 vide S.O. No. 1160(E).
b) On May 29, 2001 by SEBI (Investment Advice by Intermediaries) (Amendment)
Regulations, 2001 vide S.O. No. 476(E).
c) On September 27th, 2002 by SEBI (Procedure for holding Enquiry by Enquiry
Officer and Imposing Penalty) Regulations, 2002 vide S.O. No. 1045(E).
d) On June 16, 2003 by SEBI (Depositories and Participants) (Amendment)
Regulations, 2003 vide S.O. No. 696(E).
e) On September 2, 2003 by SEBI (Depositories and Participants) (Second
Amendment) Regulations, 2003 vide S.O. No. 1014(E).
f) On October 1, 2003 by SEBI (Depositories and Participants) (Third Amendment)
Regulations, 2003 vide S.O. No. 1156(E).
g) On March 10th, 2004 by SEBI (Criteria for Fit and Proper Person) Regulations, 2004
vide S.O. No. 398(E).
h) On June 10th, 2004 by SEBI (Depositories and Participants) (Amendment)
Regulations, 2004 vide S.O. No. 696(E).
i) On October 10th, 2007 by SEBI (Depositories and Participants)

DEPOSITORY REFORMS:

I. Introduction of T + 2 rolling settlement cycle


II. Admission of debt instruments
III. Abolition of account closure charges
IV. SEBI directive to issuers/RTAs
V. Common agency
VI. Transfer-cum dematerialization.

60
RIGHTS AND REFORMS OF SEBI
Enquiry and Inspection:
On being satisfied that it is necessary in public interest/in the interest of the
investors, the SEBI can call for information from, or, make an enquiry or inspection in
relation to the affairs of, the issuer/beneficial owner/depository participant. It may also give
appropriate directions.
 In the interest of investors or orderly development of the securities market or
 To prevent the affairs of any depository/participant being conducted in a manner
detrimental to the interest of the investors or securities market. Any person
aggrieved by an order of the SEBI may like to appeal to the SAT.

Penalties:
contravention/attempt to or abatement of contravention for the provisions if
this Act/any regulation/bye-laws is punishable with imprisonment for a term up to five years
or with fine, or with both.

Power of the SEBI:


 To carry out the purposes of this ACT, the SEBI can make regulations, in particular,
to provide for
 The from in which the record is to be maintained/certificate of commencement of
business issued,
 The manner of surrendering a security certificate/creating pledge, hypothecation by
BOs
 Condition /fee payable for the issue of certificate of securities,
 Rights/obligations of depositories/participants/issuers and
 Eligibility criteria for the admission of securities into the depository.

61
Name of DP : NETWORTH STOCK BROKING LTD

Advance/Deposit : Nill

Documentation/statutory
Charges –one time : Rs230/-

Account opening : Rs400/-+service tax

Account maintenance : Rs500/-for corporate accounts only

Custody charges : Nill


Transaction charges credit (BUY) : Nill

Transaction charges Debit (SELL) : as below

Market transfers to nsbl* accounts : Nill

Market transfers to accounts other than


nsbl* Accounts with NSBL DP** : Rs20/-per transaction

Market transfers to accounts other than


nsbl*DP** : Rs30/-per transaction

Off market transfers to NSBL* accounts : Nill

Off market transfers to accounts other


than nsbl*accounts with NSBL DP** : Rs10/- per transaction

Off market transfers to accounts other


than with NSBLDP** : Rs25/-per transaction

Account Closing : Nill

Dematerialisation charges : Rs 5/- per certificate with min. Rs.40/-Per


Request +Rs45/-courier charges Per request

Rematerialisation charges : Rs20/- per certificate/ every 100


Securities whichever is higher

Pledge - setup (to pledger) : Rs25/- per instruction

Pledge – removal (to pledger) : Rs25/- per instruction

Pledge Invocation : Rs5/- per instruction


Fax indemnity charges – one time : Rs200/-

62
Name of DP : SBI

Account opening
documentation Charges : Applicable stamp duty

Account maintenance charges


First year : Nill

Next year : Rs250/-

Custody charges : Nill

Dematerialisation charges : Rs 3/- per certificate + applicable Courier


charges

Rematerialisation charges : Rs 35/- per certificate

Transaction charges
Purchase : Nill

Sell – through SSL** : Nill

Sell – off market transfer


within SSL : Rs15/-

Sell – market / off market


transfer out side SSL : 0.04% of total transaction value minimum of
Rs25/- per transaction +CDSL charges

