About NSDL

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.

Using innovative and flexible technology systems, NSDL works to support the investors and brokers
in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian
marketplaces by developing settlement solutions that increase efficiency, minimise risk and reduce
costs. At NSDL, we play a quiet but central role in developing products and services that will
continue to nurture the growing needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is more or less similar to
holding funds in bank accounts. Transfer of ownership of securities is done through simple account
transfers. 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.

Promoters / Shareholders

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the largest development
bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and National Stock Exchange
of India Limited (NSE) - the largest stock exchange in India. Some of the prominent banks in the
country have taken a stake in NSDL.

Promoters

• Industrial Development Bank of India Limited (Now, IDBI Bank Limited)

• Unit Trust of India (Now, Adminstrator of the Specified Undertaking of the Unit Trust of
India)
• National Stock Exchange of India Limited

Other Shareholders

• State Bank of India

• HDFC Bank Limited
• Deutsche Bank A.G.
• Axis Bank Limited
• Citibank N.A.
• Standard Chartered Bank
• The Hongkong and Shanghai Banking Corporation Limited
• Oriental Bank of Commerce
• Union Bank of India
• Dena Bank
• Canara Bank
 Board of Directors

Dr. R. H. Patil
1 Chairman Chairman
The Clearing Corporation of India Limited

Mr. Gagan Rai Managing Director &

2
National Securities Depository Limited CEO

Mr. Ravi Narain

3 Managing Director Director
National Stock Exchange of India Limited

Mr. Justice B.N. Srikrishna (Retd.)

4 Former Judge Director
Supreme Court of India

Mr. P. P. Vora
Former Chairman & Managing Director
5 Director
Industrial Development Bank of India Limited
(Now, IDBI Bank Ltd.)

Mr. Bansi S Mehta

6 Chartered Accountant, Senior Partner Director
M/s Bansi S. Mehta & Co.

Mr. Sudesh Punhani

7 Former Director (Finance) Director
National Aviation Company of India Limited

Mr. Rajiv B. Lall

Managing Director & CEO
8 Director
Infrastructure Development Finance Company
Limited

Dr. Prakash G Apte

9 Former Director Director
Indian Institute of Management, Bangalore

Mr. R.K. Bansal

10 Executive Director Director
IDBI Bank Limited

Mr. Ashok Mukand

11 Former Deputy Managing Director & CFO Director
State Bank of India

Mr. Kaushik Shaparia

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

Top

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.

All the above controls require means of continuous electronic communication between NSDL and
issuer. Issuer may establish such communication link by setting a computer facility called DPM-SHR
by itself or by utilising such facility set up by Registrar & Transfer Agents.

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 :

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
dematerialisation before they are dematerialised and to maintain electronic connectivity with NSDL.
Electronic connectivity facilitates dematerialisation, rematerialisation, daily reconciliation and
corporate actions.

Clearing Corporation / House:

The clearing corporations/houses of stock exchanges also have to be electronically linked to the
depository in order to facilitate the settlement of the trades done on the stock exchanges for
dematerialised shares. At present, all the major clearing corporations/houses of stock exchanges are
electronically connected to NSDL.

The following stock exchanges have linked up with NSDL to facilitate trading and settlement of
dematerialised securities:

• Madras Stock Exchange Ltd. (MSE)

• National Stock Exchange of India Ltd. (NSE)
• Inter-connected Stock Exchange of India Ltd. (ISE)
• OTC Exchange of India (OTCEI)
• The Calcutta Stock Exchange Association Ltd. (CSE)
• The Delhi Stock Exchange Association Ltd. (DSE)
• The Stock Exchange, Mumbai (BSE)
• The Stock Exchange, Ahmedabad (ASE)

Why NSDL

• Benefits of Depository System

• Safety

Benefits of Depository System

In the depository system, the ownership and transfer of securities takes place by means of
electronic book entries. At the outset, this system rids the capital market of the dangers related to
handling of paper. NSDL provides numerous direct and indirect benefits like:

