EXECUTIVE SUMMARY

The Indian Financial System has undergone a considerable change in

the recent past. The Financial Sector reforms, along with technological
advancement have integrated international markets, which have
facilitated the scope for uninterrupted mobility of funds in various
financial markets. It has also led to efficient and low-cost transactions
related to securities. This can be seen in the Indian financial sector
reforms also, which started in the early 1990s.

Dematerialization of financial securities is the first sign of financial

reforms in India. Finance Ministry and SEBI realized the need of more
efficient financial system. As a result of this NSDL and CDSL came into
picture. It aims at ensuring the safety and soundness of Indian
marketplaces by developing settlement solutions that increase
efficiency, minimize risk and reduce costs.

The Indian Stock markets have seen a major change with the
introduction of depository system and scrip less trading mechanism.
There were various problems like inordinate delays in the transfer of
share certificates, delay in receipt of securities and inadequate
infrastructure in banking and postal segments to handle a large
volume of application and storage of share certificates .To overcome
these problems physical dealing in securities should be eliminated .
The Indian stock market introduced the system of dematerialization
recognizing the need for scrip less trading.

With the help of Demat and Trading account, buying and selling of
shares has become a much faster and even process than trading with
the assistance of a physical broker. It provides for the assimilation of

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bank, broker, stock exchange and depository participants. This helps to
get rid of the painstaking procedure of investing in stock exchange.

According to the Depositories Act, 1996, an investor has the option to

hold shares either in physical or electronic form .The process of
converting the physical form of shares into electronic form is called
dematerialization or in short demats. The converted electronic data is
stored with the depository from where they can be traded. It is similar
to a bank where an investor opens an account with any of the
depository participants. Depository participant is a representative of
the depository .The DP maintains the investors securities account
balances and intimates him about the status of holdings.

This study involves understanding the various concepts of Demat and

on Line Trading has been submitted to Chetana’s Institute of
Management and Research.

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BANKING SECTOR
The last decade has seen many positive developments in the Indian
banking sector. The policy makers, which comprise the Reserve Bank
of India (RBI), Ministry of Finance and related government and financial
sector regulatory entities, have made several notable efforts to
improve regulation in the sector. The sector now compares favorably
with banking sectors in the region on metrics like growth, profitability
and non-performing assets (NPAs). A few banks have established an
outstanding track record of innovation, growth and value creation. This
is reflected in their market valuation. However, improved regulations,
innovation, growth and value creation in the sector remain limited to a
small part of it. The cost of banking intermediation in India is higher
and bank penetration is far lower than in other markets. India’s
banking industry has strengthened itself significantly as it has to
support the modern and vibrant economy which India aspires to be.
While the onus for this change lies mainly with bank managements, an
enabling policy and regulatory framework will also be critical to their
success.
The Indian banking system is financially stable and resilient to the
shocks that may arise due to higher non-performing assets (NPAs) and
the global economic crisis, according to a stress test done by the
Reserve Bank of India (RBI).
Significantly, the RBI has the tenth largest gold reserves in the world
after spending US$ 6.7 billion towards the purchase of 200 metric
tonnes of gold from the International Monetary Fund (IMF) in November

3
2009. The purchase has increased the country's share of gold holdings
in its foreign exchange reserves from approximately 4 per cent to
about 6 per cent.

Following the financial crisis, new deposits have gravitated towards

public sector banks. According to RBI's 'Quarterly Statistics on Deposits
and Credit of Scheduled Commercial Banks: September 2009',
nationalized banks, as a group, accounted for 50.5 per cent of the
aggregate deposits, while State Bank of India (SBI) and its associates
accounted for 23.8 per cent. The share of other scheduled commercial
banks, foreign banks and regional rural banks in aggregate deposits
were 17.8 per cent, 5.6 per cent and 3.0 per cent, respectively.

With respect to gross bank credit also, nationalized banks hold the
highest share of 50.5 per cent in the total bank credit, with SBI and its
associates at 23.7 per cent and other scheduled commercial banks at
17.8 per cent. Foreign banks and regional rural banks had a share of
5.5 per cent and 2.5 per cent respectively in the total bank credit.

Population wise distribution of deposits and credits of

commercial banks of India

2008-2009

4
The scheduled commercial banks served 34,709 banked centers. Of
these centers, 28,095 were single office centers and 64 centers had
100 or more bank offices.

The confidence of non-resident Indians (NRIs) in the Indian economy is

reviving again. NRI fund inflows increased since April 2009 and

5
touched US$ 45.5 billion on July 2009, as per the RBI's February
bulletin. Most of this has come through Foreign Currency Non-resident
(FCNR) accounts and Non-resident External Rupee Accounts. India's
foreign exchange reserves rose to US$ 284.26 billion as on January 8,
2010, according to the RBI's February bulletin.

SWOT ANALYSIS
STRENGTH
• Indian banks have compared favorably on growth, asset quality
and profitability with other regional banks over the last few
years. The banking index has grown at a compounded annual
rate of over 51 per cent since April 2001 as compared to a 27 per
cent growth in the market index for the same period. Bank
lending has been a significant driver of GDP growth and
employment.
• Extensive reach: the vast networking & growing number of
branches & ATMs. Indian banking system has reached even to
the remote corners of the country.
• The government's regular policy for Indian bank since 1969 has
paid rich dividends with the nationalization of 14 major private
banks of India.
• India has 88 scheduled commercial banks (SCBs) - 27 public
sector banks (that is with the Government of India holding a
stake)after merger of New Bank of India in Punjab National Bank
in 1993, 29 private banks (these do not have government stake;
they may be publicly listed and traded on stock exchanges) and
31 foreign banks. They have a combined network of over 53,000
branches and 17,000 ATMs. According to a report by ICRA
Limited, a rating agency, the public sector banks hold over 75
percent of total assets of the banking industry, with the private
and foreign banks holding 18.2% and 6.5% respectively.

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 • Foreign banks will have the opportunity to own up to 74 per cent
of Indian private sector banks and 20 per cent of government
owned banks.

WEAKNESS
• PSBs need to fundamentally strengthen institutional skill levels
especially in sales and marketing, service operations, risk
management and the overall organizational performance ethic &
strengthen human capital.
• Old private sector banks also have the need to fundamentally
strengthen skill levels.
• The cost of intermediation remains high and bank penetration is
limited to only a few customer segments and geographies.
• Structural weaknesses such as a fragmented industry structure,
restrictions on capital availability and deployment, lack of
institutional support infrastructure, restrictive labor laws, weak
corporate governance and ineffective regulations beyond
Scheduled Commercial Banks (SCBs), unless industry utilities and
service bureaus.
• Refusal to dilute stake in PSU banks: The government has
refused to dilute its stake in PSU banks below 51% thus choking
the headroom available to these banks for raining equity capital.

OPPURTUNITY
• The market is seeing discontinuous growth driven by new
products and services that include opportunities in credit cards,
consumer finance and wealth management on the retail side,
and in fee-based income and investment banking on the
wholesale banking side. These require new skills in sales &
marketing, credit and operations.

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• With increased interest in India, competition from foreign banks
will only intensify.
• Given the demographic shifts resulting from changes in age
profile and household income, consumers will increasingly
demand enhanced institutional capabilities and service levels
from banks.
• New private banks could reach the next level of their growth in
the Indian banking sector by continuing to innovate and develop
differentiated business models to profitably serve segments like
the rural/low income and affluent/HNI segments; actively
adopting acquisitions as a means to grow and reaching the next
level of performance in their service platforms. Attracting,
developing and retaining more leadership capacity
• Foreign banks committed to making a play in India will need to
adopt alternative approaches to win the “race for the customer”
and build a value-creating customer franchise in advance of
regulations potentially opening up post 2009. At the same time,
they should stay in the game for potential acquisition
opportunities as and when they appear in the near term.
Maintaining a fundamentally long-term value-creation mindset
reach in rural India for the private sector and foreign banks.
• With the growth in the Indian economy expected to be strong for
quite some time- especially in its services sector-the demand for
banking services, especially retail banking, mortgages and
investment services are expected to be strong.
• The Reserve Bank of India (RBI) has approved a proposal from
the government to amend the Banking Regulation Act to permit
banks to trade in commodities and commodity derivatives.
• Liberalization of ECB norms: The government also liberalized the
ECB norms to permit financial sector entities engaged in

8
 infrastructure funding to raise ECBs. This enabled banks and
financial institutions, which were earlier not permitted to raise
such funds, explore this route for raising cheaper funds in the
overseas markets.

THREATS
• Threat of stability of the system: failure of some weak banks has
often threatened the stability of the system.
• Rise in inflation figures which would lead to increase in interest
rates.
• Increase in the number of foreign players would pose a threat to
the PSB as well as the private players.
• The market is seeing discontinuous growth driven by new
products and services that include opportunities in credit cards,
consumer finance and wealth management on the retail side,
and in fee-based income and investment banking on the
wholesale banking side. These require new skills in sales &
marketing, credit and operations.
• Banks will no longer enjoy windfall treasury gains that the
decade-long secular decline in interest rates provided. This will
expose the weaker banks.
• With increased interest in India, competition from foreign banks
will only intensify.
• Given the demographic shifts resulting from changes in age
profile and household income, consumers will increasingly
demand enhanced institutional capabilities and service levels
from banks.

Introduction to Union Bank of India

ABOUT
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Union Bank is a Public Sector Unit with 55.43% Share Capital held by
the Government of India. The Bank came out with its Initial Public Offer
(IPO) in August 20, 2002 and Follow on Public Offer in February 2006.
Presently 44.57 % of Share Capital is presently held by Institutions,
Individuals and Others.

VISION

To become the bank of first choice in our chosen areas by building

beneficial and lasting relationship with customers through a process of
continuous improvement

MISSION

• A logical extension of the Vision Statement is the Mission of the

Bank, which is to gain market recognition in the chosen areas.

• To build sizeable markets share in each of the chosen areas of

business through effective strategies in terms of pricing, product
packaging and promoting the product in the market.