Pledge - Creation/closure/
Invocation : 0.02% of total transaction value minimum of
Rs25/- per transaction + CDSL charges

63
Name of DP : karvy stock broking ltd

Advance/Deposit :

Account opening : Rs100/-

Account maintenance : Rs250/-per annum


Demat : Rs 3/- PER CERTIFICATE +courier charges Rs.25/-
Remat : a) a fee of Rs20/- for every 100 securities or part
Thereof; or b) a flat fee of Rs20/-per certificate
Whichever is higher

Transaction (debit) : up to 50

Pledge Creation : 000-Rs20/- >Rs50/-

Pledge Creation Confirmation : 000-Rs50/-

Pledge Closure : Rs25/-

Pledge Closure Confirmation : Nill

Pledge Invocation : Rs25/-

Failed Instruction Charges : Nill

Other Charges, if any : Rs25/-

64
Name of DP : India infoline ltd

Advance/Deposit :

Account opening : Rs550/-

Account maintenance : Rs450/-per annum


Demat : Rs 10/- per cert +Rs40/- as postal charges
Remat : Rs 15/- per cer +Rs40/- as postal charges

Transaction (debit) : min Rs15/- max Rs100/- or 0.05% of the


Value of the securities

Pledge Creation : Rs25/-

Pledge Creation Confirmation : Nill

Pledge Closure : Rs25/-

Pledge Closure Confirmation : Nill

Pledge Invocation : Nill

Failed Instruction Charges : Rs50/- per instruction

Other Charges, if any : Nill

Remarks : we have introduce a special annual scheme of


Rs600/- for debit transaction. No debit transaction
Charges for whole year to the client.

65
Name of DP : Share khan

Demat Account Opening Charges : NIL

Demat Account Maintenance Charges : Rs. 75/- per quarter (i.e. Rs. 300 per anum)

Account Closing Charges : Rs. 100/-

Buy : 0.02% (Minimum Rs. 15/-)

Buy (Off Market from other DP) : Nil

Sell : 0.04% (Minimum Rs. 15/-)

Dematerialisation Charges : Rs.3/- per Certificate or Rs.15/- per request


whichever is higher.

Rematerialisation Charges : Rs.25/- Per certificate or 0.12 % of the value


of the securities requested for
Rematerialisation, whichever is higher.

Custody Fee : Nil

Requests for Freezing or Defreezing : Rs. 25/- per request


account

Pledge Creation / Closure : 0.02% (Minimum Rs. 15/-)

66
DP ID : 20806

Name of DP : BANK OF INDIA


Account opening/Joining fees : Nill

Annual Maintenance : for individual clients Rs 350 per annum


and Rs.850 per annum.
Charges for freezing and
Unfreezing : Rs.50 per instance.
Transaction (BUY) : free

Transaction (SELL) : Rs.25/-(for individual) or Rs 30


(Corporate bodies) per transaction.

Custody charges : Nill

Demat : charges applicable are minimum Rs. 50 and


Rs. 5 per certificate.

Remat : charges applicable are Rs 50 per request.

Pledge creation/ closure/


Invocation : Rs.50/-

67
Name of DP : HDFC

Account opening : Nill

Account maintenance : Rs.500/-(Rs.450/-for customer receiving


Statements by email

Agreement Stamp Paper : Rs.100/-

Buy - Market and Off-Market : Nill

Sell-market & off market


Max. Rs. 500 for debt instruments
For trade done on www.icicidirect.com : Nill

For instruction submitted through


Internet (e-instructions) : 0.03% (Min. Rs. 10/-)

For instruction submitted through


Call Centre (e-instructions) : 0.04% (Min. Rs. 15/-)

For instruction submitted


through Branches : 0.04% (Min. Rs. 30/-)

Rejection/fails : Rs. 35 /-

Dematerialisation : Rs.30/-
For each request form
Extra for each certificate : Rs.2/-