• Elimination of bad deliveries In the depository environment, once holdings of an investor

are dematerialised, the question of bad delivery does not arise i.e. they cannot be held
"under objection". In the physical environment, buyer was required to take the risk of
transfer and face uncertainty of the quality of assets purchased. In a depository
environment good money certainly begets good quality of assets.
• Elimination of all risks associated with physical certificates- Dealing in physical
securities have associated security risks of theft of stocks, mutilation of certificates, loss of
certificates during movements through and from the registrars, thus exposing the investor
to the cost of obtaining duplicate certificates etc. This problem does not arise in the
depository environment.
• No stamp duty for transfer of any kind of securities in the depository. This waiver extends
to equity shares, debt instruments and units of mutual funds.
• Immediate transfer and registration of securities - In the depository environment,
once the securities are credited to the investors account on pay out, he becomes the legal
owner of the securities. There is no further need to send it to the company's registrar for
registration. Having purchased securities in the physical environment, the investor has to
send it to the company's registrar so that the change of ownership can be registered. This
process usually takes around three to four months and is rarely completed within the
statutory framework of two months thus exposing the investor to opportunity cost of delay
 in transfer and to risk of loss in transit. To overcome this, the normally accepted practice is
to hold the securities in street names i.e. not to register the change of ownership. However,
if the investors miss a book closure the securities are not good for delivery and the investor
would also stand to loose his corporate entitlements.
• Faster settlement cycle - The settlement cycle follow rolling settlement on T+2 basis i.e.
the settlement of trades will be on the 2nd working day from the trade day. This will enable
faster turnover of stock and more liquidity with the investor.
• Faster disbursement of non cash corporate benefits like rights, bonus, etc. - NSDL
provides for direct credit of non cash corporate entitlements to an investors account,
thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit.
• Reduction in brokerage by many brokers for trading in dematerialised securities
Brokers provide this benefit to investors as dealing in dematerialised securities reduces
their back office cost of handling paper and also eliminates the risk of being the introducing
broker.
• Reduction in handling of huge volumes of paper
• periodic status reports to investors on their holdings and transactions, leading to better
controls.
• Elimination of problems related to change of address of investor - In case of change
of address, investors are saved from undergoing the entire change procedure with each
company or registrar. Investors have to only inform their DP with all relevant documents
and the required changes are effected in the database of all the companies, where the
investor is a registered holder of securities.
• Elimination of problems related to transmission of demat shares - In case of
dematerialised holdings, the process of transmission is more convenient as the transmission
formalities for all securities held in a demat account can be completed by submitting
documents to the DP whereas, in case of physical securities the surviving joint
holder(s)/legal heirs/nominee has to correspond independently with each company in which
shares are held.
• Elimination of problems related to selling securities on behalf of a minor - A
natural guardian is not required to take court approval for selling demat securities on behalf
of a minor.
• Ease in portfolio monitoring since statement of account gives a consolidated position of
investments in all instruments.

Top

Safety

There are various checks and measures in the depository system to ensure safety of the investor
holdings. These include:

• A DP can be operational only after registration by SEBI, which is based on the

recommendation from NSDL and their own independent evaluation. SEBI has prescribed
criteria for becoming a DP in the regulations.
• DPs are allowed to effect any debit and credit to an account only on the basis of valid
instruction from the client.
• Every day, there is a system driven mandatory reconciliation between DP and NSDL.
• All transactions are recorded at NSDL Central System and in the databases maintained by
business partners.
• There are periodic inspections into the activities of both DP and R&T agent by NSDL. This
also includes records based on which the debit/credit are effected.
• All investors have a right to receive their statement of accounts periodically from the DP.
• Every month NSDL forwards statement of account to a random sample of investors as a
counter check.
• In the depository, the depository holds the investor accounts on trust. Therefore, if the DP
goes bankrupt the creditors of the DP will have no access to the holdings in the name of the
 clients of the DP. These investors can transfer their holdings to an account held with
another DP.
• The data interchange between NSDL and its business partners is protected by protection
measures of international standards such as encryption hardware lock. The protection
measures adopted by NSDL are more than what is prescribed in the SEBI Regulations.
• Freeze Facility: A depository account holder (beneficiary account) may freeze securities
lying in the account for as long as the account holder wants it. By freezing the account,
account holder can prevent unexpected debits or credits or both, creeping into its account.
The following types of freeze facility available in the NSDL system may be availed of by
submitting freeze instruction to the DP in the prescribed form.
 Freeze for debits only
 Freeze for debits as well as credits
 Freeze a particular ISIN in the account
 Freeze a specific number of securities held under an ISIN in an account
• Certification in Depository Operations : NSDL has introduced a Certification Programme
in Depository Operations (popularly known as NCFM certification), and it has been made
compulsory for all DPs to appoint a person qualified in this certification in each of its
branches. This way, NSDL wants to ensure that each branch of a DP that services investors
has atleast one person who has thorough knowledge about depository system.
• Investor grievance: All grievances of the investors are to be resolved by the concerned
business partner. If they fail to do so, the investor has the right to approach NSDL at the
following address: Officer-In-Charge
Investor Relationship Cell
NSDL
4th floor, A Wing, Trade World
Kamala Mills Compound
Senapati Bapat Marg
Lower Parel Mumbai- 400013
email: relations@nsdl.co.in
The investor relationship cell of NSDL would work towards resolution of the grievance.
• Insurance Cover: NSDL has taken a comprehensive insurance policy to help DP to
indemnifying investors for the loss accrued to them due to errors, omissions, commission or
negligence of DP.
• Computer and communication infrastructure: NSDL and its business partners use
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 system comprises an IBM mainframe system with a back-up facility and a remote
disaster back-up site.
• Machine level back-up: The IBM mainframe in which the data is processed has adequate
redundancy built into its configuration. There is a standby central processing unit (CPU) to
which processing can be switched over to in case of main system CPU failure. The disk has
RAID implementation, which ensures that a failure of hard disk will not lead to loss in data.
System has spare disk configuration where data is automatically copied from the main disk
upon encountering the first failure (due to RAID implementation - first failure does not result
in loss of data).

All network components like router, communication controllers etc., have on-line
redundancy and thus a failure does not result in loss of transaction.

Disaster back up site: A disaster back up site equipped with a computer identical to the
mainframe computer & computing resources has been set up at a distant location about
175 km away from Mumbai. The depository operations are often switched between the
computing resources at Mumbai office and disaster back up site to ensure that the disaster
site is always operational.

Back-up in case of power failure: Continuity in power supply to the main systems is
assured by providing for;

 Dual uninterrupted power supply (UPS) for IBM-Mainframe and related

components wherein the two UPSs are connected in tandem. In case of
 failure of primary UPS, the secondary UPS takes over instantaneously and
thus, there is no interruption in operation, and
 Back-up diesel generator sets.

Periodic Review: The NSDL hardware, software and communication systems are continuously
reviewed in order to make them more secure and adequate for the size of business. These reviews
are a part of an ongoing exercise wherein security considerations are given as much importance as
operational efficiency.

Charges

NSDL provides depository services to investors and clearing members through market
intermediaries called Depository Participants (DPs). NSDL does not charge the investors and clearing
members directly but charges its DPs, who are free to have their own charge structure for their
clients. NSDL charges to DPs are uniform for all DPs. Some charges are payable by Issuers also.

• Fee Payable by Depository Participants.

• Fee Payable by Issuers.

• A Comparative Chart of Fees Charged by the DPs.

FEE PAYABLE BY DEPOSITORY PARTICIPANTS

ENTRY FEES

Each Participant shall pay at the time of submitting its application to the Depository, a non-
refundable Entry Fee of Rs. 25,000.

TRANSACTION RELATED FEES

The following transaction related fees shall be payable by the Participants to the Depository:

Settlement fee:

i. A settlement fee at the rate of Rs.4.50 per debit instruction in a Client's account shall be
charged to the Participant of the Client.

ii. A settlement fee at the rate of Re.1.00 per instruction in respect of securities received from
the Clearing Corporation into the Pool account of each Clearing Member maintained with the
Participant subject to a minimum of Rs. 1,000 and a maximum of Rs. 5,000 per quarter per
CM Account shall be charged to the Participant.

iii. A settlement fee at the rate of Rs.4.50 per debit instruction for transfer of securities by way
of inter-settlement transfers in the CM Account(s) shall be charged to the Participant.

iv. A settlement fee at the rate of Rs.4.50 per debit instruction for transfer of securities from
the CM account of a Clearing Member to the CM account of another Clearing Member shall
be charged to the Participant of the delivering Clearing Member.

