market for dealing in monetary assets of short-term nature for meeting

the temporary cash requirements. Capital market is a market for long-term

funds. Capital market has two
segments.
1) Primary market (New Issues arket)
!) "econdary market
#he New Issue arket deals in new securities i.e. "ecurities$ which are not
pre%iously offered to the in%estors. #he primary market does not ha%e any
organi&ational setup and is recogni&ed only 'y the specialist institutional
ser%ices that it renders to the lenders and 'orrowers of capital funds.
#he secondary market deals in old(e)isting securities$ which were
granted in stock e)change listing. "tock e)changes pro%ide liquidity to
in%estments. It has a physical e)istence and a geographical area.
0
OBJECTIVES OF THE PROJECT:
#o know the mechanism in the *emat
#o study the acti%ities in Primary arket and "econdary arket in
the conte)t of *emateriali&ation
#o study the acti%ities of *epository Participants
#o study the process of "ettlement
#o study the process of *+,#
#o know the ad%antages of the *+,#
#o know the ser%ices pro%ided 'y the *epository Participant
SCOPE OF THE STUDY:
#he scope of the study is confined to the process of demateriali&ation of
securities and its ad%antages.
#he scope of the pro-ect is limited to the depository participant ser%ices
through depositors.
1
METHODOLOGY OF THE STUDY:
#he study is 'ased on 'oth the primary and the secondary sources of
data.
#he source of primary data is from the unstructured inter%iew of the
officials in the company.
#he secondary data is collected from the we'sites.
www.nseindia.com
www.moneycontrol.com
LIMITATIONS OF THE PROJECT:
/y not considering the entire depository participant0s implications
elating to the pattern of trading may ha%e 'een missed in the study.
#he study is confined to only depository participants ser%ices through
*epositories
N"*1. +)hausti%e analysis$ pro'lems of listing and management of
trade and "+/I guidelines of relating there lot are not co%ered due to
limited & keep the study in managea'le limits
2
CHAPTER-II
REVIEW
OF
LITERATURE
3
DEMATERIALISATION
DEFINITION:
*emateriali&ation is the process 'y which a /2 can get his physical
securities con%erted into electronic form.
Pre-requisites for demateriali&ation are.
1. In%estor should ha%e a demat account with any *P of C*"1.
!. "ecurities to 'e demateriali&ed must ha%e 'een admitted in C*"1
i.e. I"IN for the securities should 'e a%aila'le in C*"1
3. In%estor should 'e the registered holder for the securities in the
'ooks of the company.
#he /2 su'mits a request to the *P in the *emateriali&ation 4equest
5orm (*45) along with the certificates. #he *P %erifies the information on
the *45 and physical certificates and enters the details in the system to
setup a request electronically. #he *P sends the physical documents to the
concerned issuer(4#,. If the Issuer(4#, find the *45 and certificates in
order$ it registers C*"1 as the registered holder of the securities and
confirms the *4N electronically to C*"1. 2n recei%ing such confirmation$
C*"1 credits the /2 account. #he process flow$ of a demat request is
gi%en 'elow.
4
If the issuer(4#, re-ects all or some of the certificates in a demat
request then the same are sent 'ack to the *P mentioning the re-ection
reason(s). *P will then ask the /2 to rectify the reason of re-ection and
send the certificates again for demateriali&ation under a fresh demat request.
*emateriali&ation can 'e normal demateriali&ation as e)plained a'o%e
or it can 'e 6#ransfer-cum-*emateriali&ation (#C*)6 or 6#ransposition-cum-
*emateriali&ation6.
TRANSFER-CUM-DEMATERIALIZATION:
7hen physical securities are sent to the issuer ( 4#, for transfers 'y
the 'uyer$ the Issuer(4#, completes the transfer process and records the
securities in the name of the concerned 'uyer in the 4egister of em'ers.
If the Issuer(4#, is pro%iding transfer cum demateriali&ation facility$
the certificates are not dispatched to the concerned 'uyer. Instead the
Issuer(4#, intimate the 'uyer a'out the transfer and gi%es the 'uyer an
option to hold the transferred securities in demat form 'y issuing an 62ption
letter6.
#he in%estor on recei%ing such an option letter may opt for holding
the transferred securities in demats form. In such a case$ the in%estor has to
open a demat account$ if not already opened$ fill up a *45$ attach the option
letter along with the *45 and su'mit it to the *P. 4est of the process
remains same as e)plained a'o%e for normal demat.
5
#ransfer-cum-demat request can 'e set-up for a quantity up to 899
securities only. In case the Issuer(4#, does not recei%e demat request
within 39 days of the date of issuing the option letter then the physical
securities may 'e dispatched to the concerned 'uyer directly.
TRANSPOSITION-CUM-DEMATERIALISATION:
#ransposition is applica'le in situation where the demat account has
'een opened in the name of ,$/$C and some of the certificates are in any
other order of holder names such as ,$C$/ or /$C$ , or C$/$, etc.$ i.e.
holders names are same 'ut order in which they appear is different.
DEMATERIALIZATION PROCEDURE:
ACTION BYB.O.;
NORMAL DEMAT:
5or demateriali&ation /2 should su'mit the following documents to the *P
1. *uly filled *45 gi%ing all details as required on the form. #he *45
should 'e signed 'y account holder(s) or power of attorney (if any).
!. Physical certificates
*emat requests for lock-in securities cannot 'e set up along with the free
securities i.e. the /2 will ha%e to fill separate *45 for securities which are
free (without encum'rances) and a separate *45 for securities under lock-
6
in with different lock-kn reasons and different lock-in e)piry dates.
Lock-! "#$%o! c$! &# $!' o( )*# (o++o,!-:
1. *irector ( 4elati%e :uota
!. +mployee :uota
3. Preferential allotment
;. Promoters :uota
8. <nderwriters :uota
=. Pri%ate Placement
>. 8;+ (a) of I# ,ct 1?=1
@. 8;+(')of I# ,ct 1?=1
TRANSFER CUM DEMAT:
In case of #ransfer-cum-*emat$ /2 should su'mit the following documents
to the *P.
1. *uly filled *45
!. 2riginal option letter recei%ed from the Issuer(4#,
7
TRANSPOSITION CUM DEMAT:
In case the /2 intends to transpose and demat the securities following
documents ha%e to the su'mitted to the *P
1. *uly filled *45
!. *uly filled #4P5
ACTION BY DP:
2n recei%ing a *45 along with other documents from the /2$ *P
must ensure the following 'efore accepting the same.
1. #he securities intended for demateriali&ation are admitted 'y C*"1.
If not then the *P shall inform the same to the in%estor.
!. Correct I"IN is selected where the security of an Issuer has more then
one I"IN.
3. Certificates are in names of ma)imum three holders only.
8
T*# DP ./%) 0#"(' )*# (o++o,!-:
1. #he *45$ the #4P5 (if applica'le) are filled completely.
!. #he certificate details mentioned on the *45 and on the
certificates enclosed$ tally.
3. Name(s) of the holder(s) appearing on the certificates e)actly
tally with those recorded under the /2 account maintained with
C*"1.
;. ,ll the holders ha%e signed the *45$ the #4P5 (if applica'le) and the
signature of the account holders0 match with those recorded 'y
the *P.
If there is any discrepancy in any of the details$ the *P will get the
same rectified from the in%estor and the error free *45 will 'e taken up for
further processing 'y the *P. Immediately on receipt of *45 along with the
certificates$ the *P should gi%e an acknowledgement to the /2.