Rematerialisation : Rs.20 for every hundred securities

68
Accout closing : Nill

Pledge Creation/Closure/
Confirmation/ Invocation
If ICICI Bank is the counter party : 0.02% (Min. Rs. 15/-)

If ICICI Bank is not


the counter party : 0.04% (Min. Rs. 30/-)

Additional Account Statements : Rs. 20/-

69
Name of DP : Canara Bank

Advance/Deposit :

Account opening : Rs100/-

Demat : Rs 2/- PER CERTIFICATE + Rs.25/- postage


Per request

Account maintenance : Rs100/-

Custody charges : Rs 1.50 PER ISIN P.M, min Rs.2/-

Transaction (BUY) : 0.01% MIN Rs10/, Max Rs.250/-

Transaction (SELL) : 0.01% MIN Rs20/, Max Rs.500/-

Pledge Creation : Rs50/-PER ISIN

Pledge Creation Confirmation : Rs25/-PER ISIN

Pledge Closure : Rs25/-PER ISIN

Pledge Closure Confirmation : Rs25/-PER ISIN

Pledge Invocation : Rs25/-PER ISIN

Account Closing :

Remat : Rs 15/- PER CERTIFICATE + Rs.25/-


Postage per request

70
Securities Lending/Borrowing : Rs 50/- PER TRANSACTION

Failed Instruction Charges :

Other Charges, if any : 1. ADDITIONAL/ADHOC STATEMENTS-Rs 5/-


PER PAGE
2. CHEQUE BOUNCING CHARGES-Rs 25/-PER
CHEQUE

Remarks : SERVICE TAX @ 5%

71
Name of DP : HSE Securities Ltd

Advance/Deposit :

Account opening : FREE

Demat : Rs. 2/- cert

Account maintenance : Rs. 150/-

Custody charges : Rs. 1/- Month/ISIN

Transaction (BUY) : Rs. 10/-

Transaction (SELL) : Rs. 20/-

Pledge Creation : Rs. 35/-

Pledge Creation Confirmation :

Pledge Closure : Rs. 10/-

Pledge Closure Confirmation : Rs. 5/-

Pledge Invocation : Rs. 5/-

Account Closing :

Remat : Rs. 10/- courier charges

Securities Lending/Borrowing :

72
Name of DP : IDBI Bank Limited
Advance/Deposit : NIL
Account opening : FREE (Stamp duty as applicable)
Demat : For Equity-0.2% of face value, plus postage Rs 35 per
request- , For Debt-Rs. 2 per certificate, plus postage
Rs. 35 per request
Account maintenance : Account Maintenance for idbi bank SB / Current AC
Holders (Payable in advance in
the month of account opening and on anniversary
basis every year thereafter) - Rs. 350/- per annum.
Account Maintenance for non-idbi bank account
holders Rs.500/-
Transaction (BUY) : Market Equity BUY transactions - Free
Market Debt BUY Transactions - Free
Off Market Equity BUY Transaction – Free
Off Market Debt BUY Transaction – Free
Inter-Depository Transfer (Buy) - Free
Transaction (SELL) : Market Equity SELL Transactions - 0.04% of market
value* - Rs 30 per transaction.
Market Debt SELL Transactions - 0.04% of market
value* - Rs 30 per transaction.
Off Market Equity SELL Transaction- 0.04% of
market value* - Rs 30 per transaction.
Off Market
Pledge Creation : 0.05 % of market value* - Rs 50 per transaction
Pledge Closure : 0.05 % of market value* - Rs 25 per transaction
Pledge Closure Confirmation : NIL
Pledge Invocation : 0.15 % of market value* - Rs 25 per transaction
Account Closing : due to consolidation, or Zero balance -Rs.50/- and if
account is shifted to other DP - Rs.250/-