• To facilitate a process of restructuring of branches to support

a greater efficiency in the retail banking field.

• To sustain the mission objective through harnessing technology

driven banking and delivery channels.

• To promote confidence and commitment among the staff

members, to address the expectations of the customers
efficiently and handle technology banking with ease.

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HISTORY
In the year 1919, the Union Bank of India underwent a registration
process as a limited company in Mumbai. Our Father of the nation
'Mahatma Gandhi' had done the inauguration of this bank. In 1947, UBI
had 3 branches in Mumbai and one in Saurashtra. In1975, it was
assigned the status of the national bank by the government. At that
point of time, it was managing 240 branches across 28 states.
In its journey, UBI witnessed mergers with a private sector bank called
Belgaum Bank and then Miraj State Bank. On the request of RBI, it
acquired Sikkim Bank, which had 8 branches in the North-east at that
time.
In the year 2007, Union Bank of India made its presence felt in the
international arena by opening representative offices in the
destinations of United Arab Emirates, Abu Dhabi, Shanghai and Peoples
Republic of China. Besides, it chose Hong Kong as the destination to
open its very first branch outside India.

PRODUCTS AND SERVICES

UBI offers its customers a wide range of the services and products,
consisting of:

Personal Banking
• Accounts & Deposits – cumulative deposit scheme, deposit
reinvestment certificate, monthly income scheme, union flexi-
deposit, senior citizens scheme, multi gain savings account, no
frills saving account, union super salary account, union classic
current account
• Retail Loans – union cash, union home, union health, union miles,
union education, union top up, EMI calculator, union smile

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 • Cards - Classic / Silver / Gold, Corporate Credit Cards, Add-On
Cards
• Insurance & Investment – mutual fund, union healthcare
• Demat – demat accounts, online share trading

NRI Banking
• Remittance - Union E-Remit, Nostro Details for Remittance
• Savings & Deposits - NRO Non Resident Ordinary A/c Scheme,
NRE Non Resident External Rupee, RFC, FCNR(B), Union Unfixed,
Foreign Currency Deposit
• Loan & Services – house loans, foreign currency loans, loans
against deposit, immovable property, and shares or debenture
• Payments - Union Bill Pay

Corporate Banking
• CMS - Union Speed, Union Centralized Debits/Credits, Union
Prompt
• E-Tax - Customs and Direct taxes, DGFT, Central Excise and
Service Tax
• Trade Finance – trade finance for exporters, trade finance for
importers, foreign currency loans, correspondent banking
• Insurance - Non life Insurance – Corporate Agency, Insurance-
Corporate Agency
• Syndication of Loans
• MSME Banking
• Loans & Policies

Internet Banking

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 • Account Information
• Transfer of Funds
• Bills
• Requests
• Mails
• Trade
• Limits
• Currency
• Uploads
• Customization
• Financial enquiries
• Non Financial enquiries

DEMAT SERVICES
Union Bank of India offers the power of the value-added, service-
oriented Demat account-Union Demat. Union Bank is Depository
participant of Central Depository Services Ltd.
To carter to individual needs as diverse as your portfolio, Union Demat
will empower you with hassle-free, fast and accurate electronic
transactions. Plus you get Union Bank's quality service which you are
used to, at all times.

Demat Activity includes:

• Opening and maintaining of Demat Accounts
• Dematerialization
• Rematerialisation
• Purchases
• Sales
• Pledging and Unpledging

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 • Safe custody

Union bank of india along with four broking firms provide online trading
services. They are:
1. Sharekhan
2. Religare
3. IDBI
4. EMKAY

INVESTMENT PATTERN IN INDIA

Investment and financial planning in India has been successful to

a very large extent, as is evident from the fact that in the present
scenario, India is the 5th largest economy of the world.

The market in India offers very high potential for earning and growth in
all the spheres of business. All this has been possible due to the proper
financial and investment planning in India. The Ministry of finance
regulates all the investment and financial planning in India. It is this
ministry that formulates all the rules and regulations that are to be
followed for financial investment in the country.

The National Common Minimum Program was formulated by the

government of India, for planning investments and finances in India.
This program had identified certain sectors which must be given more
emphasis in order to boost investments and economic growth of the
country. The National development council is an agency which had

14
been set up by the Indian government in order to boost financial and
investment planning in India.

Many individuals find investments to be fascinating because they can

participate in the decision making process and see the results of their
choices. Not all investments will be profitable, as investors will not
always make the correct investment decisions over the period of years;
however, one should earn a positive return on a diversified portfolio. In
addition, there is a thrill from the major success, along with the agony
associated with the stock that dramatically rose after one sold or did
not buy. Both the big fish one catches and the fish that get away can
make wonderful stories.

Investing is not a game but a serious subject that can have a major
impact on investor's future well being. Virtually everyone makes
investments. Even if the individual does not select specific assets such
as stock, investments are still made through participation in pension
plan, and employee saving programme or through purchase of life
insurance or a home. Each of this investment has common
characteristics such as potential return and the risk you must bear. The
future is uncertain, and you must determine how much risk you are
willing to bear since higher return is associated with accepting more
risk.

The individual should start by specifying investment goals. Once these

goals are established, the individual should be aware of the mechanics
of investing and the environment in which investment decisions are
made. These include the process by which securities are issued and
subsequently bought and sold, the regulations and tax laws that have
been enacted by various levels of government, and the sources of
information concerning investment that are available to the individual.

15
An understanding if this financial background leads to three important
general financial concepts that apply to investing. Today the field of
investment is even more dynamic than it was only a decade ago. World
event rapidly-events that alter the values of specific assets the
individual has so many assets to choose from, and the amount of
information available to the investors is staggering and continually
growing. Furthermore, inflation has served to increased awareness of
the importance of financial planning and wise investing.

Investment options available in India

With a control free economy, supported by expert banking facilities,
Indian capital market offers a plethora of investment options both for
residents and NRIs. As per the investment plan an investor should
thoughtfully select the best option available in the capital market that
meets their requirements.
While some plans accrue short term profits some are long term
deposits. The first step towards investing in Indian market is to
evaluate individual requirements for cash, competence to undertake
involved risks and the amount of returns that the investor is expecting.
• Investments in Bank Fixed Deposits (FD)

Fixed Deposit or FD accrues 8.5% of yearly profits, depending on

the bank's tenure and guidelines, which makes it's widely sought
after and safe investment alternative. The minimum tenure of FD is
15 days and maximum tenure is 5 years and above. Senior citizens
are entitled for exclusive rate of interest on Fixed Deposits.

• Investments in Insurance policies

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Insurance features among the best investment alternative as it
offers services to indemnify your life, assets and money besides
providing satisfactory and risk free profits. Indian Insurance Market
offers various investment options with reasonably priced premium.
Some of the popular Insurance policies in India are Home Insurance
policies, Life Insurance policies, Health Insurance policies and Car
Insurance policies.
Some top Insurance firm in India under whom you can buy
insurance scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz,
Birla Sunlife, HDFC Standard Life, Reliance Life, Max NewYork Life,
Metlife, Tata AIG, Kotak Mahindra Life, ING Life Insurance, etc.

• Investments in National Saving Certificate (NSC)

National Saving Certificate (NSC) is subsidized and supported by

government of India as is a secure investment technique with a lock
in tenure of 6 years. There is no utmost limit in this investment
option while the highest amount is estimated as Rs 100. The
investor is entitled for the calculated interest of 8% which is
forfeited two times in a year. National Saving Certificate falls under
Section 80C of IT Act and the profit accrued by the investor stands
valid for tax deduction up to Rs 1, 00,000.
• Investments in Public Provident Fund (PPF)

Like NSC, Public Provident Fund (PPF) is also supported by the

Indian government. An investment of minimum Rs 500 and
maximum Rs 70, 000 is required to be deposited in a fiscal year.
The prospective investor can create it PPF account in a GPO or head
post office or in any sub-divisions of the centralized bank.
PPF also falls under Section 80C of IT Act so investors could gain
income tax deduction of up to Rs 1, 00,000. The rate of interest of

17
PPF is evaluated yearly with a lock in tenure of maximum 15 years.
The basic rate of interest in PPF is 8%.
• Investments in Stock Market

Investing in share market yields higher profits. Influenced by

unanticipated turn of market events, stock market to some extent
cannot be considered as the safest investment options. However, to
accrue higher gains, an investor must update himself on the recent
stock market news and events.

• Investments in Mutual Funds

Mutual Fund firms accumulate cash from willing investors and invest
it in share market. Like stock market, mutual fund investment are
also entitled for various market risks but with a fair share of profits.

• Investments in Gold Deposit Scheme

Controlled by SBI, Gold Deposit Scheme was instigated in the year

1999. Investments in this scheme are open for trusts, firms and
HUFs with no specific upper limit. The investor can deposit invest
minimum of 200 gm in exchange for gold bonds holding a tariff free
rate of interest of 3% - 4% on the basis of the period of the bond
varying with a lock in period of 3 to 7 years. Moreover, Gold bonds
are not entitled of capital gains tax and wealth tariff. The sum
insured can be accrued back in cash or gold, as per the investor's
preference.
• Investments in Real Estate

Indian real estate industry has huge prospects in sectors like

commercial, housing, hospitality, retail, manufacturing, healthcare
etc. Calculated realty demand for IT/ITES industry in 2010 is

18
 estimated at 150mn sq.ft. around the chief Indian cities. Termed as
the "money making industry", realty sector of India promises annual
profits of 30% to 100% through real estate investments.

• Investments in Equity

Private Equity is expanding at a fast pace. India acquired US $13.5

billion in 2008 under equity shares and featured among the top 7
nations in the world. In 2010, the total equity investment is
predicted to increase up to USD 20 billion. Indian equities promise
satisfactory returns and have more than 365 equity investments
firms functioning under it.