#he details from the *45 A the certificates are entered in the C*"1
system. 2n successful entry of details$ the system generates a unique
num'er called as *emat 4equest Num'er (*4N)$ which ser%es as a
reference num'er. #he *P writes the *4N on the *45. #he *45
details are immediately a%aila'le electronically to the Issuer(4#, after the
*4N is generated.
9
#he *P will deface and mutilate the certificates to a%oid misuse in
case they are lost in transit. #he *P will authori&e the *45 'y putting his
seal A signature. #he certificates A the original *45 is sent to the
Issuer(4#, along with a co%ering letter. , copy of the *45 is to 'e
maintained 'y the *P for its own reference and records.
#he *P will then capture the dispatch details such as the dispatch
reference no$ dispatch date$ name of the courier etc in the C*"1 system.
#he *P must dispatch the physical documents within > working days from
the date of receipt of physical documents 'y the /2.
ACTION BY ISSUER 1 RTA:
#he Issuer ( 4#, must complete the demateriali&ation process within a
period of 18 days$ or any such period as specified 'y C*"1 from time to time$
from the date of physical receipt of the *45. #he procedure gi%en 'elow is
also applica'le to #ransfer-cum-*emat ( #ransposition.
,fter recei%ing *45 along with physical certificates and other
documents as the case may 'e$ the Issuer ( 4#, will access electronic details
from the C*"1 system. #he Issuer ( 4#, will check whether the.
1. *45 is authori&ed 'y the *P.
!. *etails as mentioned on the *45 and as recei%ed electronically from
C*"1$ tally
3. "ignature of /20s on the *45 tally with the signatures recorded 'y
him.
10
If the electronic and physical details match then the Issuer(4#, gi%es
credit in the /20s demat account and transfers the registered ownership of
securities in the name of C*"1. #he Issuer ( 4#, shall inform the details of
the securities demateriali&ed to all stock e)changes where the security is
listed (as per the requirements of the respecti%e stock e)changes). #he
Issuer ( 4#, should also furnish such a certificate to C*"1 on a quarterly
'asis.
If the electronic and physical details do not tally$ the Issuer(4#, will
inform the *P. #he *45$ certificates and any other documents recei%ed
along with the *45 will 'e sent 'ack to the *P under re-ection. ,ppropriate
reason of re-ection must 'e specified so as to ena'le the *P to rectify the
same.
#he ma-or reasons under which a demat request can 'e re-ected 'y an
Issuer(4#, are as under
1. *45(Certificates(s) not recei%ed within 18 days from the date of
electronic request logged into the system 'y the *P
!. *45 not complete
3. "ignature (s) does not match
;. 5orged(5ake("tolen Certificate
8. *uplicate certificate already issued
11
1. Bolders0 name(s) does not match
!. Certificate details do not match
3. Court in-unction
;. *45 sent to incorrect Issuer(4#,
8. :uantity mentioned on the certificates is more or less than electronic
request
=. "top transfer
>. Certificate of incorrect I"IN 'eing missed up in the *45
@. Certificates0 ha%ing different lock-in release dates 'eing missed up
with the same *45
?. *4N set up under wrong I"I18.#ransfer cum demat -- Certificate(s)
sent to /2
12
CHAPTER-III
COMPANY PROFILE
13
COMPANY PROFILE
India is on the threshold of entering a new economic era. ,n era of
fast paces economic growth. 7ith %arious new commercial opportunities
opening up. #hese new industries and 'usiness %entures are often glo'al
-ulti nationals$ colla'orations$ -oint %entures$ technology transfers are the
new 'u&& words. +sta'lishing and de%eloping these genres of companies is a
complicated process. In today0s scenario of frenetic acti%ity$ the need for
quality financial ser%ices is acute.
#o crystalli&e these pro-ects a financial company that understands the
indi%idual needs is required. #hus the need for <"B,CI4,N 5IN,NC+
1II#+* is it pro%iding corporate finance or in management of issues or in
dealing with the securities market.
<"B,CI4,N 5IN,NC+ 1II#+* is an e)isting profit making
company. It is an integrated finance company esta'lished essentially as a
fund 'ased financial ser%ice organi&ation as di%ersified its range of acti%ities
from fund 'ased to non fund 'ased acti%ities and further stepped up and
e)panded the fund 'ased acti%ities and other financial ser%ices.
It is a professionally managed company comprising chartered
accountants$ Company "ecretaries$ /,s$ Cost ,ccountants and software
professionals. 7ith an infrastructure that matches with the international
standards and practices$ staff support and strong network$ the company
efficiently caters financial ser%ices to its di%erse clientele.
14
#he /oard of *irectors of the company comprises eminent and e)perienced
professionals who ha%e got a'undant e)perience 'y %irtue of their
association earlier with pu'lic sector undertakings and multi national under
takings. "hri #.,*IN,4,D,N, the chief promoter is a mem'er of the
Institute of Chartered ,ccountants of India$ the IC7, of India and IC" of
India. Be was associated with the financial institute for a'out ? years and is
well %ersed in all aspects of term lending$ pro-ect financing$ and pro-ect
ad%isory ser%ices. any 1eading industrial conglomerated has used the
ser%ices particularly in the areas of finance$ ta)ation$ secretarial and pu'lic
issues related matters. Be is also a mem'er of the Bydera'ad "tock
+)change 1imited.
#he company caters mainly to the requirements of corporate clients in the
%ariety of acti%ities which include the following.
1easing and Bire purchase finance
Inter corporate deposits
/ill *iscounting
1oans "yndication
Placement of Commercial papers
ergers$ ,malgamations and ,cquisitions
Pro-ect Counseling and ,d%isory "er%ices
Pro-ect ,ppraisals
<nder writings
erchant /anking
Issue anagement
Placement of "ecurities
arketing of Pu'lic issues
/rought out deals
Placement of share to N4Es(2C/s$ 5Is$ and 5IIs
5und anagement
+quity 4esearch ,nalysis
In%estment /anking
"tock /roking and Commodities trading
Eoint Fentures
15
CHAPTER-IV
DATA ANALYSIS
2
INTERPRETATION
16
HISTROCIAL BAC3GROUND OF DEMATERIALISATION:
+arliest records of securities trading in India are a%aila'le from the
end of the eighteenth century. /efore 1@89$ there was 'usiness
conducted in um'ai in shares of 'anks and the securities of the +ast
India Company$ which were considered as "ecurities for 'uying$ selling
and e)change. #he shares of the commercial /ank$ ercantile /ank and
/ank of /om'ay were some of the prominent shares traded. #he 'usiness
was conducted under a sprawling 'anyan tree in front of the #own Ball$
which is now in the Borniman Circle Park
In 1@89$ the Companies ,ct was passed and that heralded the
commencement of the -oint stock companies in India$ it was the ,merican
ci%il was that helped Indians to esta'lish 'roking 'usiness. #he leading
'roker$ S*" P"#.c*$!4 Ro'c*$!4 designed and de%eloped the
procedure to 'e followed while dealing in shares.
In 1@>;$ the *alai "treet 'ecame the prominent place for meeting of
the 'rokers to conduct their 'usiness. #he 'rokers organi&ed an association
on ?
th
Euly 1@>8 known as 6Nati%e "hare and "tock /rokers ,ssociation6 to
protect the character$ status and interest of the nati%e 'rokers. #hat was the
foundation of #he "tock +)change$ um'ai. #he +)change was
esta'lished with 31@ mem'ers.
17
#he "tock +)change$ um'ai did not ha%e to look 'ack as it started
riding high in the ladder of growth. #he "tock +)change is a market place$
like any other centrali&ed market$ where 'uyers and sellers can transact
'usiness in securities at a gi%en point of time in a con%enient and
competiti%e manner at the fairest possi'le price. In Eanuary 1@??$ r. Eames
. ac1ean$ .P.$ inaugurated the /rokers0 Ball.
