A STUDY ON

Demat accounts in Banks with Reference to HDFC Bank

SEMESTER V
Bachelor of Commerce Banking and Insurance

SUBMITTED BY
Dalton Souza
ROLL No: 8210

UNDER THE GUIDANCE OF:
PROF. SAVINA SHENOY


ST. ANDREWS COLLEGE OF ARTS, COMMERCE AND SCIENCE
2014-2015





DECLARATION

I, DALTON DSOUZA, Roll No. 8210 of ST .Andrews College Bandra, in The
Third Year B.Com (Banking and Insurance) Semester V hereby declare that I have
completed the research report on the topic DEMAT ACCOUNTS IN BANKS
WITH REFRENCE TO HDFC BANK for the academic year 2014-2015. The
information submitted herein is true and original to the best of my knowledge

Stamp of college Signature of student




(St .Andrews college of Arts, (DALTON DSOUZA)
Commerce, science and
Management)



Signature of co-coordinator Signature of external examiner


CERTIFICATE

I, SAVINA SHENOY, hereby certify that the following student of St. Andrews
college of T.Y.B.B.I semester V has completed his Research Report on DEMAT
ACCOUNTS IN BANKS WITH REFRENCE TO HDFC BANK For the
academic year 2014-2015 information submitted is true and original to the best of
my knowledge.




Signature of project guide Signature of external examiner





Signature of co-coordinator Signature of principal
College seal



ACKNOWLEDGEMENT

It gives me immense pleasure in acknowledging the valuable and co-operative
assistance extended to me by the various individuals who have helped me
successfully in completing this project.

First of all I would like to show my gratitude to my guide Professor SAVINA
SHENOY for her assistance, encouragement and support on the topic DEMAT
ACCOUNTS IN BANKS WITH REFRENCE TO HDFC BANK.

I would like to thank my parents, friends and colleagues who have supported me
during the making of this research report. The information provided by them has
helped me gain practical understanding of the subject

I would like to thank the Mumbai University for giving me the Opportunity to
carry out the research.








Executive Summary:

The commencement of E-Trading and Demat has transformed the capital market in India. 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 bank, broker, stock exchange and depository participants. This helps to get rid
of the painstaking procedure of investing in stock exchange. Today, if one wants to invest in
stock market, he has to contact a broker on phone or meet him personally to place order.

A broker generally gives such importance and additional service only to high net worth
customers. But the introduction of Internet trading, even a common or a small investor gets an
opportunity to avail the service at an affordable price which is much lesser than what is charged
by a physical broker over the phone. Online trading has given customer a real time access to
account information, stock quotes elaborated market research and interactive trading. The
prerequisites of Internet trading are a computer, a modem and a telephone connection,
registration with broker, a bank a/c and depository account.

Despite the advantages of Dematerialization, the awareness levels among the investors relating
to demat account is not adequate because of numerous reasons. The investors are not sufficiently
responsive of the concept of Demat account and the various financial institutions providing such
services







Objectives of the Study:

To know The role of Demat Account

To know the Procedure Of opening a Demat Account

To understand the procedure of demat accounts in HDFC














Research Methodology:

This Project Consists Of Two Parts.

PRIMARY DATA:
Primary data is that data which is collected for the first time and thus happens to be original in
nature In this study primary data will be collected from survey where in questionare was framed
and the respondants were 50.
SECONDARY DATA:
Secondary data are those which have already been collected by someone. For this study there
will be following secondary data:

A. Websites
B. Magazine
C. Articles and Newspaper
D. Books








INDEX:

SR NO

TITLE
PAGE NO.