• Investments in Non Resident Ordinary (NRO) funds

Investing in domestic (NRO) is one of the best investment

alternatives for NRIs who wish to deposit their income accrued
abroad and maintain it in Indian rupees. The deposited amount
along with the interest is completely repatriable. Investment can be
done in Indian financial institutions including the Non Banking
Finance Companies which are listed with RBI. The interest returns
accrued on in this account is entitled under IT Act and is subject to
30% tax reduction at source including the appropriate surcharge
and education cess. The NRI investor can repatriate up to USD 1
million every year, for genuine reasons, by forfeiting valid tariffs.

OVERVIEW OF DEMAT SERVICES

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Dematerialization is the process of converting the physical form of
shares into electronic form and an Issuer/RTA, is an entity giving credit
to demat account. Prior to dematerialization the Indian stock markets
have faced several problems like delay in the transfer of certificates,
forgery of certificates etc. Dematerialization helps to overcome these
problems as well as reduces the transaction time as compared to the
physical segment.

Demat account is just like a bank account where actual money is

replaced by shares. Just as a bank account is required if we want to
save money or make cheque payments, we need to open a demat
account in order to buy or sell shares. A Demat Account holds portfolio
of shares in electronic form and obviates the need to hold shares in
physical form. The account offers a secure and convenient way to keep
track of shares and investments without the hassle of handling
physical documents that get mutilated or lost in transit. The Securities
and Exchange Board of India (SEBI) mandates a demat account for
share trading involving more than 500 shares.

Benefits of Demat Account

• Eliminates risks associated with physical certificates such as bad
delivery, fake securities, delays, forgery, counterfeiting, thefts
and loss due to fire.
• Reduces brokerage charges
• Pledging/Hypothecation of shares is easier
• Enables quick ownership of securities on settlement thereby
resulting in increased liquidity
• Reduction in paperwork involved in transfer of securities
• Demat account obviates the need to pay stamp duty (in case of
physical shares, 0.5 per cent stamp duty is payable).

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 • There is no odd lot problem. Even one share can be bought or
sold.
• Investors can dematerialize only those certificates that are
already registered in their names and are in the list of securities
admitted for dematerialization. These are: shares, scrips, stocks,
bonds, debentures, stock or other marketable securities of a like
nature in or of any incorporated company or other body
corporate, units of mutual funds, rights under collective
investment schemes and venture capital funds, commercial
paper, certificate of deposit, securities debt, money market
instruments and unlisted securities, underlying sharing of
American Depository Receipts and Global Depository Receipts
issued to non-resident holders.

Dematerialization is the process of converting physical holdings into

electronic form with the depository wherein the share certificates are
shredded and corresponding entry of the number of shares is done in
the opened with the depository.
The securities held in dematerialized form are fungible; that is, they do
not bear any notable feature like distinctive number, folio number or
certificate number. Once shares get dematerialized, they lose their
identity in terms of share certificate distinctive numbers and folio
numbers.

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DEPOSITORY SYSTEM AND DEPOSITORY
PARTICIPANTS (DP)
Depository, in very simple terms, means a place where something is
deposited for safekeeping. A depository is an organization which holds
securities of a shareholder in an electronic form and facilitates the
transfer of ownership of securities on the settlement dates. The
depository system revolves around the concept of paperless or scrip
less trading because the shares in the depository are held in the form
of electronic accounts, i.e. in dematerialized form.
A Depository is a provider for holding and transacting securities in
electronic form. A depository functions somewhat similar to a
commercial bank. There are two types’ of depositories operating in our
country. They are as follows:
• NSDL (National Securities Depository Ltd.)
• CDSL (Central Depository Services Ltd.)

National Securities Depository Limited (NSDL)

NSDL is a public limited company incorporated under the Companies
Act, 1956. The first and largest depository in India established in
August 1996 and 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 dematerialized form

22
in the Indian capital market. Four renowned institutions participate in
it:
• Unit Trust of India (UTI),
• Industrial Development Bank of India (IDBI),
• National Stock Exchange of India (NSE),
• State Bank of India (SBI)

UTI is the largest mutual fund of India and IDBI is the largest
development bank, NSE is the largest stock exchange of India and SBI
is the largest commercial bank of India having clearing facility. HDFC
and Citibank also share in this system. NSDL is managed by Board of
directors headed by a managing director. It is governed by its bye-laws
and its business operations are regulated by business rules. NSDL
interfaces with the investors through players or business partners.
Constituents of depository compromises of:
• Clearing corporation,
• Brokers,
• Clearing members,
• Registrar and Transfer Agents (RTA),
• Company or issuer,
• Stock exchange,
• Bank depository participant and
• Investors.
All are electronically linked to the main depository for the settlement of
trades and to perform a daily reconciliation of all accounts held with
NSDL.

Central Depository Service (India) Limited (CDSL)

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Second agency is CDSL - Central Depository Service (India) Limited.
Main functions of this agency are centralized database and accounting.
CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly
with leading banks such as State Bank of India, Bank of India, Bank of
Baroda, HDFC Bank, Standard Chartered Bank, and Union Bank of India
and Centurion Bank. This agency is set up with the object to keep in
mind to accelerate growth of scrip less trading, with major thrust of
individual participation and creating competitive environment,
responsible to the users’ interests and demands to enhance liquidity.
CDSL aims to retain the entire data of the investors in the central
database of CDSL.

It has opted for it with the following objectives:

• Within time information is available to issuers/registrar’s and
share transfer agents.
• Companies can monitor critical holdings, e.g., holding of FIIs and
FIs, investment companies, etc., by using up the parameters
through their front end terminals. There is no other database in
the system to reconcile.
• No additional security or storage cost of data or critical database
residing at the front-end terminals with the issuers/registrars.
Recover only the annual maintenance charges.
• CDSL signed a memorandum of understanding with NSDL for
inter-depository connectivity. Presently, more than half the
business of depositories is handled by this agency. Role of both
these agencies has become very vital after SEBI’s declaration
that there would be no deals in physical form and only dealing to
happen in market through demat accounts.

Main Depository Players are

24
a) Depository (new NSDL and CDSL)
b) Issuer companies/Registrars of transfer agent (RTA)
c) Depository participant (DP)
d) Investors
e) Brokers (clearing members (CM)

An R&T agent acts as a third-party on behalf of a fund house and

has a vital role to play. It has a wide network through which it helps
investors with their transactions, for example, getting the forms of
various fund houses, transacting with fund houses or providing account
statements. An R&T agent also provides technology-based services like
online transaction or account statement facilities. It acts as single-
window system for investors.
An R&T agent also helps investors with information on various
corporate actions like details on new fund offers, dividend distributions
or even maturity dates of investments. This information is also
available with the fund houses, but an R&T Agent is a one-stop shop
for all the information. Investors can get information about his various
investments into different schemes of different fund house at a single
place.

A Depository Participant (DP) is an agent of the depository

and provides depository services to investors. To avail the services of
the depository, the investor has to open a demat account with a DP.
The DP is the link between the investor and depository. While the DP
processes the instructions of the investor, the account and records
thereof is maintained with depository. A DP is thus a "service centre"
for the investor.

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Issuer of Securities Corporate / Companies which issue any kind of
security are known as 'Issuer' in the depository system. Only those
securities, which are admitted into the CDSL system are available for
dematerialization to the holders of such securities or can be allotted in
electronic record form by the issuer. Securities include shares,
debentures, bonds, commercial paper (C.P.), and certificate of deposits
(C.D.), pass through certificates (PTCs), government securities and
mutual fund units. Both listed and unlisted securities can be admitted
into the depository system. Depository functions as the central
accounting and record keeping office in respect of the securities
admitted by issuer companies.

It is mandatory for all listed companies to have their securities

admitted for dematerialisation with both the depositories viz CDSL &
NSDL. It is however desirable that all securities are admitted on both
the depositories so that investors having account with any of the
depositories can acquire that security.

Before the admission of any security into the depository system, it is

necessary for the issuer to establish an electronic connectivity with
depository either directly or through a registrar and transfer agent
(RTA), who has already established connectivity with CDSL.
Clearing Members (CMs) are the members of the Clearing
Houses/Clearing Corporations who facilitate settlement of trades done
on stock exchanges. They could be a broker or custodian registered
with SEBI as such is an important intermediary in the capital market
and an essential link in the depository system.

The various categories of CMs are:

• Trading members

26
 • Custodians
• Subsidiary companies formed by regional stock exchanges to
facilitate their members to trade on BSE/NSE.
While beneficial owners may have their demat accounts on any of
both the depositories it is mandatory on the part of CM to have a
demat CM account with both the depositories.

CM's main activity is to facilitate pay-in/pay-out of securities to/from

Stock Exchanges/Clearing House/Clearing Corporations either on their
own behalf or on behalf of their clients. The securities which are due
for delivery can be delivered directly from client's account (depending
on whether exchange provides this facility) or through CMs to the
Stock Exchanges/Clearing House/Clearing Corporations Account.
Similarly, pay-out of securities can be delivered directly to client's
account on the basis of information given to Clearing House by the
CMs or to CMs A/c.

Compulsory settlement of trades in demat, introduction of 'T+2' rolling

settlement, higher volume of securities traded daily requires
monitoring of CMs demat account on continuous basis. In order to
facilitate smooth functioning for CMs CDSL has introduced a special
Depository Participant Type i.e. CM DP. Members of the Stock
Exchange, Mumbai and Calcutta Stock Exchange who have
participated in the equity of CDSL can register as CM DP at
concessional rate of deposit.
A CDSL CM DP can derive the following benefits:

• He can continuously monitor the deliveries received for pay-in

or from pay-out, their movement and subsequent reconciliation
of trade settlements very easily.
• Can subsequently reduce cost of his operations for himself as

27
 well as for his clients.
• By offering one stop services to clients both in respect of
trading and depository services, not only he increases his
business but can effectively monitor client a/c position and
insulate from failure in settlement.

Custodians provide custodial services which are quite different from

depositories. A custodian is an intermediary who keeps the scrips of
the clients in custody or is the keeper of the clients. A custodian is not
only a safe keeper of share certificates and a trustee of the same but
also provides ancillary services such as physical transfers of share
certificates, collecting dividends and interest warrants, and conforming
to transfer regulations. Besides these, it updates clients on their
investment status. To claim benefits on behalf of its clients, a
custodian keeps a track of book closures, record dates, and bonus and
rights shares. For rendering these services, custodians charge a fee of
one percent of the total volume transactions.