Provided further that no settlement fee shall be charged :

a. in respect of commercial papers and short term debt instruments such as certificate of
deposits, MIBOR linked papers etc.; and

b. in case of :

i. transfers necessitated by transmission on death of the Client; and

 ii. transfer of the accounts of Clients from one Participant to another as a
consequence of expulsion or suspension of such Participant.

Pledge fee

A fee at the rate of Rs.25 per instruction for creation of pledge / hypothecation shall be charged to
the Participant of the pledgor/ hypothecator. No fee shall be charged when a pledge / hypothecation
is closed or invoked.

CUSTODY FEES

Nil

FEE FOR DEMATERIALISATION & REMATERIALISATION

No fee shall be charged by the depository for dematerialisation of securities. Participant shall be
charged the following fee for rematerialisation of securities:

a. a fee of Rs.10 for every hundred securities or part thereof ; or

b. a flat fee of Rs.10 per certificate,

whichever is higher.

No rematerialisation fee shall be charged for Government Securities.

MINIMUM FEE

In case the total fee billed to the Participants in a financial year is less than the minimum fee of
Rs.1,00,000 then the Participant shall be charged the difference thereof.

SECURITY DEPOSIT

Every Participant shall pay to the Depository Rs.10 lakh by way of interest free refundable security
deposit. However, a Clearing Corporation or a Clearing House of a Stock Exchange will be exempt
from payment of security deposit.

Top

FEE PAYABLE BY ISSUERS

ANNUAL CUSTODY FEE

i. With effect from April 1, 2009, an Issuer of listed securities shall pay an annual custody fee
at the rate of Rs. 8 per folio (ISIN position) in NSDL, subject to a minimum amount as
mentioned below, plus taxes as applicable:

Nominal Value of Securities admitted Amount

(Rs.) (Rs.)

Upto 5 crore 6,000

Above 5 crore and upto 10 crore 15,000

Above 10 crore and upto 20 crore 30,000

Above 20 crore 50,000

ii.
 iii. The above fee would be applicable on all securities i.e. equity, debt, Units of mutual funds,
pass through certificates, certificates of deposit, commercial papers, preference shares etc.,
except Government securities.

iv. The fee will be based on the total ISIN positions (folios) as on March 31, of the previous
financial year.

Provided however that, in case the issued capital or ISIN positions increase during the
financial year due to issue of further shares, by way of public offer, the annual custody fee
would be charged on a pro-rata basis, at the time of such issue.

v. The fee will be charged every year on a financial year basis and shall be payable by April 30
of that financial year.

If an Issuer fails to pay the fees mentioned under "Annual Custody Fee" by the due date, the
Depository may charge interest @ 12% p.a. on the amount, from the due date of payment
till the payment is received by the Depository. Provided further that the Depository may
stop providing details of clients / clearing members / clearing corporation / intermediary to
the Issuer and / or its Registrar and Transfer Agent as mentioned in the Bye Laws and
Business Rules.

Provided further that the Depository may not permit the Issuer to use its infrastructure
including for issue of further securities in electronic form.

FEE FOR DISTRIBUTION OF NON-CASH CORPORATE BENEFITS

i. In case of offers for sale by an offerer or disinvestment by GOI, bonus, rights, public issue,
preferential issue, split, merger, demerger, capital reduction, redemption, etc., a fee at the
rate of Rs. 10 per record for debits or credits to accounts as the case may be, shall be
charged to the Issuer, subject to a minimum fee of Rs.1000 per corporate action.

ii. In case of issue of Commercial Papers, a fee of Rs.10,000/- (plus taxes) shall be levied on
the Issuer for five issues of Commercial Papers during the financial year. Provided however
that an additional fee of Rs. 10,000/- (plus taxes) shall be levied on the Issuer for every
additional five issues.

iii. In case of issue of short term debt instruments viz; certificate of deposits, MIBOR linked
papers etc., a fee of Rs. 10,000/- (plus taxes) shall be levied on the Issuer for five such
issues made in a financial year. Provided however an additional fee of Rs.10,000/- (plus
taxes) shall be levied on the Issuer for every additional five issues.