1
Introduction

1-2
2 Meaning of depository
Constituents of depository
Working of depository system

3-7
3 Depository system at a glance

8-11
4 Depository act 1996
Objectives
Eligibility conditions
Fungibility
Rights of depository and beneficial owners
Pledge or hypothecation
Opetion to opt out
Bye laws
Contents of by laws

12-22
5 SEBI(depositories and participants) regulations 1996

23-25


6
Audit under SEBI regulations 1996

26
7
Basic services demat account
Features
Charges
27-28
8 Demat account
Documents required
Procedure for dematerialization
29-32
9
Benefits and disadvantages of demat account

33-34
10 Transfer of shares between depository participants
Fees involved

Security recommendations


35-37

11
Introduction to HDFC bank

38-39

12

Features of hdfc demat account
40-52

13

How to open demat account

53

14

Demat account tariff

54-56










15

HDFC vs. ICICI

57-59

16

Data interpretation and analysis

60-69

17

conclusion

70

18

Recommendations

71
1

INTRODUCTION:

The trading on stock exchanges in India used to take place through open outcry without the use
of information technology for immediate matching or recording of trades. This was time
consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to
provide efficiency, liquidity, and transparency, NSE introduced a nationwide online fully
automated screen based trading system where a member can punch into the computer quantities
of securities and the prices at which he likes to transact and the transaction is executed as soon as
it finds a matching sale or buy order from a counter party. Screen based electronic system
electronically matches orders on a strict price/time priority and hence cuts down on time, cost
and risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster
incorporation of price sensitive information into prevailing prices, thus increasing the
informational efficiency of markets. It enables market participants, irrespective of their
geographical locations, to trade with another simultaneous, improving the depth and liquidity of
the market. It provides full anonymity by accepting orders, big or small from members without
revealing their identity, thus providing equal access to everybody. It also provides a perfect audit
trial, which helps to resolve disputes by logging in the trade execution process entirety. The
sucked liquidity from other exchanges and in the very year of its operation, NSE became the
leading stock exchange in the country impacting the fortunes of other exchanges and forcing
them to adopt SBTS also. Today India can boast that almost 100% trading takes place through
electronic order matching.

Now dematerialization of shares introduced a new concept which converts paper based physical
trading into electronic trading. It is a safe and convenient way to hold securities. Screen based
trading system helps in faster transfer of securities and no stamp duty is required on transfer of
securities. The trading system operates on a strict price time priority. All orders received on the
system are sorted with the best priced order getting the first prosperity for matching i.e. the best
buy order match with the best sell order. Orders are matched automatically by the computer
keeping the system transparent, objective and fair. The trading system provides tremendous
2

flexibility to the users in terms of kinds of orders that can be placed on the system. The trading
system also provides market information online.
In order to promote dematerialization of securities, NSE joined hands with the leading financial
institutions to establish the national securities depository Ltd (NSDL), the first depository in the
country with the objective of enhancing the efficiency in settlement systems as also to reduce the
menace of fake/forged and stolen securities. This has ushered in an era of dematerialized trading
and settlement. SEBI has made dematerialized settlement mandatory in an ever increasing
number of securities in a phased manner, thus bringing about an increase in the proportion of
shares delivered in dematerialized form. There is an increasing preference to settle trades,
particularly in high value securities, in demat form. Such high level of demat settlement
reassures success of rolling settlement.













3

Meaning of Depository:

The term Depository means a place where something is deposited for safekeeping; a bank in
which funds or securities are deposited by others, usually under the terms of a specific depository
agreement. Though the terms depository and depository in banking are not synonymous they
have come to be used interchangeably in banking. Depository means one who receives deposit
of money, securities, instruments, or other property; a person to whom something is entrusted; a
trustee, a person or group entrusted with the preservation or safekeeping of something.
Depository means an organization where the securities of a shareholder are held in the form of
electronic accounts in the same way as a bank holds money. The Depository holds electronic
custody of securities and also arranges for transfer of ownership of securities on the settlement
dates. According to section 2(e) of the Depositories Act, 1996, Depository means a company
formed and registered under the Companies Act, 1956 and which has been granted a certificate
of registration under section 12(1A) of the Securities and Exchange Board of India Act, 1992.
As per section 2(10) of the Companies Act, 1956, a company means a company as defined in
section 3 of the Act. According to section 3 company means a company formed and registered
under the Companies Act, 1956. A depository cannot act as a depository unless it obtain
certificate of commencement of business from SEBI. All the securities held by a depository shall
be dematerialized and shall be in a fungible form. A depository is not a mere custodian of
securities but it can be compared to a bank. If an investor wants to utilize the services offered by
a depository, the investor has to open an account with the depository through a participant,
similar to the opening of an account with any of the bank branches to utilize services of that
bank. Registration of the depository is required under SEBI (Depositories and Participants)
4

Regulations, 1996 and is a precondition to the functioning of the depository. Depository and
depository participant both are regulated by Securities and Exchange Board of India.