Even though depositories have been set up, there is a need for
custodians as they act as complements to depositories. The volume of
transactions by fund managers is so large that custodial services are
imminent. With depositories in existence, their volume of paper work
has not only reduced but most of them also act as depository
participants. Custodians provide the infrastructure facilities which
provide the post-issue and post-trade and settlement work.

Custodians are clearing members but not trading members. They are
involved in the process of clearing. They settle trades on behalf of
other trading members. A trading member may assign a particular
trade to a custodian for settlement. If the custodian confirms to settle
the trade, then the clearing corporation assigns that particular

28
obligation to the custodian who is then required to settle it on the
settlement day.

Beneficial Owner is a person in whose name a demat account is

opened with DP for the purpose of holding securities in the electronic
form and whose name is recorded with DP.

ISIN (International Securities Identification Number) is

the unique identification number given to each security of an issuer at
the time of admitting such security in the depository. Different
securities issued by the same issuer will have different ISINs.

Services provided by a DP
• Dematerialization
• Rematerialization
• Maintaining records of holdings in electronic form
• Settlement of trades i.e. on-market and inter-depository
• Settlement of off-market trades i.e. transactions between BOs
entered outside the stock exchange and therefore occurs
between BO and BO or BO and CM.
• Facilitating electronic credit in respect of securities allotted by
issuers under IPO or otherwise.
• Receiving on behalf of demat account holders non-cash
corporate benefits which can bonus shares or rights issue.
• Pledging of dematerialized securities & facilitating loans against
shares.
• Un-pledging of shares
• Freezing of the demat account for debits, credits, or both.

29
The Depository system has the following benefits to
different groups:

Benefit to the Country

The depository system helps the capital market to be more liquid,
attracting more foreign investors and is in compliance with
international standards, as it creates efficient and risk free trading
environment. It minimizes the settlement risks and frauds in carrying
out transactions in capital markets and thus can restore faith of
investors in capital markets. It helps to reduce delay in trading
practices creating investor friendly atmosphere in the capital markets.

Benefit to the Company

The depository system helps in reducing the cost of new issues due to
less printing and distribution cost. It increases the efficiency of the
registrars and transfer agents and the Secretarial Department of the
company. It provides better facilities for communication and timely
services with shareholders, investor etc.

Benefit to the Investor

The depository system reduces risks involved in holding physical
certificated, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer
settlements and reduces delay in registration of shares. It ensures
faster communication to investors. It helps avoid bad delivery problem
due to signature differences, etc. It ensures faster payment on sale of
shares. No stamp duty is paid on transfer of shares. It provides more
acceptability and liquidity of securities.

Benefit to Brokers

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The depository system reduces risk of delayed settlement. It ensures
greater profit due to increase in volume of trading. It eliminates
chances of forgery – bad delivery. It increases overall of trading and
profitability. It increases confidence in investors.

OPENING OF AN ACCOUNT
Objectives:
• By opening a demat account with a DP of CDSL, investors can
carry out the following activities:
• Convert the physical securities held by them in to electronic form
by way of dematerialization.
• Deliver (sell)/receive (buy) securities in demat account for trades
done on stock exchanges or for any other reason.
• Receive securities in electronic form in case of Initial Public
Allotment or Corporate Action, such as: Rights Issues, Bonus
Issues, Stock-spilt, Mergers, Acquisitions, and Amalgamations.
• Obtain statement of securities held in their demat account.
• Pledge the securities held in the demat account.
• Rematerialize securities held in the demat form.

Documents required to be submitted by the Investor

while opening an account:
For Individuals:

RESIDENTS (INDIANS)
1. Proof of Identity
2. Passport
3. Voter’s Id Card
4. Driving License
5. PAN card with photograph

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 6. Identity Card/document with applicant’s photo, issued by-
• Central/State Government and its Departments,
• Statutory/Regulatory Authorities,
• Public Sector Undertakings,
• Scheduled Commercial Banks,
• Public Financial Institutions,
• College affiliated to universities,
• Professional Bodies such as ICAI, ICWAI, ICSI, Bar
Council, etc, to their Members,
• Credit Cards/Debit Cards with photographs issued by
banks.
7. Proof Of Address: (Any one)
• Correspondence Address:
• Electricity Bill (not more than 2 months old)
• Leave & License Agreement/ Purchase Agreement/Office Address
Certificate from Employer

Permanent Address:
• Ration card
• Passport
• Voter ID card
• Driving License
• Bank Passbook Statement
• Cancelled Cheque
• Latest Union Bank Statement

Imp: Permanent Address information about the 2nd and 3rd holders is
to be obtained (if any)

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 • A POA holder cannot open a demat A\C on behalf of the BO and
BO can give POA subsequently.
• Sections not relevant to a particular type of BO should be
marked NOT APPLICABLE (N.A)

NON-RESIDENTS
1. PAN card
2. Passport Size photo
3. Proof of Identity: Passport/Driving License
4. Foreign Address
5. Proof of local address, if any
6. NRI a/c cheques
7. NRI a/c Statement-latest
8. FEMA Declaration
9. POA, if any
10. Declaration to inform the DP regarding change of address
11. Change of status from NRI to Resident and vice-versa
It is the responsibility of the NRI to inform the change of status to the
DP with whom he/she has opened the demat account. Subsequently, a
new demat account in the resident status will have to be opened,
securities should be transferred from the NRI demat account to
individual resident account and then the NRI demat account should be
closed.

COMPANY
1. Company PAN card
2. Authorized Signatories Pan Card
3. Director’s Photo (passport size)
4. Certified copy of Articles of Association

33
 5. Certified copy of Memorandum of Association
6. List of authorized signatories with signatories attested by
Company Secretary or any other Director on company’s letter
head
7. Resolution for Demat a/c and operation mandate on letter head
signed by CS/MD
8. Current a/c cheque book
9. Latest Bank Statement

HINDU UNDIVIDED FAMILY (HUF)

1. PAN card of HUF
2. PAN card of Karta
3. Photo of Karta
4. Passbook of HUF
5. Declaration by Karta giving details of family members of the
HUF- with their names, DOB, sex &relationship with the Karta
and signatures of the co-partners.
6. Karta should sign the AOF and the declaration under the stamp
of HUF
7. HUF cannot be opened with Joint Holders
No nomination is allowed

Account administration and maintenance

The main objective of account administration & maintenance is to
allow DPs to make additions, modifications/deletions to the details
submitted by the BO at the time of account opening. Additions,
deletions and modifications should be done only against written
instructions from the BO.

34
DEMATERIALZATION OF SHARES
Dematerialization is the process, which enables BOs to convert their
existing holdings of securities in physical form to electronic form and
hold the same in their accounts with DP.

According to the Depositories Act, 1996, an investor has the option to

hold securities either in physical or electronic form. However, SEBI has
notified that settlement of trades in listed securities should take place
only in the demat mode. Although, trades up to 500 shares can be
settled in physical form, physical settlement is virtually not taking
place for the apprehension of bad delivery on account of mismatch of
signatures, forgery of signatures, fake certificates, etc.

Procedure for Dematerialization:

1. Open a demat account with a DP.
2. Fill in a Demat Request Form (DRF) in triplicate and submit the
same with the physical certificate(s) to the DP for
dematerialization.
3. The DP shall verify all the particulars filled in the DRF by the BO.
The following should be checked before accepting the DRF:

35
4. Whether the securities intended for dematerialization have been
admitted in CDSL. If the securities intended for dematerialization
are not admitted in CDSL, the DP shall return the same to BO.
5. Whether the certificate details (no. of shares, return, distributive
numbers, ISIN, folio no, quantity) mentioned on the DRF and on
the certificates enclosed, tally.
6. Whether the name(s) of the account holder(s) and the name(s)
on the shares certificates appearing on the certificates tally
exactly with those recorded under the BO account maintained
with CDSL. (In case the names are matching, but order of the
names is not the same, then the transposition-cum-demat (TRF)
form has to be filled and should be attached with the
documents).
7. Whether all the holders have signed the DRF and the signature of
the account holders’ tally with those recorded by the DP.
8. If there is any discrepancy in any of the details, the DP shall get
it rectified and duly authenticated by all the holders.
9. The error free DRF shall be taken up for further processing by the
DP.
10. If the DRF is complete in all respects, then the DP should
give an acknowledgement to the BO. A separate DRF has to be
used for each ISIN
11. The DP shall capture the details from the DRF &
Certificates in the CDSL system and shall generate the Demat
Request Number (DRN).
12. A demat confirmation letter is sent as an
acknowledgement to the BO. The demat confirmation letter
signed by the DP officials along with the original share
certificates & DRF is sent to the RTA.

36
 13. DP defaces and sends the certificates to the
Issuer/Registrar who credits an equivalent number of securities
in the demat account, maintained by BO.
14. The DP must dispatch the physical documents to the
issuer/RTA within 7 day from the date of receiving physical
documents from the BO.
15. After receiving the physical documents, Issuer/RTA shall
compare these documents with the electronic data. If the details
do not tally between the electronic and physical request, the
Issuer/RTA shall inform the DP. The DRF and the certificates shall
be sent back to the DP under the Rejection Memo, specifying the
reason for rejection.
16. The Issuer/RTA should complete processing of the demat
request within 15days of receiving the physical documents. The
Bo’s account is credited for the number of securities confirmed
by the Issuer/RTA.
17. The reasons under which an Issuer/RTA can reject a
dematerialization request shall be provided in the CDSL system
from time to time.
18. The DP shall arrange to return the certificates along with
the rejection letter sent by the Issuer/RTA to the concerned BO
within 7 days from receipt of rejected certificates.
19. If the demat request is not processed by the Issuer/RTA within 21
days after it has been set up on the system, then the DP should
follow up with the Issuer/RTA.
20. If the DP does not get the documents within 30 days from
the date of rejection by the Issuer/RTA, then the DP should follow
up with the Issuer/RTA.