,fter the 5irst 7orld 7ar$ the "tock +)change was housed property at
an old 'uilding near the #own Ball. In 1?!@$ the present premises were
acquired surrounded 'y *alai "treet$ /om'ay "amachar arg and Bamam
"treet. , new 'uilding$ the present location$ was constructed and was
occupied on 1
st
*ecem'er 1?39.
In 1?89 the regulation of 'usiness in securities and stock e)changes
'ecame an e)clusi%ely Central go%ernment su'-ect following adoption of the
Constitution of India. In "ecurities Contracts (4egulation) ,ct was passed
'y the Parliament of India$ to regulate the securities market$ "+/I was
initially esta'lished on 2cto'er 1!$ 1?@@ as an interim 'oard under control of
the inistry of 5inance$ go%ernment of India. In 1??!$ the "+/I ,ct was
passed through which the "+/I came into e)istence.
Bence "+/I acquired statutory status on 39
th
Eanuary 1??! 'y passing an
ordinance$ which was su'sequently con%erted into an ,ct passed 'y the
Parliament on ,pril ;$ 1??!.
18
#he main o'-ecti%es of "+/I are to protect the interest of the
in%estors$ regulate and promote the capital market 'y creating an
en%ironment$ which would facilitate mo'ili&ation of resources through
efficient allocation$ and to generate confidence among the in%estors. ,s
such$ "+/I is responsi'le for regulating stock e)changes and other
intermediaries who may 'e associated with the capital market and the
process of pu'lic companies raising capital 'y issuing instruments that will
'e traded on the capital market. "+/I has 'een empowered 'y the Central
Go%ernment to de%elop and regulate capital markets in India and there'y
protect the interest of the in%estors.
In 1??!$ 2%er the Counter +)change of India (2#C+) came into
e)istence where equities of small companies are listed. In 1??;$ National
"tock +)change (N"+) came into e)istence$ which 'rought an end to the
open cut-cry system of trading securities which was in %ogue for 189 years$
and introduced "creen /ased #rading ("/#) system. /"+0s 2n 1ine #rading
"ystem was launched on arch 1;$ 1??8. Now the trading in securities is
done using screen 'ased trading method through duly authori&ed mem'ers of
the e)change.
In "/#$ in%estors place 'uy and sale orders with their 'rokers who
enter the orders in the automated trading system. 7hen 'uy and sale orders
match$ a trade is generated and trade details are gi%en to the respecti%e
'rokers. ,fter a trade has taken place$ the 'uyer has to pay money and the
seller has to deli%er securities.
19
2n the stock e)change(s)$ hundreds and thousands of trades take place
e%ery day. /uyers and sellers are spread o%er a large geographicalH area. *ue to
these pro'lems completing a trade 'y paying cash to seller and securities to
'uyer immediately in e)ecution of trades on an indi%idual 'asis in
%irtually impossi'le. "o the stock e)changes allow trading to take place for a
specified period$ which is called as a 0#rading Cycle0.
, unique settlement num'er identifies each trading cycle. 2nce the
trading period is o%er$ 'uyer 'roker pays money and seller 'roker deli%ers
securities to the CC(CB on a predefined day. #his process is called as Pay-in.
,fter pay-in$ securities are gi%en to the 'uyer 'rokers and the CC(CB gi%es
money to the seller 'roker. #his process is called as Payout. #his process of
pay-in and payout is called settlement.
Initially the trading cycle was of one fortnight$ which was reduced to
one week. #he transactions entered during this period$ of a fortnight or one-
week$ were used to 'e settled either 'y payment for purchase or 'y deli%ery
of share certificates sold on notified days one fortnight or one week after the
e)piry of the trading. #he settlement schedules are made known to the
mem'ers of the e)change in ad%ance.
20
#he weekly settlement period was replaced 'y daily settlements$
popularly known as rolling settlements$ in which each day is separate trading
day. 7ith effect from *ecem'er !991$ #I8 rolling settlement cycles was
introduced for all equities where 0#0 is the 0#rading *ay0 and pay-in and
Payout for the settlement was done on 8
th
'usiness day after trade day. 5or
e)ample$ if # was onday$ the pay-in and payout were done on ne)t
onday$ as "aturday and "unday are not counted as 'usiness days. #I8
cycles were further shortened to #I3 settlement cycle w.e.f. ,pril 1$ !99!.
CURRENT SCENARIO:
"+/I has since introduced #I! rolling settlements from ,pril 1$ !993. #I!
settlement cycle means that the final settlement of transactions done on #$
i.e. trade day 'y e)change of monies and securities 'etween the 'uyers and
sellers respecti%ely occurs on second 'usiness day after the trade day
e)cluding "aturdays$ "undays$ 'ank holidays and e)change holidays.
DAY ACTIVITY
#
#rading and daily downloading of statements
showing details of transaction and margins at the end
of each trading day
= ,(> ,J entry 'y the mem'er- 'rokers(confirmation 'y
the custodians
# I 1 Confirmation of =,(>, data 'y the custodians up to a
specified deadline time. *ownloading of securities and
funds o'ligation statement 'y mem'ers.
21
# I ! Pay-in of funds and securities and payout of funds and
securities 'y Pre-specified deadline times. #he
mem'ers are required to su'mit the pay in instructions
for funds and securities to 'anks and depositories
respecti%ely.
# I 3 ,uction for shortages in deli%ery of securities
# I ; ,uction pay-in and pay-out of funds and securities.
J=,(>,. , mechanism where'y the o'ligation of setting the transactions
done 'y a mem'er 'roker on 'ehalf of a client is passed on to a custodian
'ased on his confirmation. #he custodian can confirm the trades done 'y the
mem'ers on-line.
#rading on the on-line screen 'ased system (/"+0s 2n-1ine #rading
system$ /21# for /"+ and National +)change for ,utomated #rading$
N+,# for N"+) is conducted from onday to 5riday 'etween ?.88 a.m. and
3.39 p.m. #he scripts traded on #he "tock +)change$ um'ai are classified
into 0,0$ 0/10$ /!0$0C0$ 050$G0$ and 0KLH groups.
,$ /1$ /! and C group0s represent the equity market segment.
5 group represents the de't market (fi)ed income securities) segment.
/"+ has commenced trading in Go%t. "ecurities for retail in%estors under G
22
group w.e.f. Eanuary 1=$ !993.
K group co%ers the companies$ which ha%e failed to comply with listing
requirements and(or failed to resol%e in%estor complaints or ha%e not made
the required arrangements for demateriali&ation of their securities with 'oth
the depositories.
PROBLEMS WITH PHYSICAL MODE OF SETTLEMENT:
#he capital market was a marginal institution in the financial market
for almost three decades after India0s independence. Bowe%er$ until late
eighties the common man kept away from capital markets.
Not many companies accessed the capital market and$ thus$ the
quantum of funds mo'ili&ed through the market was meager. , ma-or
pro'lem$ howe%er$ continued to plague the market. #he Indian markets were
literally weighed down 'y the need to deal with shares in the paper form.
#here were pro'lems galore with handling documents -- fake and
stolen shares$ fake signatures and signature mismatches$ duplication and
mutilation of shares$ transfer pro'lems etc. #he trading %olumes were small
due to small in%esting population.
23
T*# (o++o,!- $"# %o.# o( )*# .$5o" 6"o&+#.% ($c#4 (o" 6*'%c$+
c#")(c$)#% &' )*# !0#%)o"%:
a. Inordinate delay in recei%ing securities after transfer 'y the
companies.