Constituents of Depository
The constituents of a depository are as under
Issuer or company
Issuers registrar
Depository participant
Clearing members
Clearing House / Clearing corporations
Investors
Depository interfaces with all the above, directly or indirectly.






5

Depository System

In a Depository system, securities are held in securities accounts. This is more or less similar
to holding funds in bank accounts. Transfer of ownership of securities is done through simple
account transfers. This method does away with all the risks and hassles normally associated
with the paperwork. According to SEBI (Issue of Capital & Disclosure Requirements)
Regulations, 2011, a company cannot make public or rights issue or an offer for sale of
securities, unless the company enters into an agreement with a depository for
dematerialization of securities already issued or proposed to be issued to the public or
existing shareholders; and the company gives an option to subscribers / shareholders /
investors to receive the security certificates or hold securities in dematerialized form with a
depository. Section 68B of the Companies Act, 1956, introduced from 13.12.2000, provides
that every listed public company, making initial public offer of any security for a sum of Rs
10 core or more, shall issue the same only in dematerialized form. In the depository system
share certificates belonging to the investors are to be dematerialized and their names are
required to be entered in the records of depository as beneficial owners. Consequent to these
changes, the investors names in the companies register are replaced by the name of
depository as the registered owner of the securities. The depository, however, does not have
any voting rights or other economic rights in respect of the shares as a registered owner. The
6

beneficial owner continues to enjoy all the rights and benefits and is subject to all the
liabilities in respect of the securities held by a depository. Shares in the depository mode are
fungible and cease to have distinctive numbers. The transfer of ownership changes in the
depository is done automatically on the basis of delivery v. payment. In the Depository
mode, corporate actions such as IPOs, rights, conversions, bonus, mergers/ amalgamations,
subdivisions & consolidations are carried out without the movement of papers, saving both
cost & time. Information of beneficiary owners is readily available. The issuer gets
information on changes in shareholding pattern on a regular basis, which would enable the
issuer to efficiently monitor the changes in shareholdings.
There are two Depositories functioning in India, namely the National Securities Depository
Limited (NSDL) and the Central Depository Services (India) Limited (CDSL). Under the
provisions of the Depositories Act, these Depositories provide various services to investors
and other Participants in the capital market, such as, clearing members, stock exchanges,
investment institutions, banks and issuing corporate. These include basic facilities like
account opening, dematerialization, dematerialization, settlement of trades and advanced
facilities like pledging, distribution of non-cash corporate actions, distribution of securities to
allotters in case of public issues, etc. The Depository system links the issuing corporate,
Depository Participants (DPs), the Depositories and clearing corporation/ clearing house of
stock exchanges. This network facilitates holding of securities in the electronic form and
effects transfers by means of account transfers. The clearing corporations/houses of stock
exchanges are electronically linked to the Depository in order to facilitate the settlement of
the trades done on the stock exchanges for soft securities.




7

Working of Depository System:
The number of Companies signed up as at the end of March 2004 were 5,216 on NDSL and
4,810 on CDSL (see Table 8.1). The number of shares demat replaced were 8, 36,935 (laths) on
NDSL and 1, 40,100 (laths) on CDSL. The number of shares settled LU1der the demat form
were 4, 38,310 (laths) and 975 (laths) at NSDL and CDSL respectively; and the total value Rs.2,
78,425 cores and Rs.83, 715 cores. The market capitalization of companies admitted for demat
form was Rs.11, 07,084 of companies which have joined NSDL for demat of equity stock and
Rs.11, 92,263 cores on CDSL. Large number of bond and commercial paper instruments has also
been dematerialized. The total value of demoted bonds works out to Rs.2, 47,268 cores and Rs.
5,623 cores at NSDL and CDSL at end of March 2004, respectively. The size of commercial
paper demoted stood at Rs.10, 455 cores and Rs.396 cores at NSDL and CDSL respectively at
the end of March 2004. The location of depository participants is also presented in Depository
participants of NSDL is available at 242 locations while depository participants of CDSL have
their facilities at 108 locatives. Four locations account for 89.2% of NSDL participants; and
97.2% of CDSL participants