73
Remat : 0.04 % of market value, minimum Rs 20 per certificate
Securities Lending/Borrowing : Securities Lending / Borrowing Initiation - Rs. 50 per
instruction
Securities Lending / Borrowing Confirmation - Rs. 50
per instruction
Securities Recall / Repay Initiation - Rs. 50 per
instruction
Securities Recall / Repay Confirmation - Rs. 50 per
inst
Other Charges, if any : Service Tax (subject to change, as prescribed by Tax
Authorities from time to time) - 10.2% of charges for
Depository Services
Remarks : * IDBI Bank SB/Current A/c holders must
provide Standing Instructions for recovery of the service
* For calculation of charges, market value of transaction / holding will be as per NSDL
* All instructions for transfer must be received at respective

74
Name of DP : ING Vysya Bank Ltd.

Advance/Deposit : NIL

Account opening : Rs.100/-

Demat : Rs.2/- per cert. (Re.1/- in case number of certs exceeds


500 per request) and mailing charges or Rs.25/- per
request
Account maintenance : NIL

Custody charges : 50 paise per ISIN p.m. plus NSDL charges


Sub to a min. of Rs.50/- per quarter
(Incldgzero holdg a/cs) and a max. Of
Rs.250/- per quarter

Transaction (BUY) : 0.01% of market value subject to a min. of Re.1/- per


transaction and a max. of Rs.250/- per transaction

Transaction (SELL) : 0.02% of market value with a min. of Rs.10/- per


transaction plus NSDL charges sub to a max of
Rs.500/- per transaction

Pledge Creation : 0.02% of market value with a min of Rs.25/- per


transaction plus NSDL charges:
Pledge Creation Confirmation : NIL

Pledge Closure : 0.02% of market value with a min. of Rs.50/- per


transaction
Pledge Closure Confirmation : NIL

75
Pledge Invocation : 0.02% of market value with a min. of Rs.50/- per
transaction
Account Closing NIL:

Remat : Rs.20/- per cert. Plus NSDL charges

Securities Lending/Borrowing : Lending: Rs.50/- per transaction. Borrowing: Rs.25/-


per transaction plus NSDL charges
Failed Instruction Charges : NIL

Other Charges,if any : addl statement Rs.2/- per page (min. of Rs.10/-), late
transaction fee - Rs.100/- per transaction, service
charges for non-payment of bills within due date- 18%
p.a. with monthly rests.
Remarks : NIL

76
DP ID : 10000
DP Name : STOCK HOLDING CORPORATION OF INDIA
LTD.
Advance : nill

Account opening/Joining fees : nill

Market –BUY : Rs. 15/-

Market –SELL : 0.05% (MIN. RS.15/-) + CDSL CHARGES

Off Market-BUY : Rs.15/-

Off Market-SELL : 0.05% (MIN. RS.15/-) + CDSL CHARGES

Pledge Creation : 0.02% + CDSL CHARGES

Pledge Closure : 0.02% + CDSL CHARGES

Pledge Invocation : Rs. 50/-

Annual Maintenance : RS.900/- (FOR 3 YEARS)

Demat : RS.3/- PER CERTIFICATE + RS.25/- POSTAGE


PER REQUEST

Remat : RS.25/- PER CERTIFICATE + RS.25/- POSTAGE


PER REQUEST

Other Charges : DOCUMENTATION CHARGES RS.30/- + STATE


STAMP DUTY ( MIN. RS.50/-)

77
ANNUAL MANTANCE [CDSL]

HSE
300 150
BNR
300
250 UTI

300 200 CENTURION


B.O.I
SHC

78
TRANSACTIONS ON NSDL

30

25

20
CHARGES

15

10

0 NSBL HSE HDFC IDBI ING VYSYA KARVY

D.P PARTICIPANTS

TRANSACTION (BUY) TRANSACTION (SELL)