'. 4eturn of share certificates as 'ad deli%eries on account of signature
mismatch or forged signature of transferor or fake certificates.
c. *elay in receipt of securities after allotment 'y the companies.
d. Non receipt of securities.
e. Procedural delays in getting duplicate shares(de'enture certificates.
f. "toring physical certificates.
1ack of moderni&ation 'ecame a hindrance to growth of secondary
market and resulted in creation of cum'ersome procedures and paper work.
Bowe%er$ the real growth and change occurred from mid-eighties in the
wake of li'erali&ation initiati%es of the Go%ernment.
#he reforms in the financial sector were en%isaged in the 'anking
sector$ capital market$ securities market regulation$ mutual funds$ foreign
in%estments and Go%ernment control.
24
#hese institutions and stock e)changes e)perienced that the paper
certificates are the main cause of in%estor disputers and ar'itration cases.
#hus$ the Go%ernment of India decided to set up a fully automated and high
technology 'ased model e)change$ which would offer screen 'ased trading
and depositories as the ultimate answer to all such reforms.
#herefore$ the Go%ernment of India promulgated the *epositories
2rdinance in 1??8. Bowe%er$ 'oth Bouses of Parliament passed the
*epositories ,ct in 1??=. #he unparalleled success of the introduction of
the depository concept in the Indian capital markets is reflected in the on-
going successful reduction in the period 'etween trading and settlement.
PROBLEMS WITH PHYSICAL MODE OF SETTLEMENT:
#he capital market was a marginal institution in the financial market
for almost three decades after India0s independence. Bowe%er$ until late
eighties the common man kept away from capital markets.
Not many companies accessed the capital market and$ thus$ the
quantum of funds mo'ili&ed through the market was meager. , ma-or
pro'lem$ howe%er$ continued to plague the market. #he Indian markets were
literally weighed down 'y the need to deal with shares in the paper form.
#here were pro'lems galore with handling documents - fake and
stolen shares$ fake signatures and signature mismatches$ duplication and
mutilation of shares$ transfer pro'lems etc. #he trading %olumes were small
due to small in%esting population.
25
T*# (o++o,!- $"# %o.# o( )*# .$5o" 6"o&+#.% ($c#4 (o" 6*'%c$+
c#")(c$)#% &' )*# !0#%)o"%:
a. Inordinate delay in recei%ing securities after transfer 'y the
companies.
'. 4eturn of share certificates as 'ad deli%eries on account of signature
mismatch or forged signature of transferor or fake certificates.
c. *elay in receipt of securities after allotment 'y the companies.
d. Non receipt of securities.
e. Procedural delays in getting duplicate shares(de'enture certificates.
f. "toring physical certificates.
1ack of moderni&ation 'ecame a hindrance to growth of secondary
market and resulted in creation of cum'ersome procedures and paper
work. Bowe%er$ the real growth and change occurred from mid-eighties
in the wake of li'erali&ation initiati%es of the Go%ernment.
#he reforms in the financial sector were en%isaged in the 'anking
sector$ capital market$ securities market regulation$ mutual funds$
foreign in%estments and Go%ernment control.
26
#hese institutions and stock e)changes e)perienced that the paper
certificates are the main cause of in%estor disputers and ar'itration cases.
#hus$ the Go%ernment of India decided to set up a fully automated and high
technology 'ased model e)change$ which would offer screen 'ased trading
and depositories as the ultimate answer to all such reforms.
#herefore$ the Go%ernment of India promulgated the *epositories
2rdinance in 1??8. Bowe%er$ 'oth Bouses of Parliament passed the
*epositories ,ct in 1??=. #he unparalleled success of the introduction of the
depository concept in the Indian capital markets is reflected in the on-going
successful reduction in the period 'etween trading and settlement.
ACCOUNT OPENING AND MAINTENANCE:
,n indi%idual who wants to keep his ( her cash safe in a 'ank has to
open an account with a 'ank as a first step and maintain cash in 'ook entry
form. "imilarly$ an in%estor has to open a demat account with any *P of
C*"1 as a first step to hold securities in demat form in the depository system.
#he in%estor can open an account with any *P of C*"1. C*"1 system
facilitates opening of demat accounts for different categories of in%estors.
*emat accounts opened with C*"1 are referred as 0/eneficial 2wner
,ccounts0 or 0/2 account0. ,s e)plained earlier$ when securities are held in
physical form name of the in%estor is recorded in the 'ooks of the company
as 04egistered owner0. 7hen the same securities are con%erted into
electronic form and held in a demat account$ the depository 'ecomes
registered owner of the securities.
27
"ince depository is acting as a custodian of the securities$ original
in%estor is legally entitled for all rights ( lia'ilities attached with securities
and hence are called a 0/eneficial 2wner0. ,ll accounts opened on C*"1
system are 'eneficial accounts irrespecti%e of the type of account.
, demat account may 'e opened and maintained in the name(s) of one
person (sole holder) or more than one persons (-oint holders). ,ll the -oint-
holders ha%e to sing the application form and the agreement.
#he supporting documents and photograph should also 'e pro%ided
for all -oint-holders. #hough the 'eneficial ownership of -ointly held
securities %ests equally in all -oint-holders$ communications a'out the -oint
depository account are pro%ided only to the first holder. #he di%idend and
interest warrants$ annual reports and notices for meetings are also issued to
the first-named -oint holder only. ,ll /o accounts are operated at *P le%elH
howe%er$ data is maintained at C*"1 le%el.
, /2 does not ha%e direct access to C*"1 system and must act
through his ( her *P. 7hile opening an account$ the /2 can gi%e a standing
instruction (Confirmation wai%er or Purchase wai%er) to allow credits
automatically to the account without separate instructions.
28
ACCOUNT TYPES
T*# $"# ),o .$! )'6#% o( $cco/!)% )*$) c$! &# o6#!#4 o! CDSL
%'%)#..
1. ,ccounts to 'e maintained 'y *Ps.
1. Clearing Corporation ( Clearing Bouse accounts.
ACCOUNT OPENING;
PROCEDURE:
T*# .$! o&5#c)0#% o( $cco/!) o6#!!- $"# )o $++o, !0#%)o"% )o
6#"(o". )*# (o++o,!- $c)0)#%:
1. *emateriali&e physical securities currently held 'y in%estors and
reflect securities-ownership 'y electronic 'ook-entries in C*"1.
!. /uy and sell demateriali&ed securities$ which are admitted in C*"1.
3. 4ecei%e statements of all demateriali&ed holdings of securities as /2.
;. 4ecei%e securities in electronic form in case of Initial Pu'lic
2fferings$ 4ights Issues$ /onus Issues$ ergers$ ,cquisitions and
,malgamations$ etc.
8. Pledging of securities.
29
#he /2 and the *P will enter into an agreement and each one will
a'ide 'y the terms and conditions of the agreement. #he /2 will gi%e the
account opening form along with the rele%ant documents to the *P.
#he *P will check all the documents and in case of any additional
information is required shall call for the same. If the *P finds all the papers
as correct$ he will send a confirmation to the /2. (+.g. a tear off slip on
account opening form as counter slip.)
#he *P will capture details from the account opening form filled 'y
the /2 in the front-end system pro%ided 'y C*"1. #he *P will scan the
signature(s) of the /2(s) as well as the power of attorney signatures$ if
applica'le. 2nce the *P commits the transaction$ the data is captured and
stored at C*"1.
, unique /2 account num'er is generated 'y the system and this can
'e seen at the *P front-end system. #his will 'e done on-one and the
information gets transmitted to C*"1 instantaneously. #he *P will record
the /2 I* on the original application form and on the *P-/2 agreement for
cross-reference.