Working of Depositories (of equity shares only) 2003-04:
Particulars NSDL CDSL
2003-04
Companies signed up as on March 31
Demat: Quantity of shares (laths)
Total no. of shares settled in demat (laths)
Total value of shares settled in demat (Rs. cores)
Market capitalization of companies in demat
(Rescores)
5,216 4,810

8,36,935 1,40,100

4,38,310 975

2,78,425 83,715
11,07,084 11,92,263
8

Depository System at a Glance:
Following presentation about depositories reveal all about depositories, its concepts and trading,
i.e. models of depositories, Depository functions, Legal linkage, depository participant,
Registrars and issuers, dematerialization, dematerialization, electronic credit in new issues,
settlement of trades, corporate action, issuer concerns Models of Depository Modes of
converting physical securities in to electronic form Immobilization Where share certificates
are kept in vaults with the depository INTERNAL & CONCURRENT AUDIT OF
DEPOSITORY PARTICIPANTS Dematerialization No Physical scrip in existence, only
electronic records maintained by depository. This type of system is cost effective and simple and
is prevalent in India.
Depository Functions
Account opening
Dematerialization
Dematerialization
Settlement
Initial Public Offers (IPOs) corporate benefits
Pledging / Unplugging and Confiscation
Freeze and Unfreeze.
Depository Participant
Acts as an Agent of Depository
Customer interface of Depository
Functions like branch of a Securities Bank
Account opening
Facilitates dematerialization
Instant transfer on pay-out
Instant transfer of balance from one account to other account
Credits to investor in IPO, rights, bonus
9

Settles trades in electronic segment.
Registrar/Issuer
Dematerialization
Confirmation of Beneficiary Holdings
Corporate Actions Rights, Bonus, etc.
Reconciliation of Depository Holdings
Dematerialization.
Demat Account Opening
Investor opens account with DP
Adherence to KYC Norms prescribed by SEBI
DP - BO Agreement
Account opening form with supporting documents
In Person Verification - Individual category accounts
Data entry in the depository system
Confirmation to the investor
Subsequent account maintenance / Modification
Account closure.
Dematerialization
Fills Dematerialization Request Form (DRF) for registered shares
Investor lodges DRF and certificates with DP
DP intimates the Depository Electronically
Depository intimates Registrar/Issuer Electronically
DP sends certificates and DRF to Registrar/Issuer
Registrar/Issuer confirms demat to Depository
Depository credits investor a/c.
10

REMATERIALISATIION
Client submits Dematerialization Request Form (RRF) to DP
DP intimates Depository
Depository intimates the Registrar/Issuer Electronically
DP sends RRF to the Register/Issuer Electronically
Registrar/Issuer prints certificates and sends to Investor
Lock-in should be retained
Registrar/Issuer confirms remit to Depository
Investors account with Depository debited

Electronic Credit in New Issues
Investor opens account with Depository through DP
Submits application with option to hold securities in depository
giving DP-Id and Client-Id
Registrar verifies details of demat account with depository records
Registrar uploads list of allotters to Depository
Depository credits allotters account with DP
Refunds sent by Registrar as usual where securities are not
Allocated.
Settlement of Trades
Trading takes place at stock exchange platform
Trading Member to have Clearing Account with DP
Settlement as per Settlement Calendar of Stock Exchange
On specified time, depositories carries out pay-in of securities
through which securities are transferred from clearing member
accounts to clearing corporation / house of stock exchange and in
turn after due processing clearing corporation / house of stock
11

exchange provides pay out of securities to clearing member
Accounts.
Corporate Actions
Depository Issuer obtains holding report from depository as of record date or
book closure dates and based on the holding report
Dividends/cash benefits these benefits are directly forwarded
To the investors by the company or its registrar and transfer agent.
Non-cash benefits, viz. Bonus, Rights Issue, etc. these benefits
are electronically credited to the beneficial owners account through depository
.
Issuer Concerns
Safety of investors
Only institutions to be DPs
Adequate capitalization
Statutory indemnity
Built in system controls, audit trails, reconciliation
Back-ups, disaster recovery
Compliance procedures
Status of beneficial owner deemed member under Companies
Act.