79
A/C MANTANCE NSDL

350

300

250
CHARGES

200

150

100

50

0 CANARA HSE HDFC IDBI KARVY ING VYSYA

D.P PARTICIPANTS

80
MARKET(BUY/SELL) ON CDSL

25

20

15
CHARGES

10

0 HSE CENTURION UTI BNR B.O.I S.H.C

D.P PARTICIPANTS

BUY SELL

81
CHAPTER-V
 FINDINGS
 SUGGESSIONS
 CONCLUSIONS
 BIBLIOGRAPHY

82
FINDINGS

 Demat in Indian scenario is a new concept. Undoubtedly by seeing its seeing its
success in other developed countries, its good move towards the development in the
Indian stock market. Dematerialization of the shares not only safeguards the investor
interest, it also has many advantages as said before.
 Financial markets are not fully fledged so it is under the process of development with
effect of reforms.
 stock exchange is one of the regional exchanges; it had to take images for improved
the number of investor’s geographical area and intermediary system.
 stock exchange has to develop the intermediary network and brokers and bubs brokers
to meet the needs of investor of all over the Andhra Pradesh.
 The exchange also provides services to depository participant providing national
securities depository participant with national securities depository limited (NSDL)
and central depository services limited (CDSL). The requisite infrastructure for NSDL
is it place.
 As per the available statistics at BSE and NSE, 99.9 per cent transactions take place in
dematerialized mode only.
 Therefore, in view of the convenience of trading in dematerialized mode, it is
advisable to have a beneficial owner (BO) account for trading at the exchanges.

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SUGGESTIONS
 Stock exchange depository services are fully operational.

 Central government should implement various measures to improve the


financial system.
 Stock exchange has to improve Demat services in consideration of small
investors also.
 Stock exchange should concentrate on expanding the investors market,
broker’s network; demat services, geographical expansion and large trade
numbers.
 Stock exchange provides better service to the investors then that of brokers.
It should also take measures to compete with BSE and NSE.

 As a depository participant with both NSDL and CDSL stock exchange has
to provide better services to investors, brokers, as well as others who
interested in demat.

 However to facilitate trading by small investors in physical mode the


stock exchanges provide an additional trading window, which gives one
time facility for small investors to sell physical shares which are in
compulsory demat list.

 The buyer of these shares has to demat such shares before further
selling.

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Conclusion

Client account holders enjoy the convenience of obtaining immediate electronic securities
transfer. No risks in handling certificates such as bad delivery, fake securities.
Reduction of paper work for all concerned. Lower costs for investors and listed companies.
Convert physical share certificates into electronic form (Dematerialization)
Convert the securities held electronically into physical form (Rematerialisation)
Facilitating the post trade settlement of all secondary market transactions conducted through
the CSE.Direct credit to client accounts of shares arising out of new share issues, rights
issues share splits, mergers and consolidation Account maintenance service for address
changes , dividend disposal instructions etc Transmission and Nomination facility.

Investor need not open separate demat a/c for demat of debt or instruments Procedure for
demat of debt instruments is same as that of equity shares The investor has to ensure that
before the certificates are handed over to the DP for demat, he marks ‘surrendered for
dematerialization’ on the face of the certificates

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BIBLIOGRAPHY

1. Indian financial system.


M. Y. Khan.
2. Financial Market.
Jordan, Himalaya publication.

3. Economics times (News paper)

WEBSITES

1. www.hdfc.com

2. www.nseindia.org

3. www.nsdl.com.in

4. www.cdslindia.com

5. www.sebi.gov.in

6. www.bseindia.com

7. www.moneymonetary.com

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LIST OF ABBREVIATIONS

HSE : Hyderabad Stock Exchange

BSE : Bombay Stock Exchange

NSE : National Stock Exchange

LAN : Local Area Network

WAN : Wide Area Network

V-SAT : Very Small Aperture Terminal

WPC : Wireless Planning Commission

TS : Terminal Station

TDM : Time Division Multiplexing

TDMA : Time Division Multiple Access

NSDL : National Securities Depository Limited

CDSL : Central Depository Service (India) Limited

SEBI : Security Exchange Board of India

DP : Depository Participant

EDP : Electronic Data Processing

HOST : Hyderabad Stock Exchange Online Securities Trading System

BWS : Broker Work Station

VECTOR : Versatile Engine for Centralized Trading and On-Line Reporting

CTS : Central Trading System

CRS : Central Radio Station

OTCEI : Over the Counter Exchange Of India

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SCRIP : Stock Calculus and Rating for Improving Port-Folio

CC : Clearing Corporation

CH : Clearing House

DOT : Department Of Telecommunication

FDDI : Fiber Distributed Data Interface

MAR : Multi-Access Radio

TCP/IP : Transport Control Protocol / Internet protocol

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