, /2 will 'e classified with a /2 status. #hese status are system
defined. /2 status indicates whether the /2. is an Indi%idual$ N4I and
Corporate /ody$ /ank etc. the information to 'e captured for each /2 status
will 'e different.
30
#he user will first select proper status code to use for the set-up of
/2. 2nly those fields$ which are pre-defined 'y C*"1 for the status code$
will come up on the screen for the user to enter.
#he /2 I* is a com'ination of the C*"1 Code (1)$ *P #ype(l)$ *P
Code (;) and /ranch Code (!)$ "erial no(>)$ and the Check *igit (1).-
5igures in 'racket indicate num'er of characters.
#he system maintains a consistent running sequence of account
num'ers at the *P front-end system. #he *P sends the /2 a final
confirmation letter for ha%ing opened the account mentioning the account
num'er therein. In case of a -oint account$ all correspondence ( queries
relating to /2 account will 'e sent to the first holder only . #he account
cannot 'e made acti%e till the /20s signature(s) ha%e 'een captured.
#he account opening form for Indi%idual In%estors$ Institutional
In%estors$ Corporate In%estors$ and Cs can 'e common. Bowe%er$ a *P
may print separate forms for a each type of /2 if found necessary or
con%enient.( those sections of the application form$ which are not rele%ant to a
particular type of /2$ should 'e marked 0Not ,pplica'le0 (N.,.).
#he documents specified at the end of the account opening form are to
'e su'mitted along with the account opening form. #he /20s *P may also
specify additional documents to 'e supplied with the account opening form. ,
*P shall$ 'efore opening any account of any /2 make inquiries as may 'e
necessary and e)ercise due care and caution in ascertaining the 'onafides of
the intending /2$ scrutini&e the documents relating to the securities in
31
respect of which account is intended to 'e opened$ for their authenticity.
#he *P should ensure that a /2 ha%ing different su'-status for
different I"INs$ opens a separate /2 a(c for different /2 su'-status e.g.
director of a company will ha%e a different su'-status for shares held 'y
him in that company and will ha%e another /2 account.
Fo++o,!- $"# )*# co..o! 4#)$+% )o &# 6"o04#4 o! $cco/!) o6#!!-
(o". (o" $++ )'6#% o( $cco/!)%:
1. Name of the holder(s)
!. ,ddress A phone (fa) num'er.
3. /ank details$ like$ name of 'ank$ type of account
(current(sa%ings) account num'er$ /ranch address$ IC4 No.
etc.
;. P,N num'er$ if applica'le.
8. "pecimen signatures.
32
DP-BO AGREEMENT
+ach /2 has to sign a *P-/2 agreement with the *P 'efore opening a demat
account. Bowe%er$ a /2 'elonging to any one of the categories specified
under the C*"1 /yelaws need not enter into an agreement with the *P.
T*#%# BO c$)#-o"#% $"# $% (o++o,%:
1. , foreign institutional in%estor registered with the "+/I$ who has entered
into an agreement with the *P either directly or through its power of
attorney holder in accordance with the pro%isions of 4egulation 1= of
"+/I (5oreign Institutional In%estors) 4egulation$ 1??8. Pro%ided that
such agreement gi%es the *P an authority to act on 'ehalf of the
foreign institutional in%estor for a%ailing the ser%ices of the depositoryH
and a copy of such agreement has 'een filed with the "+/I.
!. ,n International ultilateral ,gency and Glo'al Custodian who has
entered into agreement with the *P pursuant to 4egulation 1> of "+/I
(Custodians of "ecurities) 4egulations$ 1??= and such agreement inter
alias confers authority on the *P to a%ail of the depository ser%ices on
'ehalf of an International ultilateral ,gency and Glo'al Custodian.
33
DOCUMENTS TO BE SUBMITTED WHILE OPENING A DEMATS
ACCOUNT
1ist of documents ( information to 'e su'mitted 'y different categories
of /2s along with the account opening form is gi%en 'elow. #he *P should
%erify copies of the documents against the original documents.
INDIVIDUAL INVESTORS
1. Introducer0s Name$ ,ddress$ and Contact Num'er.
!. Name$ ,ddress$ #el No. +tc. of agistrate(Notary Pu'lic(+)ecuti%e
agistrate in case of attestation done 'y any of them.
3. Power of ,ttorney$ if applica'le.
;. Photocopy of dri%ing license(+lection I* card(Passport(/ank
attestation(Pan Card to determine intending /20s identity.
8. 4ation card ( passport ( %oter0s I* ( dri%ing license ( 'ank pass'ook as a
proof of address.
=. /irth Certificate in case of minors.
>. 2ne passport si&e photograph of applicants with their signatures
across the face of the photograph.
34
HUF
1. ,ll the a'o%e documents as taken for Indi%idual in%estors at the time
of account opening hold good. In addition B<5 signature under the
stamp of B<5.
!. 1ist of family mem'ers.
CORPORATE INVESTORS:
1. Certified true copy of 'oard resolution for persons authori&ed 'y the
'oard to act as authori&ed signatories.
!. Names of the authori&ed signatories$ designation$ and their specimen
signatures.
3. P2, gi%en to the authori&ed signatories.
;. Name$ ,ddress$ #el No. etc. of agistrate(Notary Pu'lic("pecial
+)ecuti%e agistrate incase of attestation done 'y any of them.
8. emorandum and ,rticles of ,ssociation of the company.
=. 2ne passport si&e photograph of each authori&ed signatory with their
signatures across the face of the photograph.
35
CM7 FII7 NRI AND OCB
1. Copy of Certificate of 4egistration with "+/I (where applica'le).
!. Power of ,ttorney (if applica'le).
3. Certified true copy of 'oard resolution for persons authori&ed 'y
the 'oard to act as authori&ed signatories.
;. Names of the authori&ed signatories$ designation$ and their
specimen signatures.
8. Name$ ,ddress$ #el No. etc. of agistrate(Notary Pu'lic("pecial
+)ecuti%e agistrate in case of attestation done 'y any of them.
=. 4/I 4egistration for 5II$ N4I$ 2C/ (if applica'le).M
>. /ank ,(c details with respecti%e status like N4+$ N42$ etc.
@. emorandum and ,rticles of ,ssociation of the company.
?. Conduct Certificate from the stock e)changes where /2 is a C.
19. 2ne passport si&e photograph of each of the authori&ed signatory
with their signatures across the face of the photograph.
36
SETTLEMENTS:
7hen securities are purchased or sold$ the same need to 'e taken
into 'uyer0s account or transferred o?ut of seller0s account. "ince
settlement of trades in all listed securities is to 'e compulsorily done in the
demateriali&ed form$ the transaction has to 'e routed through the depository
system. #he securities could either 'e sold or purchased through the stock
e)change mechanism or outside the stock e)change mechanism.
, demat account can 'e de'ited ( credited only on instructions of the
/2. /2 therefore needs to gi%e instructions to his ( her *P to effect de'it (
credit of securities out of his ( her demat account. Bowe%er$ most of the
time instructions are required only for de'it since a /2 can gi%e a one-
time standing instruction to the *P$ for crediting the account without a
credit instruction$ at the time of account opening. #his one-time
instruction is known as 6Purchase wai%er6. #he *P e)ecutes all
instructions in the C*"1 system$ only after %erification of the signature of
the account holder(s).
T"$!%(#" o( %#c/")#% ! 1 o/" o( )*# 4#.$) $cco/!) c$! $"%# ! )*#
(o++o,!- !%)$!c#%
a) 5or e)ecution of off market transaction i.e. transactions 'etween two
accounts on mutually agreea'le terms$ i.e. a transaction done on a
person-to-person 'asic$ without going through the stock e)change
mechanism.