12

The Depository Act, 1996:


Reduction of settlement risks and of settlement cycles is the basic requirements for upgrading the
existing trading system into a modern one. Severe infrastructme bottlenecks have often come in
the way of upgrading the Indian clearing and settlement system. These bottlenecks have become
more pronounced with a growing number of investors and consequent increase in trading
infrastructure to keep up with the flow of paper in settlement cycles and move to rolling
settlement. The Depositories Act, 1996 allows for dematerialization (and dematerialization) of
securities in depositories and the transfer of securities through electronic book entry. The Act
provides for multiple depository system. This will help in reducing settlement risks and
removing some of the infrastructure bottlenecks. The dematerialized securities will be fungible,
meaning thereby that they will not have any distinctive numbers or specific identification. As the
network of depositories expands and the proportion of securities dematerialized increases, the
benefits would percolate to the vast majority of market participants. This is expected to lead to
better investor service and investor protection.


OBJECTIVES:

The depositories legislation as per the statement of objects and reasons appended to the
depositories act 1996 aims at providing for:
13


A legal basis for establishment of depositories to conduct the task of maintenance of
ownership records of securities and effect changes in ownership records through book entry.

Dematerialization of securities in the depositorys mode as well as giving option to an
investor to choose between holding securities in physical mode and holding securities in
dematerialized form in a depository.

Making the securities fungible.

Making the shares, debentures and any interest thereon of a public limited company freely
transferable

Exempting all transfers of shares within a depository from stamp duty.


ELIGIBILITY CONDITION FOR DEPOSITORY SERVICES:

Any company or institution to be eligible to provide depository services must:

Be formed and registered as a company under the companies act 1956

Be registered with SEBI as a depository under the SEBI act 1992

Has framed bye-laws with the previous approval of SEBI

Has one or more participants to render depository services on its behalf

Has adequate systems and safeguards to prevent manipulation of records and transactions
to the satisfaction of SEBI
14


Complies with depositories arc 1996 and SEBI (depositories and participants) regulations
1996

Meets eligibility criteria in terms of constitution, network, etc




FUNGIBILITY:
Section 9 states that securities in depositories shall be in fungible form.

The act envisages that all securities held in depository shall be fungible i.e. all certificates of the
same security shall become interchangeable in the sense that investor loses the right o obtain the
exact certificate he surrenders at the time of entry into depository. It is like withdrawing money
from the bank without bothering about the distinctive numbers of the currencies.

Immobilization of securities in a depository mode refers to a situation where the depository holds
securities in the form of physical paper side by side with electronic evidence of ownership. In
such a case the transfers are not accompanied by physical movement of securities but securities
are in existence in the custody of the depository. However the depositories act envisages
dematerialization in the depository mode. In such a case the securities held in a depository shall
be dematerialized and the ownership of the securities shall be reflected through book entry only.
The securities outside the depository shall be represented by physical scraps. Hence the
depository legislation envisages partial dematerialization i.e. portion of the securities in
dematerialized form and the other portion in physical form





15

RIGHTS OF DEPOSITORIES AND BENEFICIAL OWNER:



A depository should be deemed to be the registered owner for the purposes of effecting transfer
of ownership of security on behalf of a beneficial owner. The depository as a registered owner
should not have any voting rights or any other gifts in respect of securities held by it. The
beneficial owner is entitled to all the rights and benefits and be subjected to all the liabilities in
respect of his securities held by a depository.

PLEDGE OR HYPOTHECATION OF SECURITIES HELD IN A
DEPOSITORY:

A beneficial owner may with the previous approval of the depository create a pledge or
hypothecation in respect of a security owned by him through a depository. Every beneficial
owner should give intimation of such pledge or hypothecation to the depository participant and
such depository is required to make entries in its records accordingly. Any entry in the records
off a depository should b evidence of a pledge or hypothecation.