Transposition-cum-Dematerialization (TRF)

37
Transposition is “change in order of names”. For example, if the
certificates are in the names of A & B, the same can be lodged for
dematerialization under account held in the name of B & A, by filling
up the DRF and the Transposition Request Form (TPRF). This will
enable the issuer/RTA to transpose the securities in the order of the
names in which the account is opened and then accept the
dematerialization request.

Transmission-cum- Dematerialization
In case of the death of one or more joint holders, the surviving
holder(s) can get the name(s) of the deceased deleted from the
certificate(s) and get them dematerialized by submission of the
following documents:

1. Dematerialization Request Form

2. Notarized copy of the death certificate of the deceased holder(s)
3. Transmission request form (in case of death of one/more of joint
holders)
4. In case of death of the sole holder shares are transferred in the
name of the nominee.

SETTLEMENTS
To enable investors having demat accounts with depository to settle
trades done by them on stock exchanges or transfer securities to any
other demat account within CDSL or with the other depository.

38
 In case of sale of securities in demat mode, on receipt of intimation of
execution of trade from the broker, the seller/BO should immediately
issue the Delivery Instruction Slip (DIS) to their DP with whom the
demat account is held, for delivery of securities either directly to the
Clearing Corporation (CC)/Clearing House (CH) or to the Clearing
Member (CM) settlement account, as advised by their broker.
The customer has to fill up DIS by giving settlement no, settlement
type, execution date, name of securities, no of securities.

SETTLEMENTS OF SECURITIES

CLEARING
HOUSE/CORPORATION

CLEARING 39
CLEARING
MEMBER/DEPOSITORY PAY-OUT of
CUSTOMER/SELLER
PAY-IN of CUSTOMER/BUYER
MEMBER/DEPOSITORY
PARTICIPANT SECURITIES
SECURITIES PARTICIPANT
A purchaser of securities can give one-time standing instruction to
his/her DP for receiving securities in his/ her account. This standing
instruction can be given at the time of opening the account or later.
Alternatively, a BO may choose to issue a separate receipt instruction
to his/her DP every time he/she makes a purchase.

On Market and Off Market transaction

40
 • Any transaction for sale and purchase of securities executed
through a broker/CM on the stock exchange that is to be settled
through the Clearing Corporation/Clearing House is an On Market
transaction.
• Any transfer of securities which are settled directly between two
BOs having an account with the same depository with or without
the involvement of the broker/CM and the CC/CH are an Off
Market transaction.

Inter-Depository transfer
Any transfer of securities between one DP to other DP is an Inter
Depository transfer.

• It can be done only for securities that are available for

dematerialisation on both the depositories.
• The account in depository can be either a clearing account or a
beneficiary account.
• For debiting the clearing account or the beneficial account, the
form for "Inter-depository delivery instruction" is required to be
submitted by the clearing member/beneficial owner to its DP.
• For crediting the clearing account or the beneficial account, the
standing instruction given for automatically crediting the account
is applicable. In case the standing instructions are not given,
then the form for "Inter-Depository Receipt Instruction" is
required to be submitted by the clearing member/beneficial
owner to its DP.
• As both the depositories are connected to each another, the
batches to effect inter - depository transfers are presently
exchanged on each working day.
• Online transfer of inter depository instructions has commenced
w.e.f December 14, 2002. In the online inter depository transfer

41
 (OLIDT) module, Inter Depository Transfer instructions for the
day will be exchanged online between the two depositories.
Thus, the instructions executed by DPs may get settled at
shorter intervals.
• The deadline time for DPs to verify & release Inter Depository
Transfer delivery/ receipt instructions is 6 p.m. on weekdays and
2.30 p.m. on Saturdays.
• The Issuer/Registrar & Transfer Agent is informed about the
transfer by both the depositories and it amends its records
accordingly.
• Government securities cannot be transferred from one
depository to another using this facility.

CDSL’S NSDL’S
Depository Depository
Participant Participant

SELLER BUYER

42
Indication of the Settlement Number at CDSL
Settlement number in CDSL has 13 digits, the 1st 2 digits are the
exchange-id, the next 2 digits are clearing house-id, the next 2 digits
are settlement type, the next 4 digits represent the year and the
remaining 3 digits represent the settlement number of the exchange
on which the transaction has been executed.
Settlement no. for NSE is a 7 digit no which starts from 2010 and same
for BSE which starts from 1011.

Pay-in of Securities
CM can perform pay-in of securities using either of the options given
below:
1. BO level pay-in: option enables the BO to deliver the securities
directly to the CH/CC of the exchanges.
2. CM level pay-in: for using this option, securities have to be
delivered by the BO to the respective CM through off-market
transfers. The CM, in turn, would deliver securities received from
the delivering BO to the CH/CC.
3. CM Can deliver securities to the CC/ CH using the following
modes, which are explained below:
• Normal pay-in
• Auto pay-in
• Early pay-in

Normal pay-in
• DP shall receive a duly filled in DIS for execution of on-market
transactions from the BO/CM.

43
 • DP shall verify the same and set-up an on-market transaction,
i.e. set-up a BO obligation confirmation in the CDSL system.
• Seller BO/CM can give on-market instructions to the DP on the
“T” day itself even if no balance is available in the account, as
the available from the seller BO/CM account would be picked up
only at the pay-in deadline time.
• In case of BSE settlements, at the pay-in time, CDSL shall first
earmark the available balances in the accounts for which “on-
market” instructions have been entered.
Part earmarking in case of insufficient balances is permitted.
E.g. if a BO account has 500 shares and an on-market instruction is
entered for 600 shares, available balance of 500 shares will be
earmarked, at the pay-in time.

In case of settlement of trades, done on exchanges other than BSE, the

securities are moved from BO accounts for which on-market settlement
instructions have been given, to their respective CM accounts at the
pay-in deadline time. In case of insufficient balances, available
balances are moved. After this transfer, all available balances in the
CM accounts would be blocked and thereafter, debit takes place.
DP can advise BO/CM to maintain adequate balances in the accounts
from where the on-market instructions are entered before the
scheduled pay-in timings, as specified by the CH/CC of the respective
stock exchanges.
The BO confirmations can be modified or deleted by the DP till the pay-
in time on receipt of instructions from the BO/CM.

Early pay-in
• DP shall receive a duly filled DIS for execution of early pay-in
instructions from the BO/CM.

44
 • DP shall verify the DIS and set up an early pay-in instruction in
the CDSL system.
• DP shall ensure that the early pay-in instruction is given from the
CM clearing account or CM principal account or BO account only.
• On set up of early pay-in instruction, the securities are
immediately transferred from the concerned BO/CM account to
the designated early pay-in account maintained with the CC/CH
of exchanges.
• In case balances in the delivering account are in sufficient at the
time of set-up of instruction, the transaction shall fail. DP will
have to set up a fresh early pay-in instruction after the balance is
available in the account.

Pay out of securities

• On payout, securities are delivered by the CC/CH of the
exchanges to the designated CM accounts.
• Alternately, pay-out securities could be directly transferred to the
buying BO account provided the CM gives the BO ID of their
buying client through their respective trading terminals to the
CC/CH.
• DP shall receive the duly filled-in DIS for execution of off-market
transactions from the CM for transfer of securities from their
designated CM accounts (where the payout of securities is
received) to the buying BO account.
• DP shall verify the DIS and set up off-market transactions in the
CDSL system.
• As per SEBI directive, CM must deliver the payout securities to
their buying BO accounts within 1 working day from the day of
payout or such time as may be decided by SEBI from time to
time.

45
 • In case the securities are not transferred out within the specified
time period, securities shall be automatically transferred to the
CISA account. The balance in CISA account will attract a penalty
as stipulated by SEBI from time to time.
• Securities in the CISA are not permitted for use for pay-in
purposes directly. They have to be transferred to a CDSL BO
account/ CM principal account/CM clearing member account/BO
a/c with the other depository.

TRANSMISSION
The objective of transmission functionality is to allow the transfer of
title of securities in case of death of an account holder and inheritance
by a successor, as stated by the deceased BO.
The securities are transferred into the account of either the surviving
joint holder(s) or the claimant of the securities.

The process of transmission depends upon whether the Demat account

is held in single or joint names, and the nomination has been made for
the demat account.

A. Demat Account Held in Single name

i. Where nomination has been made:
On death of the sole holder of the Demat Account, if a nomination
has been made by the deceased holder, the nominee can submit

46
 the Transmission Form to request transfer of all securities from the
Demat Account of the deceased holder to the Demat Account of the
nominee.
A Demat Account has only one nominee, as joint nominees are not
allowed. If the nominee already has a Demat Account, securities can
be transferred to the same. Otherwise, the nominee needs to open
a new Account.
A nominee is required to submit the following documents:
a. A completed Transmission Form
b. A copy of the Death Certificate of the deceased holder duly
notarized
Closure request &
c. Delivery Instruction Slip (DIS) of the deceased account for
transfer of shares.

ii. Where nomination has not been made:

On death of the sole holder of the Demat Account, if a nomination

has not been made by the deceased holder, the legal heirs or the
legal representatives of the deceased can submit the Transmission
Form to request transfer of all securities from the Demat Account of
the deceased holder to their Demat Account. Legal heirs or the legal
representatives can be one or many as determined by the court.
Securities can be transferred to an existing Demat Account.
Otherwise, they need to open a new Account. Legal heirs or the
legal representatives are required to submit the following
documents:
a) A completed Transmission Form
b) A copy of the Death Certificate of the deceased holder duly
notarized
c) A copy of the probate or letter of administration duly
notarized, where the deceased has left a Will.

47
 d) A copy of Succession Certificate duly notarized or an order of
a court of competent jurisdiction, where the deceased has not
left Will.
e) Closure request & DIS of the deceased’s account for transfer
of shares.