37
') 5or settling on market trades i.e. trades done 'y the in%estors through
stock e)change mechanism and settled using the settlement
mechanism of the same e)change.
c) 5or inter depository transfers i.e. transfer of securities from an account held
in one depository to an account held in the other depository.
5or transfer of securities$ /2 is required to su'mit a duly filled in
instruction slip$ in the format specified 'y C*"1$ to his ( her *P for
e)ecution. #his instruction slip can 'e used for transfer of securities
necessitated due to any of the a'o%e reasons.
/ooklets of instruction slips are issued to the /2 after an account has
'een opened. #he instruction slips ha%e the /2 I* and a serial num'er pre-
printed on them. #he *P is required to keep a proper record in respect of the
range of serial num'ers of the instruction slips issued to each /2.
#he /2 should su'mit the instruction slip$ duly filled in and signed 'y
all -oint holders or a duly constituted P2, (if any$ to the *P. #he /2 should
clearly specify the type of transaction for which the instruction slip is
su'mitted. ,ny alternations( modifications to the instruction slips already
signed 'y the holder(s) should 'e again authenticated 'y the holder(s).
38
OFF-MAR3ET TRANSACTIONS:
2ffNarket transaction can 'e used for transfer securities from
1. 2ne /2 account to other /2 ,ccount
!. /2 account to C account for pay-in
3. C account to /2 account for pay-out
#he seller /2 will su'mit a duly filled in instruction slips$ gi%ing details
of the 'uyer /2$ I"IN. :uantity etc.$ to the *P. 2n receipt of the
instruction slip$ the *P will %erify the same and enter the off-market
instruction in the C*"1 system. If the 'uyer /2 has not gi%en one time
standing instruction i.e. purchase wai%er$ the 'uyer /2 will 'e
required to gi%e receipt instruction to his *P for recei%ing securities in
the account.
#he instruction entered 'y the *P will 'e e)ecuted in the 6e)ecution
date6 as specified 'y the /2 in the instruction slip. ,t the time of
e)ecution$ if sufficient 'alances are present in the seller /2 account$ the
account will 'e de'ited and corresponding credit will 'e gi%en in the 'uyer
/2 account.
If the 'alance in the seller /2 account is insufficient$ the instruction
will remain in the 62%erdue6 status. 5or all instructions will 62%erdue6
status$ C*"1 system will check for a%aila'ility of 'alances at pre-defined
inter%als till the end of the e)ecution date (till +2*). ,t the end of day of
39
the e)ecution date$ if 'alances are still insufficient the instruction will 'e
marked as failed.
ON MAR3ET TRANSACTIONS:
In%estors 'uy ( sell securities on the trading platform pro%ided 'y the
stock e)changes through "+/I registered Cs. #he day on which the trade
is e)ecuted is called as the #rading day or the 6#6 day. 2n recei%ing
confirmation$ from the C$ of e)ecution of the trade$ the 'uyer /2 has to
deli%er the funs (money) to his ( her C and the seller /2 has to deli%er the
securities to his ( her C. #he C deli%ers the funds and the securities
recei%ed from the /2 to the CB ( CC of the stock e)change 'efore the
stipulated time specified 'y the stock e)change.
#he Ch ( CC of the stock e)change then deli%ers the securities to the
'uying Cs and funds to the selling Cs$ who ha%e e)ecuted trades on
'ehalf of their clients.
#he acti%ity of the CB ( CC of the stock e)change of deli%ering funds
and securities to the respecti%e sellers ( 'uyers is known as 6"ettlement of
market trades6. #he date on which settlement takes place is known as
6"ettlement date6.
#he process of deli%ery of securities 'y the seller C to the CB ( CC
for settlement is known as 6Pay-in of securities6 and the process of deli%ery
of securities 'y the CB ( CC to the 'uyer C is known as 6Pay-out of
securities6. Pay-in and Payout of securities takes place at predetermined
timings decided 'y the stock e)changes.
40
"ettlement of on market trades is currently done on a #I! 'asis i.e.
settlement takes place on !
nd
working day after the trade has 'een e)ecuted
'y the C.
ADVANTAGES OF DEMAT:
#ransacting the depository way has se%eral ad%antages o%er the
traditional system of share certificates.
1. #he in%estor can a%oid the e)pense of applying for duplicate
certificates in case of loss ( mutilation of certificates.
!. #rading in demat segment completely eliminates the risk of 'ad
deli%eries$ which in turn all cost and wastage of time associated with
follow up for rectification.
3. #he in%estor can also recei%e your 'onuses and rights into your
depository account as a direct credit$ thus eliminating risk of loss in
transit.
;. In case of transfer of electronic shares$ 9.8O can 'e sa%ed in stamp
duty.
8. Cost of delay(courier(neutrali&ation the need for further follow up
with the clearing mem'er for shares returned for company0s o'-ection$
which happens only in case of physical securities scan$ 'e a%oided.
41
=. 5acilitation of cash corporate actions such as di%idends. C*"1
pro%ides details of 'eneficial owners as on a gi%en day (the record
date) to the issuer company(registrar so as to ena'le the company to
Calculate the 'enefits arising out of these ho?1dings. #he company0s
registrar and transfer agents forward the cash 'enefits to the in%estor
directly.
>. 1ending and 'orrowing of securities. , client either a lender or a
'orrower$ ha%ing a 'eneficiary account with the *P can lend or
'orrow securities in electronic form through an appro%ed
intermediary$ who has opened a special intermediary account with a
*P.
@. #he creation of lend('orrow instruction will 'e initiated 'y
lender('orrower respecti%ely through his *P.
?. In%estor can e)pect a lower interest charge for loans taken against
demat shares as compared to the interest for loan against physical
shares.
42
REMATERIALISATION:
DEFINITION:
4ematerialisation is the process of con%erting securities$ held in a
demat account (i.e. electronic form) to physical form. , /2 (/eneficiary
2wner) intending to con%ert the securities into physical form su'mits a
*emat request to the *P in a 4ematerialisation 4equest 5orm (445).
*P %erifies the information on the 445 and enters the details in the
system to setup a request electronically. #he system generates a unique
serial num'er called as 4ematerialisation 4equest Num'er (44N)$ which
can 'e used for future reference. #he *P sends the 445 to the concerned
Issuer(4#,.
If the *emat request is in order$ the Issuer(4#, appro%es the same and
confirms the 44N electronically to C*"1. 2n recei%ing such confirmation$
C*"1 de'its the /2 account. Physical certificates are sent 'y the
Issuer(4#, directly to the in%estor.
43
STEPS:
1. #he in%estor request for the physical certificate to its *epository
Participants through 4emat 4equest 5orm (445)
!. #he *epository Participants will inform the *epository of the request.
3. #he *epository Participants in turn will also appraise the
4egistrar (#ransfer agents
;. #he depository will forward the same request to the 4 A # ,gent
8. #he 4egistrar ( #ransfer agents after printing the physical certificates
will update the *epository.
=. #he depository will update the *epository Participants
>. #he physical certificates are sent to the in%estors directly 'y the
4egistrars.
44
ACTION BY BO
, /2 who wishes to ha%e 'alance in his demat account in C*"1$
remateriali&ed$ has to fill up a 445 in duplicate$ sign it and su'mit the same to
his *P. 445 should 'e signed 'y all holders ( P2, (if any).
#he /2 may specify on the 445 that all the quantity to 'e included in
only one certificate (Eum'o 1ot) or the certificates may 'e for marketa'le
losts. "eparate 445 is to 'e su'mitted for remat of free quantity and quantity
under lock-in$ if lock-in is for different reasons then a separate 445 is to 'e
su'mitted for each lock-in reason.