ONE TIME CUSTODY FEES

An Issuer may pay a one time custody fee to NSDL at the rate of 0.05% plus taxes as applicable on
the market capitalisation of the company. The market capitalisation of a company will be
determined on the basis of the average market price for a period of 26 weeks preceding the date on
which the company agrees to make such payment. Consequent upon such payment, NSDL shall not
levy any custody fee on the Participants or annual custody fee on the Issuer.

If a company opts to pay the aforesaid one time fee, it will also be required to agree to pay on the
newly issued shares, a custody fee at the rate of 0.05% (five basis points) on the value of shares
calculated on the basis of issue price of newly issued shares. In case the company does not pay this
amount, NSDL shall charge annual custody fee or custody fee as per provision mentioned
hereunder, as the case may be. However, the Issuer shall not be required to pay any one time
custody fee on any subsequent issue of Bonus shares by the company.

JOINING FEE BY ISSUERS

An Issuer of unlisted securities shall pay a joining fee of Rs. 20,000 plus taxes at the applicable rate
at the time of joining NSDL, for the purpose of making its shares available for dematerialisation.

Provided however that in case the Issuer gets its securities listed on any recognised stock exchange
within one year of joining NSDL, the joining fee paid by the Issuer will get adjusted against the one
time custody fee or Annual Custody Fee, as the case may be.

If an issuer gets its securities delisted from all stock exchanges where its securities were listed, it
shall pay joining fee of Rs. 20,000 plus taxes at the applicable rate. If an Issuer fails to pay the fees,
the Depository may stop providing details of clients/ clearing members/ clearing corporation/
intermediary to the Issuer and / or its Registrar and Transfer Agent as mentioned in the Bye Laws
and Business Rules. Provided further that the Depository may not permit the Issuer to use its
infrastructure including for issue of further securities in electronic form.

NSDL as a Clearing Corporation / House

Any stock exchange desiring to facilitate settlement in demat shares should have a clearing
corporation/house with a fully operational settlement guarantee mechanism. The settlement
guarantee mechanism should have been approved by SEBI

Admission Criteria:
A clearing corporation or a clearing house of stock exchange shall be admitted as a User on the
Depository only if:

• The Depository is satisfied that the clearing corporation or a clearing house of a stock
exchange operates in such a manner that it ensures payment against delivery or
guarantees settlement; ·
• In the opinion of the Depository, the clearing corporation or a clearing house of a stock
exchange has the operational capability to provide the services relating to clearing and
settlement of transactions relating to the securities admitted to the Depository to the held
in dematerialised form;
• The clearing corporation or a clearing house of a stock exchange undertakes to co-operate
at all times to redress the grievances of Clients and the Participant in respect of its
operation in relation to the Depository;
• the clearing corporation or a clearing house of a stock exchange has adequate hardware
and software systems to interact with the Depository as specified in the Business Rules.

NSCCL, The Organisation

The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE,
was incorporated in August 1995. It was the first clearing corporation to be established in the
country and also the first clearing corporation in the country to introduce settlement
guarantee.

It was set up with the following objectives:

• to bring and sustain confidence in clearing and settlement of securities;

• to promote and maintain, short and consistent settlement cycles;
• to provide counter-party risk guarantee, and
• to operate a tight risk containment system.

NSCCL commenced clearing operations in April 1996. It has since completed more than 2400
settlements (equities segment) without delays or disruptions.

National Securities Clearing Corporation Limited First Indian Clearing Corporation to

get rated

CRISIL has assigned its highest corporate credit rating of ‘AAA’ to the National Securities
Clearing Corporation Ltd (NSCCL). 'AAA' rating indicates highest degree of strength with
regard to honouring debt obligations. NSCCL is the first Indian Clearing Corporation to get this
rating. The rating reflects NSCCL’s status as Clearing Corporation for NSE, India’s largest stock
exchange. The rating also factors in NSCCL’s rigorous risk management controls and adequate
settlement guarantee cover.