B. Demat Account held in joint names:

i. Where there are surviving holders:
On death of any holder of a Demat Account held in joint names, the
surviving holder or holders become entitled to receive securities.
• Where there is a single surviving holder, the Transmission
Form can be submitted by the surviving holder to request
transfer of all securities from the Demat Account jointly held
with the deceased holder to the Demat Account of the single
surviving holder.
• Where there are joint surviving holders, the Transmission
Form can be submitted by them jointly for transfer of
securities to their Demat Account. The Demat Account of the
joint surviving holders should be in the same order as that of
the Demat Account held jointly with the deceased holder.
• For example, where Demat Account was held in the names of
X, Y and Z being the first, second and third holder. If Y
deceased, then securities can be transmitted to X and Z only
if they hold a Demat Account where X is the first holder and Z
is the second holder. Securities can be transferred to an
existing Demat Account.
Otherwise, a new Account needs to be opened.

Surviving holders are required to submit the following documents:

a) A completed Transmission Form

48
 b) A copy of the Death Certificate of the deceased holder duly
notarized
c) Closure request / DIS of the deceased account for transfer of
shares.

ii. Where nomination has been made:

On death of all joint holders of a Demat Account, if a nomination has
been made by the deceased joint holders, the nominee can submit
the Transmission Form to request transfer of all securities to the
Demat Account of the nominee. If the nominee already has a Demat
Account, securities can be transferred to the same. Otherwise, the
nominee needs to open a new Account. A nominee is required to
submit the following documents:
a) A completed Transmission Form
b) A copy of the Death Certificate of the deceased holder duly
notarized.
c) Closure request / DIS of the deceased account for transfer of
shares.

iii. Where nomination has not been made:

Legal heirs or the legal representatives are required to submit the
following documents:
a) A completed Transmission Form
b) A copy of the Death Certificate of the deceased holder duly
notarized
c) A copy of the Probate or Letter of Administration duly
notarized, where the deceased has left a Will.
d) A copy of Succession Certificate duly notarized or an order
of a court of competent jurisdiction, where the deceased
has not left Will.

49
 e) Closure request / DIS of the deceased account for transfer
of shares.

PLEDGING AND UNPLEDGING

The pledge function provided in CDSL system helps in meeting the

following objectives:
• Allows a BO (pledgor) to use his dematerialized securities as
collateral for a pledge transaction with another BO (pledgee).
• Allows release (unpledging) of the pledged securities when the
pledge obligation, as agreed between the pledgor and the
pledgee, is fulfilled.
• Allows pledgee to invoke (confiscate) the pledged securities, if
the pledgor does not fulfill the pledge obligation, as agreed
between the pledgor and the pledge.

Pre-requisites for carrying out pledge, unpledged and invocation

activities through CDSL system
• The pledgor and the pledgee must have accounts in CDSL to
create a pledge. However, the pledgor and the pledgee may
hold accounts through different DPs.
• The accounts should be active
• The pledgor and the pledgee may enter into the pledge
agreement
• Pledgor DP and pledgee DP each shall create at least two users
to implement the maker-checker feature. Make shall initiate the
pledge/unpledged/invocation transaction. Checker shall verify
the pledge/unpledged/invocation transaction initiated by the
maker. The same user cannot do initiation and verification of
pledge/unpledged/invocation transaction even though access
rights are given to the user.

50
Procedure for pledging securities
• The pledgor has to fill up the Pledge Request Form (PRF) in
duplicate available with his DP.
• On receipt of the PRF, the pledgor’s DP shall verify that the
securities can be pledged. The DP then sets up a pledge in the
depository system and a unique Pledge Sequence No. (PSN) will
be generated. The PSN number should be recorded on the PRF.
Authorized official of the DP should sign the PRF and stamp it. A
copy of the PRF is then given to the pledgor.
• One copy of PRF (with the PSN) should be sent to the pledgee by
the Pledgor. The Pledgee will then countersign the PRF for
acceptance/ rejection of the pledge request and submit the PRF
to his DP.
• The pledgee’s DP has the facility to access the request on line.
Based on copy of PRF the pledgee’s DP either accepts or rejects
the pledge request.
• If free securities are pledged, then securities are moved from
“free balance” to “pledge balance” and are blocked till the same
are either unpledged or invoked/confiscated.
• If lock-in securities are pledged, then securities are moved from
“lock-in balance” to “pledge balance” and are blocked till the
same are unpledged.

If one wishes to take a loan from a Bank against the security of

physical share, the certificate must be physically lodged with the Bank.

51
This action is called a Pledge. In electronic holding one can pledge the
shares by making a request with your DP in favor of any Bank.

Unpledging is the reverse process which takes places when the shares
are unpledged. It can either be initiated by the pledgee or the pledgor.

Invocation (Confiscation)
• The pledgee can invoke (confiscate) the pledged securities
through his DP by filling the Invocation Request Form (IRF) and
submits it to the DP.
• Invocation can be for full quantity or for part quantity that is
pledged.
• A user with maker access rights shall set up (initiate) the
confiscate request in the system by entering relevant
information. A user with checker rights shall verify the confiscate
request.
• On verifying the confiscate request by the pledgee, if the pledge
is for free balance, then the securities, which were blocked in
pledgor BO’s account for pledge, are transferred to the pledgee
BO’s account.
• If the pledge is for lock-in securities, then confiscate request
cannot be setup till the lock-in period is over.
• After the transaction is verified, CDSL system generates a letter
giving details of the confiscation.

Pledging of shares in order to avail the loan is neither a new concept

for promoters nor for investors. In brief, when the promoters want to

52
raise the funds for the personal or the company’s needs, they pledge
their shares with the financial or non-financial institution.

For many years now, lending against shares was a common practice
amongst promoters. As long as share prices were rising, there was
little danger. Lenders such as nonbanking finance companies (NBFCs)
and banks were comfortable doling out such loans. These loans
typically have tenure of between one and three years, and carry a
margin of 2-3 times, which means that the value of the promoters’
shares pledged is 2-3 times the amount of the loan. For the NBFCs and
banks, it’s a low-risk business as they can charge a mark-up of 3-4 per
cent over the prime lending rate. Hence the lender has to ensure that
his market risk is covered as the shares being pledged should be liquid
enough to ensure recovery of dues from the borrower.

Before the Satyam debacle, there were no disclosure norms made by

the SEBI (Securities and Exchange Board of India) for the promoters to
disclose their pledged shares. In developed countries like US, not just
promoters but directors too are required to disclose their pledged
shares. In UK this is covered under Insider Trading Regulation. In
developed markets, the pledging of shares by promoters, or insiders,
as collateral for a loan is equivalent to a sale of the stock to the
pledgee.

Bankers or financiers give loan taking the shares as collateral. Hence,

whenever the price of the share come down to a certain level in the
secondary market, the promoter is required to either make some
payment or pledge more shares.
If the promoter cannot do either, the lender keeps the right to sell
pledged shares in the market. Apart from this, promoters always have
the risk of a hostile takeover.

53
Hence the certain disclosures were necessary regarding the pledging
of shares by promoters as pledging of shares could result in a change
of ownership if the promoter is unable to redeem those shares by
repaying the loan. This is critical, as many investors consider promoter
holding and management structure of the company as a critical aspect
of their investment decision.

Promoters of many listed companies have raised finances by pledging

their shareholdings. When they pledge their shares, they pledge their
voting rights as well and hence it becomes a risk factor. And
deleveraging of such positions has the potential of deteriorating the
company's valuation. As in the recent times, the Stock prices have
been on a downtrend for some time due to adverse market conditions.
So when such situation happens, lenders ask for either additional
shares, or margin payment to cover the shortfall.

In the event of promoters being unable to meet these conditions,

lenders dump the shares in the market to recover their dues. As the
sale of these pledged shares usually happens in huge quantities, it has
a cascading impact on the stock price. However, till now the
information regarding the pledging of the shares by the promoters was
not made public, as there were no rules mandating them to do so. The
pledging of shares by promoters was not considered a major issue in
the bull market, as nobody thought that the market could slide so
rapidly. The non-availability of cheaper money in recent months has
made the buying back of the pledged shares by promoters difficult.

While promoters try to raise the money, even though for the
development of the business of the Company, they should not get into
the habit of pledging all shares at one go. As when they pledge the
shares, the market is high but if the opposite happens, then there
could be great trouble which can be set off by either pledging more

54
shares or through other means. As such a practice could work well in a
rising market but in a falling market that often leads to dilution of
promoter holding in the company whose shares are pledged. In a
falling market, if the value of the collateral falls below the quantum of
the loan taken by promoters, lenders often sell those shares to recover
their loans, partly or fully.

Reasons for opting for pledging of shares by the

promoters

• It can be for either personal needs or business expansion.

Sometimes, promoters collateralise their shares for converting
warrants into shares.
• When the promoter has exhausted all other sources to raise
funds, he pledges his holding in the company as a last resort,
which is a clear indication that it is not an ideal situation. In
developed markets, the pledging of shares by promoters, or
insiders, as collateral for a loan is equivalent to a sale of the
stock to the pledge.

Pledging of shares by general shareholders and

promoters

• When a shareholder/investor needs loan from bank or financial

institution, he can pledge his shares to them.
• Banks and financial institutions give loan against shares. To avail
such loans any shareholder can pledge shares to the lender. But
unlike promoters, small shareholders are not required to
disclose. For taking a loan against shares, the investors have to
collateralise the physical shares to the bank.

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Pledging of shares or Acquisition

• It would be really interesting to note that pledging of the shares

of listed company and/or exercise of such pledge and acquisition
of such shares would amount to acquisition requiring an open
offer under the SEBI Takeover Regulations or not. The issue thus
has to be examined in two stages - First is, whether at the time
of pledging the shares, there is an acquisition. Second stage is
when the pledge is exercised and the shares transferred to the
name of the pledgee.

• It may be tempted to believe that the answer is quite clear cut.

The first stage of pledge, unless it amounts to unconditional and
full transfer of shares, is not an acquisition of shares attracting
the Takeover Regulations. The second stage would however
clearly amount to an acquisition and thus attract the
Regulations. In support of this, one may point out that
Regulation 3(1)(f) is also explicit in exempting only acquisition
by banks and public financial institutions as pledgee. Arguably,
thus, all other acquisitions as pledges would not be exempted.