ACTION BY DP
2n receipt of 445 from the /2$ the *P %erifies the details mentioned
in the 445 with the /2 details maintained with C*"1. "ufficient 0free
'alance0 or 0lock-in 'alance0 must e)ist in the account for remat.
"ignature(s) of the /2(s) or P2, holder should match with those recorded
with the *P.
If all the details on the 445 are correct then the same are entered in
the C*"1 "ystem 'y the *P on the same day or latest 'y the ne)t working
day from the date of receipt of 445. 7hen the request is set up$ C*"1
system generates a unique 4ematerialisation 4equest Num'er (44N) for
each remat request.
45
2nce a remat request is set up$ the 'alances in the demat account are
'locked and such securities cannot 'e transferred. *P records the 44N on
the 445 and authori&es the 445 with his seal and signature. #he *P retains a
copy of the 445 for his records and sends the original 445 to the Issuer (
4#, with other documents$ if any.
#he *P must ensure that the remat request is sent to the Issuer(4#,
within two working days of request recei%ed from the /2 and is honored
with a period of 39 days from the date of physical receipt of the 445 'y the
Issuer(4#, .
ACTION BY ISSUER 1 RTA
2n recei%ing the physical documents$ the Issuer ( 4#, access the
electronic request from C*"1 system and %erify the details as per 445. If
the remat request is accepta'le$ Issuer ( 4#, confirm the same electronically
through the C*"1 system de'its the /2 account with quantity accepted for
*emateriali&ation.
2n %erification$ if the details do not match$ the Issuer ( 4#, will
electronically intimate the re-ection of 445 and send the re-ected 445 to the
*P$ along with all the documents$ for necessary correction ( rectification.
5or the re-ected 445$ the *P will carry out the necessary rectification in
consultation with the /2 and set up a fresh remat request.
46
A REMATERIALISATION RE8UEST MAY BE REJECTED FOR
REASONS SUCH AS
1. #he details gi%en in 445 do not match with electronic intimation recei%ed
!. #he 445 is incomplete
3. #he documents are sent to wrong 4#, ( Issuer
;. Necessary documents do not accompany the 445
5or all accepted remat requests$ the Issuer ( 4#, take the following
particulars on record 'ased on 445
1. Name of Bolder(s)
!. 5ather0s Name(Bus'and0s Name of the first holder
3. ,ddress
;. P,N
8. #a) "tatus
=. ,ge
>. /ank ,ccount Num'er
@. Name of the Company
?. :uantity of securities remateriali&ed
19. "ignature of all the Bolders mentioned in the 445
11. 7hether the securities are under lock-in$ if yes$ then the period up to
which such securities are under lock-in and reasons for such lock-in
47
1!. +)isting 5olio N2.$ if any
13. If P2, holder operates the /20s account$ the true copy of the P2,
also will 'e taken on record.
1;. 2ther documents$ if any #he Issuer ( 4#, generate a folio num'er for
the /2 or gi%e the e)isting folio num'er$ if the /2 is already holding
the same type of securities of the same Issuer in the physical form.
#he Issuer ( 4#, record the name of the /2 as the 4egistered 2wner(s) of
the remateriali&ed securities. #he Issuer ( 4#, print the certificates in the
name of 4egistered 2wner(s) and dispatch the same to the /2.
#he Issuer ( 4#, inform all the stock e)changes$ where the securities
are listed$ a'out the news certificate num'ers$ distincti%e num'ers of the
remateriali&ed securities (as per the requirements of the %arious stock
e)changes). "uch a certificate should also 'e issued to C*"1 on a quarterly
'asis.
48
INTRODUCTION TO DEPOSITORY
WHAT IS A DEPOSITORY9
#he *epositories ,ct defines a depository as 6a company formed and
registered under the Companies ,ct$ 1?8= and which has 'een granted a
certificate of registration under su'-section (1,) of section 1! of "ecurities
and +)change /oard of India ,ct$ 1??!.6
THE DEPOSITORIES ACT:
#he *epositories ,ct$ 1??=$ ushered in an era of efficient capital
market infrastructure$ impro%ed in%estor protection$ reduced risks and
increased transparency of transactions in the securities market. It also
immensely 'enefited the issuer companies$ in terms of reduced costs and the
effort e)pended in managing their shareholder populace. Perhaps$ no other
single act other than the depositories ,ct has had such profound all round
impact on e%ery single stakeholder in the Indian capital markets.
#his legislation en%isaged multiple depositories in India to ensure
'enefits of competition for then users of the depository system. #he
*epositories ,ct which facilitated esta'lishment of depositories (like
C*"1) in India sought to effecti%ely cur' such irregularities$ and
protect the interests of the in%estors$ and pa%ed a way for an orderly
conduct of the financial markets through free transfera'ility of securities
with speed$ accuracy$ transparency etc.
49
ue to the introduction of the depository system$ the in%estors are a'le
to en-oy many 'enefits like free and instant transfera'ility in a secured manner
at lower costs$ free from the pro'lems like 'ad deli%eries$ odd-lots etc.
#oday the trada'le lot is reduced to 6one unit6 hence e%en a common
man is a'le to in%est money in one equity share or 'ond or de'enture. #he
in%estor is a'le to sa%e a lot on account of stamp fee as go%ernment has
e)empted stamp duty on transfer of securities at present. In%estors are also
spared from the pro'lems of preser%ing the securities held in physical form
VARIOUS SERVICES OFFERED BY A DEPOSITORY:
, depository in India cannot open a demat account of an in%estor and (
or pro%ide ser%ices to such a person directly. 5or opening a demat account or
a%ailing the ser%ices offered 'y the depository$ a person is required to
approach a *epository Participant (*P) who is an agent of the depository$
complete the account opening formalities as per the "+/I regulations$
*epository 'yelaws.
#hereafter$ the in%estor can recei%e securities in the demat account as
well as tender the securities held 'y him ( her in physical form for
demateriali&ation to the *P (as e)plained in the su'sequent part) and hold the
same in 'ook-entry form in the account.
7hen an in%estor holds securities in physical form$ his ( her name
is recorded as registered owner in the 'ooks of the company. ,s per the laws
currently in force in India$ when the securities are con%erted in electronic
form 'y way of demateriali&ation$ name of the depository is registered in the
'ooks of the company as registered owner.
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Bowe%er$ the in%estor continues to 'e the real owner of the securities
and is entitled to recei%e all the 'enefits such as di%idend$ interest$ 'onus
shares etc. in respect of the said security and as such is called as /eneficial
2wner (/2) under the depository system.
#oday 6demat6 has 'ecome a common word. #he institutional and
indi%idual in%estors spread all o%er India are found to 'e making an
e)tensi%e use of the depository participant ser%ices for holding their
securities in electronic form.
FUNCTIONS OF DP:
COMMON FUNCTIONS FOR DP AND RTA:
:.TRANSFER FILES1 UPDATE DATABASE:
C*"1 system parameters are defined and set up from a central point
and are stored in the Bost system. #hese parameters are the 'ase on which
user specific parameters are set up$ as such these are required uni%ersally to
all *P(4#, systems. #his module facilitates the transfer of such parameters to
all *P(4#, systems. #his is to 'e done only once in a day -ust after the user
logs in.
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;. DATABASE ADMINISTRATION:
#he *ata'ase ,dministration module can 'e used set-up authori&ed
users. It also allows user to set up 7orkstation(s)$ Courier information and
Printer.