Other Acts/Guidelines for pledging of shares

Banking Regulation Act

Under Section 19(2) of the Banking Regulation Act 1949, it is provided

that no banking company shall hold shares in any company whether as
pledgee, mortgagee or absolute owner of an amount exceeding 30% of
the paid-up capital of that company or 30% of its own paid-up capital
and reserves, whichever is less. The shares of any company are taken
as security by the banks and financial institutions in following cases:

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1. Overdraft facility against listed and approved shares of any
public limited company.

2. Pledge of shares of listed companies as an additional or

collateral security for a loan or overdraft given against some
other prime security.

Pledge of promoter’s shares in cases of project finance where the loans

and advances are secured by a charge over the entire block of assets
of the borrower and the pledge of shares is taken by the bank to
ensure that the promoter continues to be involved in the project and
does not transfer his interest without the consent or knowledge of the
bank. Such a pledge also enables the lender to sell or dispose of the
securities along with management of the company by exercising the
rights as a pledgee although in practice such rights are rarely
exercised.

Obtaining of loan by NRIs by pledging shares

NRIs can pledge the shares to obtain loan, only after the specific
approval of RBI is received. The application has to be made through
the same bank in which the NRE/NRO account was opened.

Amendment by SEBI

SEBI has come out with new disclosure, in a bid to protect the interest
of existing and potential shareholders, as pledging of shares could
result in a change of ownership if the promoter is unable to redeem
those shares by repaying the loan.

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REMATERIALISATION
Rematerialisation allows to convert the electronic balances held by the
BO in it’s demat account into physical form. It is the process by which
the securities held in electronic form are converted into paper
securities by the Beneficial Owners.

Procedure
A BO, who wishes to have his dematerialized holdings of securities in
the CDSL rematerialized, will fill in the Rematerialisation Request Form
(RRF), in duplicate, and submit the same to his DP. All the joint holders,
if applicable, should sign the RRF. The POA holder can sign RRF also if
any POA has been given. The POA must be registered with the
issuer/RTA.
1. Sufficient free/lock-in balance should be present in the demat
account.
2. Separate remat request should be setup for free shares and lock-
in shares.
3. The ISIN should not be Inactive/ frozen for debits.
4. The BO account should not be closed.

In case of a remat request along with request for change of address, it

should be ensured that it is from the BO only and not from any other
person.
DP should verify the following details, as mentioned in the RRF, with
the BO master maintained with CDSL. The details to be verified are as
follows:
• Name(s) of the Beneficial Owner(s)

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 • BO ID
• Address
• ISIN
• Name of the Issuer
• Quantity of securities requested for rematerialisation
• Whether the quantity to be rematerialized is a free balance and
there is no pledge or any other encumbrances attached to it.
• Signature(s) of the Beneficial Owner(s) or POA holder, as
recorded with the DP.

Repurchase
In case the BO intends to repurchase the units that are available in
demat form in his account, then a repurchase request form has to be
submitted along with the rematerialisation request form. The DP
should ensure that the bank details are entered in the CDSL system. If
bank details are not entered, then the purchaser request may get
rejected.

The details of the RRF shall be captured in the CDSL system and the
Rematerialisation Request Number (RRN) is generated on the same
day or latest by the next working day from the date of receipt of RRF.
When the request is set up, the system generates a RRN for each such
request.

• RRF, which has been set up, can be modified any time before the
same is accessed by the Issuer/RTA (either on-line access or
downloads by Issuer/RTA). Modification of RRN or deletion of RRN
which has already been set up by the DP, but not yet accessed
by the Issuer/RTA, should be authorized by the BO, if the change

59
 of RRN is as per the RRF submitted by the BO or the deletion of
RRN is to rectify the mistake committed by the DP.
• DPs should exercise caution when selecting the “lot option” i.e.
market lot or jumbo lot, in the CDSL system, as the charges
applicable would vary depending on lot opted for.
• The RRN is noted on the RRF and the same is sent to the
Issuer/RTA. This should be done within two days of receipt of the
RRF. The DP will retain a copy of the RRF for his records and send
the original RRF to the Issuer/RTA. The DP must authorize the
RRF with his seal and signature.
• The DP should follow up with the Issuer/RTA if the remat request
is not honored within the prescribed time limit i.e. within 30 days
and keep on record the follow-up done.
• The Issuer/RTA will electronically intimate the rejection of RRF
and send the rejected RRF along with all the documents for
necessary correction/rectification.
• Where the Issuer/RTA has rejected the RRF, the DP will carry out
the necessary rectification in consultation with the BO, and set
up a fresh remat request.

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FREEZE AND UNFREEZE
Freezing is an action performed on a BO account as a whole or
individual ISIN balances held within a BO account to safeguard the
balances present in the BO account. Freezing represents the
temporary blocking of entire balance or part of the balance in a BO
account or the full BO account as such.
Freeze module enables:
• BOs having accounts with CDSL to freeze their accounts or
balance for a specific ISIN.
• DP to freeze an account based on instructions received from a
statutory authority/regulatory authority.
• CDSL to freeze an account based on instructions received from a
statutory authority/ regulatory authority.
• Release (unfreeze) account/ISIN balances that have been frozen.

Freeze initiated by BO
• The BO shall fill up the FREEZE REQUEST FORM and submit the
same to his DP.
• An authorized official of the DP shall verify that the form is duly
filled and signature (s) of the holder(s) is matching.

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 • The freeze request should be entered on the system. A unique
freeze ID is generated by the system. It should be recorded on
the form.
• For freeze with activation type as current, the acknowledgement
letter is generated immediately.
• For freeze to be activated at a future date, the acknowledgement
letter is generated at SOD of the activation date.
• DP should send the acknowledgement letter, duly signed and
stamped by an authorized official of the DP, to the BO.

Freeze initiated by DP for the following reasons:

• Order from statutory/regulatory authority.
• To create lien on balances in BO account after getting approval
from CDSL.
• The DP should ensure that system-generated acknowledgement
is sent to the BO.
• Orders from statutory/regulatory authority/ authorization from
CDSL, the DP should maintain the acknowledgement copy sent to
the BO and record of dispatch of such acknowledgement copy.

Unfreeze initiated by BO:

An authorized official of the DP should verify that the Unfreeze Request
Form received from the BO is filled completely and signature(s) of the
holders are matching before the same is entered in the system.
System generated acknowledgement for unfreeze, duly signed and
stamped by the authorized official of the DP should be sent to the BO.

Unfreeze initiated by DP

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The DP can initiate unfreeze either to clear the lien created on the
balances of the BO or to adhere to the orders from statutory
authority/regulatory authority.
The acknowledgement letter for unfreeze should be duly signed and
stamped by the authorized official of DP and sent to the BO.

All documents/letters received from CDSL/statutory/regulatory

authority, DP should carefully maintain acknowledgement copy of
freeze/unfreeze letters sent to BO.

There are various reasons for which the BO account is freezed.

Every reason has got a code that is to be entered in the system by
concerned person at DP. The reasons are as follows:
1. Beneficiary Owner
2. ITO attachment
3. SEBI directive
4. Disinvestments & Private Deals
5. Court Order
6. PAN verification pending
7. Sole/ 1st holder deceased
8. 2nd holder deceased
9. 3rd holder deceased
10. Order from special recovery officer
11. CBI order
12. FIU-IND requirement
13. In person verification pending
14. Assignment DP closure
15. Minor attained Majority

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 16. PAN not recorded

CORPORATE ACTIONS
• The Issuer or its RTA shall intimate CDSL of all corporate actions
simultaneously with the intimation to stock exchanges in case of
listed securities and in case of unlisted securities with prior
notice of seven clear days from the date of corporate action.
• On receiving the intimation as stated above, the details of the
holdings of the Beneficial Owners shall be provided electronically
by CDSL to the Issuer or its RTA as of the cutoff date (relevant to
that particular corporate action ) for the purpose of distribution
of corporate benefits within five working days of the record date
or the book closure date.
• The Issuer or its RTA shall distribute dividend, interest and other
monetary benefits and also ineligible securities directly to the
Beneficial Owners on the basis of the list provided by CDSL.
• The Issuer or its RTA may, if the benefits are in the form of
securities, distribute such benefits to the Beneficial Owners
through CDSL by electronically crediting the account of the

64
 concerned Beneficial Owner provided that the newly created
security is an eligible security and has been admitted to CDSL.
• The concerned Beneficial Owner has consented to receive the
newly created securities through CDSL in dematerialised form.
• In such case, the Issuer or its RTA shall provide allotment details
of all Beneficial Owners to CDSL.
• On receipt of allotment details, CDSL shall cause the necessary
credit entries to be made in the account of the Beneficial Owner
concerned.

ONLINE TRADING IN INDIA

Online trading in India is the internet based investment activity that
involves no direct involvement of the broker. There are many leading
online trading portals in India along with the online trading platforms of
the biggest stock houses like the National stock exchange and the
Bombay stock exchange.

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Facilities of the online trading in India
The investor has to register with an online trading portal and get into
an agreement with the firm to trade in different securities
following the terms and conditions listed down on the agreement.
The order processing is done in correct timings as the servers of
the online trading portal are connected to the stock exchanges
and designated banks all round the clock. They can also get
updates on the trading and check the current status of their
orders either through e-mail or through the interface. Brokerages
also provide research content on their websites, such that the
clients can take their own decisions on stocks before investing.

Products and services of the online trading in India:

The major financial products and services of the Online trading in India
are like equities, mutual funds, life insurance, general insurance, loans,
share trading, commodities trading, portfolio management and
financial planning.

Objectives of Present Trading System

• Reduce and eliminate operational inefficiencies inherent in
manual system
• Increased trading capacity in Stock Market Improve market
transparency
• Eliminate unmatched trades and delayed reporting Provide for
on-line and off-line monitoring control and surveillance of the
market.
• Promote fairness and speedy matching Smooth market
operations using technology while retaining the flexibility of
conventional trading practices
• Set up various limits, rules and controls centrally.