<. MASTER FILES:
aster files module is used to inquire the master files. , user can only
inquire the master data for the following 'asic master ta'les such as list of
I"IN$ *Ps$ Issuers$ 4#,s$ Bolidays$ +)changes$ "ettlement calendar etc.
Information in these files is updated 'y C*"1.
=. REPORT SCHEDULER:
#his module helps user to generate %arious reports for aster files
such as list of I"INs *Ps$ Issuers$ 4#,s$ Bolidays$ +)changes$ "ettlement
calendar etc.
>. NON-FINANCIAL HISTORY:
#his inquiry module gi%es the complete audit trail of changes made
and the transactions causing the changes. 2nly those transactions are
reflected which do not affect the holdings of a particular /2-I"IN account.
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?. RECOVER TRANSACTION INFORMATION:
#his module is used to reco%er /2I*s and user details in case of
reinstallation of the C*1" system.
C Indicates communication gateway status.
R Indicates workstation registration status.
S Indicates user0s sign-on status.
@. OPERATOR CONC8LE:
T*% .o4/+# 6"o04#% (o++o,!- (/!c)o!%:
1. #wo way communications 'etween the front end and the 'ack
end.
!. *ownloading of reports at the front end.
A. HOST REPORT MANAGER:
#his option allows the user to manager the transaction reports. It
pro%ides facilities for %iewing$ printing$ copying of the reports. <ser can
download daily I"IN rate files for 'illing acti%ity in 'ack office. <ser can
also download %arious communiques sent 'y C*"1 to *P ( 4#,. #his
module is also used for pulling reports.
B. REPORT PARAMETERS:
#he module is used to set up different request reports 'y using
parameters such as sort criteria$ filter criteria etc. #his module also
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pro%ides facility to generate 2n-line reports for acti%es such as holding
statement for his /20s$ Inter depository transactions and transaction
-ournal.
:C. END OF DAY DEODE SCHEDULER
+2* can 'e declared using this module. #he other options are *"
Purge and *ata'ase /ackup.
::. SIGNATURE DOWNLOAD:
#his module allows the user to download signatures of /2s and their
P2,s for 'ack office acti%ity.
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CHAPTER-V
CONCLUSION
55
#he study re%ealed to us that 6*emateriali&ation of "hares6 has 'rought a'out re%olutionary
changes like.
Immediate transfer of shares$ there'y minimi&ing time
No "tamp duties on transfer shares
+limination of risk with physical certificates such as 'ad deli%ery$
5ake certificates etc.$
#hough there are certain shortcomings like.
2%erload of work due to hea%y transactions
1ack of necessary infrastructure and personnel at the depository
participant.
It can 'e taken for sure that these shortcomings will 'e o%ercome in the ne)t few
years and this process will contri'ute towards the making of more efficient and in%estor friendly
market.
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BIBLIOGRAPHY
Gathered information from r. B,4E P,4#B,",4,#BI of
<"B,CI4,N 5IN,NC+ 1td
4eferred related articles$ references$ -ournals and certain we'sites.
aterial pro%ided 'y P.C." "ecurities 1td.
W#& S)#%:
www.8paisa.com
www.googlesearch.com
www.nationalstocke)change.com
www.moneycontrol.com
www.sdls.com
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APPENDICES
Acco/!) C+o%/"#: , /2 wanting to close a demat account held with any
*P shall make an application in the specified format. #he /2 may close its
account if no 'alances are standing to its credit in the account. In case any
'alance e)ist$ then the account may 'e closed 'y rematerialisation of all its
e)isting 'alances in its account and ( or$ 'y transferring its security 'alances to
its other account held either with the same *P or with a different *P. #he *P
ensures that no transactions should 'e pending for the account
A((4$0) . is any written document in which then signer swears under oath
'efore a notary pu'lic or someone authori&ed to take oath that the statements
in the document are true
B#!#(c$"' Acco/!): ,n in%estor or a 'roker who wants to hold shares in
demat form and undertake scripless trading must ha%e a depository account
called 'eneficiary account with *P of his choice.
BO: #he "tock e)change$ um'ai also known as /"+ is one of the oldest
stock e)changes in ,sia with o%er =$999 stocks listed.
Co"6o"$)# Ac)o!: includes any action relating to payment of interest$
di%idend$ redemption$ warrants$ 'onus$ merger$ split$ amalgamation and any
such other action time to time.
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Co"6o"$)# B#!#()%: means 'enefits like di%idends$ interest$ 'onus shares$
rights$ preferential allotments$ warrants$ discount coupons$ redemption at
premium and such other 'enefits$ accruing from time to time from the issuer
to the /2 in respect of the securities held 'y such /2.
DRF: In order to demateriali&e his physical shares the in%estor (registered
owner) su'mits a request to the *P in the *emateriali&ation 4equest 5orm
(*45) along with the certificates of securities to 'e demateriali&ed.
DRN: Is a unique num'er generated 'y C*"1 system when a demat request
is set up.
D#6o%)o"': , *epository is an organi&ation where the securities of an
in%estor are held in electronic form$ at the request of the in%estor through the
medium of a *P. It is a company formed and registered under #he
Companies ,ct$ 1?8= and which has 'een granted a certificate of
registration under the rele%ant sections of the "+/I ,ct$ 1??!
D#6o%)o"' P$")c6$!): Is an agent of the depository and is authori&ed to
offer depository ser%ices to the in%estors. ,ccording to "+/I guidelines$
financial institutions$ 'anks$ custodians$ stock'roker0s etc. can 'ecome *P
of a depository
E+#c)"o!c P/&+c O((#"!- DEPOE: ,n initial pu'lic offering$ or new issue of
shares$ in which the process of applying for shares is handled
electronically (%ia 7e'site).
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I!)$+ P/&+c O((#"!- DIPOE: #he first offering of a company0s shares to
the pu'lic. #he shares offered may 'e e)isting ones held pri%ately$ or the
company may issue new shares to the pu'lic.
I!)#" D#6o%)o"' T"$!%(#"%: Inter depository transfer means transfer of
securities$ which are admitted$ for demat on 'oth the depositories from an
account held in one depository to an account held in the other depository.
ISIN: eans International "ecurities Identification Num'er (I"IN) is a code
that uniquely identifies a specific security$ which is allocated at the time of
admitting the same in the depository system.
I%%/#: means the num'er of shares of a company on sale to the pu'lic at a
gi%en time.
I%%/# P"c#: means the price at which a company0s shares are offered to the
market for the first time. 7hen they 'egin to 'e traded$ the market price may
'e a'o%e or 'elow the issue price
IRF: In%ocation 4equest 5orm
PAN: means Permanent ,ccount Num'er issued 'y Income #a) *epartment
RRF: 4ematerialisation 4equest 5orm.
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R#-%)"$" $!4 T"$!%(#" A-#!) DRTAE . eans a registrar to an issue of any
securities and(or a transfer agent in respect of any securities appointed 'y the
Issuer on its 'ehalf who has 'een granted the certificate of registration 'y the
"ecurities and +)change /oard of India under "u'-section(l) of "ection 1!
of the "ecurities and +)change /oard of India ,ct$ 1??!
T"$!%(#"$&+)' o( S*$"#%: "hares in a company are freely transfera'le$
su'-ect to certain conditions$ such that no shareholder is permanently or
necessarily wedded to a company. 7hen a mem'er transfers his shares to
another person. #he transferee steps into the shoes of the transferor and
acquires all rights of the transferor in respect of those shares. 5or
demateriali&ed shares the *P de'its and credits the account of the /2 with
an authori&ation from such /2
Z#"o &$+$!c#: ,lso known as nil 'alance$ a situation when a depository
account has no securities in it. , /2 account may 'e opened with any *P
e%en with &ero 'alance
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