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 • Consolidate the trades data on electronic media to interface will
the broker‘s back office system
• Provide public information on scrip prices, indices for all users of
the system
• Provide analytical data for use of Stock Market.

Features of Online Trading

The Online Trading is having many features which make it most
suitable for the investors to go for. Some of these features are as
follows:

1. Freedom of Information:
The Internet can provide a new sense of control over your financial
future. The amount of investment information available online is truly
astounding. It's one of the best aspects of being a wired investor. For
the first time in history, any individual with an Internet connection can:
• Know the price of any stock at any time
• Review the price history of any stock in chart format
• Follow market events in-depth
• Receive a wealth of free commentary and analysis about stock
markets and the global economy
• Conduct extensive financial research on any company

2. Control our money:

One of the great appeals of using an online trading account is the fact
that the account belongs to you, and is under your direct control. When
you want to buy or sell stock, you no longer need to call your broker on
the phone; hope that he is in the office to place your order; possibly
argue with the broker about the order; and hope that the transaction is
executed instantly.

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 3. Access to the market:
At the most basic level, an online trading account gives you more
agility in buying and selling stocks. This is through sophisticated
information streams, dedicated trading platforms and sophisticated
tools for accessing the markets.

4. Offers greater transparency:

Online trading offers you greater transparency by providing you with
an audit trail. This involves a complete integrated electronic chain
starting from order placement, to clearing and settlement and finally
ending with a credit into your depository account. All these stages are
subject to inspection, thus bringing in transparency into the system.

5. Reduces the settlement risk:

This method of trading reduces the settlement risk for the investor, as
in this case all short sell orders are squared off at the specified cut-off
time and not allowed to be carried forward.

6. Instant trade order confirmations:

Every trade is confirmed immediately and you will receive an on-
screen confirmation following every trade with full details for your
records. This avoids costly errors that would have been discovered
when it is too late.
7. Integrated Accounts:
Our Bank, Depository and Trading account are integrated for our
convenience.
Various broking houses provide access to many of the popular banks.

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Benefits of Online Trading
1) Less Costly:
The most significant advantage of the online broking is the cost
reduction in the brokerage. Due to the power of the Internet one has
the privilege of becoming the clients of really large brokerages with the
benefits of enjoying the low charges before enjoyed only by the big
players. As the DP account has got linked to the trading account most
players do not charge a minimum transaction cost thus truly allowing
one to buy a single share and achieve meaningful rupee price
averaging whatever be your buying power.

2) Peace of Mind:
One can never have complete peace of mind but online investing does
away with the hassles of filling up instruction slips, visits to the broker
for handing over these slips and consequent costs.

3) Keeping Records:
The site one trades on keeps a record of all transactions down to
unexecuted orders and cancelled orders thus keeping one abreast of
all your transactions 24 hours a day. No paperwork means more time
at one’s disposal for research and analysis.

4.) Ease of trade:

69
It is the ease of doing the trade through net, with a click of mouse; one
can buy or sell any share that is dematerialized.

Other than the above-mentioned advantages, Internet trading provides

some additional advantages to the investors, brokers and also helps
the nation to channelize the resources. Net trading would increase
competition in the market hence increase in the bargaining power of
the investors. The entire communication between the investor, broker
and exchange would take place within milliseconds.

Problems of Online Trading

1. Server not found:
This may appear on one’s screens when he is desperately trying to get
out of an unprofitable position. Some of the online sites are providing a
telephone number for use in case their sites are overloaded or their
server down.

2. Connectivity of the Broker with NSE :

Recently ICICI Direct had a connectivity problem with the NSE for two
and half-hours during trading hours. This problem is rare but be alive
to its possibility.

3. Cyber attack:
In the event of a malicious attack on the systems of one’s broker he is
protected only if the company is taking proper precautions against
such attacks and if proper backup is regularly been taken. He may like
to choose a brokerage that has a stated security policy and
contingency plan in place.

4. Non-availability of a seamless interface:

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As a client one will access the NSE through a server of the online
brokerage and this may involve queuing delays. If a number of client
access the server the server takes its own time sending the orders to
the NSE server. He must check out the seamlessness of this interface
before selecting an online brokerage. The faster the orders are
processed the more seamless is the interface.

5. Margin
If Internet trading alone is not fast and furious enough; many people
are trading on margin. That is where the brokerage firm lends you
money by leveraging his account, allowing him to buy a large amount
of securities by putting up only a small amount of money. He may have
forgotten what he read in the small print of his agreement, but the
brokerage firm has the right to change the maintenance margin
requirements without any warning or notice to him. In fact, the firm
has the right to liquidate his securities holdings (and it can pick and
choose which ones) without any notice to one if he fails to meet the
margin call. And there he was leveraged to the hilt, hoping to hit a
home run when he discovered that he is required to make a large
deposit that he cannot make. The next thing one knows, the firm is
selling off his securities at a point in time that is not the best for him.
These are the perils of trading on margin.

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Competitors
Demat services are provided by all the banks in the country. Therefore,
the competition is immense in the field. This section of the report
focuses on the competitor banks in the Public sector as well as in the
Private sector. Hence, for this comparative study the following banks
are considered:
• State Bank of India
• Punjab National Bank
• ICICI Bank
• HDFC Bank

State Bank of India offers Demat services that would ensure free
transferability of securities with speed, accuracy and security. SBI is
Depository Participant both with - National Securities Depositories

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Limited (NSDL) and Central Depository Services Limited (CDSL)
through more than 1000 branches
As a customer, one deserves nothing but the very best, which is why
SBI provides new Power Demat Account that offers the following
features:
• Customer Care
• Transact Anywhere
• Statements by E-Mail
• ‘Demat Services’ Online
• Mobile Alerts
• eZ-Trade@Sbi: Online Trading Facility in alliance with SBI Cap
Securities Limited and Motilal Oswal Securities Limited. This
service provides you with a 3-in-1 account which is an integrated
platform of Savings Bank A/c, Demat A/c and Online Trading A/c
to give you a convenient and paper free trading experience.

Punjab National Bank offers depository & online trading services

to its customers through 360 branches spread across 150 centers all
over the country. The online trading facility is being offered in a
strategic alliance with
• SMC
• IDBI
• NETWORTH
With this facility, the customer can trade in securities online anywhere,
anytime without intervention of Bank and/or Broker. The customers
may approach designated branches of PNB for availing three-in-one
account facility under which a deposit account, a demat account and a
trading account will be opened. Those who already have deposit and

73
demat accounts with the Bank, will be required to open a trading
account which will be facilitated by our branch itself on behalf of SMC/
NSBL/ ICMS.

ICICI Bank Demat Services boasts of an ever-growing customer

base of over 16.80 lacs customer base as on 28.02.10 account holders.
In our continuous endeavour to offer best of the class services to our
customers we offer the following features:

• E-Instructions: You can transfer securities 24 hours a day, 7

days a week through Internet & Interactive Voice Response (IVR)
at a lower cost. Now with "Speak to transfer", you can also
transfer or pledge instructions through our customer care officer.
• Digitally Signed Statement: Receive your account statement
and bill by email
• Corporate Benefit Tracking: Track your dividend, interest,
bonus through your account statement.
• Mobile Request: Access your demat account by sending SMS to
enquire about Holdings, Transactions, Bill & ISIN details
• Mobile Alerts: Receive SMS alerts for all debits/credits as well
as for any request which cannot be processed. Dedicated
customer care executives specially trained at our call centre, to
handle all your queries. Countrywide network of over 700
branches, you are never far from an ICICI Bank Demat Services
outlet

HDFC Bank is one of the leading Depository Participant (DP) in the

country with over 8 Lac demat accounts. HDFC Bank Demat services
offers you a secure and convenient way to keep track of your securities
and investments, over a period of time, without the hassle of handling

74
physical documents that get mutilated or lost in transit. HDFC BANK is
Depository participant both with National Securities Depositories
Limited (NSDL) and Central Depository Services Limited (CDSL).

HDFC Bank Ltd provides convenient facility called 'SPEED-e' (Internet

based transaction) whereby account holder can submit delivery
instructions electronically through SPEED-e website (https://speed-
e.nsdl.com). SPEED-e offers secured means of transaction processing
eliminating preparation of instruction slips and submission of the same
across the counter to the depository participant. The 'IDEAS' facility
helps in viewing the current transactions and balances (holdings) of
Demat account on Internet on real time basis.

CONCLUSION
From the analysis made, it is evident that online trading and
Dematerialization has its demerits and merits. The demerits of online
trading are:
• Many banks make the process of opening a Demat account a
cumbersome one by making numerous enquiries about the
customers as the process needs it.

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 • The charges involved in opening a Demat account are soaring.
Even the other associated charges like transaction charge,
statement charges, pledge charges are very high.
• It is also highly influenced by economic factors like recession,
slowdown etc which can have a drastic impact on the investors.

The merits of online trading are:

• Securities can be held safe in a Demat account. This evades the
disadvantage of holding physical share certificates like wear and
tear, damage to securities, loss of securities etc.
• If the investor uses the trading account regularly, then it can
prove to be a fast source of income.
• Demat account also helps the investors to purchase the shares in
primary market.
• Dematerialization eases the process of selling the securities
thereby helping the investor to earn decent income.

Considering that the advantages clearly outweigh the disadvantages, it

is coherent to say that Dematerialization is a positive process which
mobilizes and channelizes the savings of investors into the
development of the industry and thereby the entire economy.
Therefore the investors must be made aware of these benefits that
they will derive on usage of the services and thereby promote the
development of online trading by moving in the right direction.

BIBLOGRAPHY
• Material given by the organization
• www.csdlindia.com
• www.nsdl.co.in
• www.unionbankofindia.com

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• www.statebankofindia.com
• www.hdfcbank.com
• www.icicidirect.com
• business.mapsofindia.com
• www.rediff.com/money
• www.financialexpress.com
• www.economicstimes

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