16

OPTION TO OPT OUT IN RESPECT OF ANY SECURITY:

Section 14 of the act provides that if a beneficial owner seeks to opt out of a depository in
respect of any security he should inform the depository accordingly. After the receipt of
intimation the depository should make appropriate entries in its records and also inform the
issuer. Every issuer may within thirty days of the receipt of intimation from the depository and
on fulfillment of such conditions and on payment of such fees as may be specified by the
regulations, issue of the certificate of securities of the beneficial owner or the transferee, as the
case may be.



BYE-LAWS OF A DEPOSITORY:

Depository is required to frame its bye-laws with the prior approval of SEBI consistent with the
provisions of the act and the regulations made by SEBI there under. SEBI has however the
power to direct the depository to amend or revoke any bye-laws already made, wherever it
considers expedient to do so. If the depository fails or neglects to comply with the directions of
SEBI, SEBI may make the bye-laws or amend or revoke the bye-laws on its own.

CONTENTS OF THE BYE-LAWS:

As per sub-section 2 of section 26 of the act the bye-laws of a depository would include:

The eligibility criteria for admission and removal of securities in the depository.

The conditions subject to which the securities shall be death with.

The eligibility criteria for admission of any person as a participant.

17

The manner and procedure of dematerialization of securities.

The procedure for transactions within the depository.

The manner in which securities are to be dealt with or withdrawn from a depository.

The procedure for ensuring safeguards to protect the interests of participants and
beneficial owners.

The conditions pouf admission and withdrawal from a participant by a beneficial owner.

The procedure for conveying information to the participants and beneficial owners on
dividend declaration, shareholder meetings and other matters of interest to the beneficial
owners.

The manner of distribution of dividends, interest and monetary benefits received from the
company among beneficial owners

The manner of creating pledge or hypothecation in respect of securities held with a
depository.

Inter-se rights and obligations among the depository, issuer, participants and beneficial
owners.

The manner and the periodicity of furnishing information to SEBI, issuer and other
persons.

The procedure for resolving disputes involving depository, Issuer Company and
beneficial owner.

18

The procedure for proceeding against the participant committing breach of the
regulations and provisions for suspension and expulsion of participants from the
depository and cancellation of agreements entered with the depository.

The internal control standards including procedure for auditing, reviewing and
monitoring


ACTIVITIES OF THE DEPOSITORY :
Activities of depositories are as follows :
Accepting deposit of securities for custody.
Marketing compuetrised book entry deleveries of securities which are immobilised in its custody
Creating computerised book entry pledges of securities in its custody
Providing for withdrawal of securities
Undertaking corporate actions like distribution of dividend and interest
Redemption of securities on maturity

DEPOSITORY PROCESS
. lmmobllisation of Shares
Immobilisation of shares is the first step in the depository process. In the immobilisation process
the share certificates are submitted to the depository which converts the physical certificates into
electronic data and starts issuing statement of accounts for the holdings of the investors or
shareholders.

The steps involved in the process of converting the existing paper certificates into an electronic
mode are as follows:
19

1. The stock exchange will notify through an advertisement after which the investors may
deposit their shares into the Central Depository through an Authorised Depository Agent with
whom the investors' account will be maintained.
2. On receipt of the share certificate, the Depository or the Depository's Agent sends the
certificate to the Registrar and Transfer Agent for registering Depository Nominee's name.
3. Within a prescribed period, the Registrar will transfer the scrips, after confirming that the
shares are good for disposition, in the name of the Depository Nominee .The depository will
credit the account of the investor with the number of shares deposited.

TRADING IN A DEPOSITORY SYSTEM
When the investor sells his share, the Depository debits the 'Free Balance' of the seller and
credits the 'Available Balance' of the buyer for the scrip traded on the settlement day. After the
payment has been made by the buyer, the Available Balance will be converted into Free Balance
which can be traded by the buyer. It is like, a Share Bank where the balances are in the form of
different corporate entities' shares instead of currency. Confirmation statements are sent to the
investors after the accounts are adjusted or at stipulated intervals. The delivery and settlement
process will be the same as at present except that physical delivery will be replaced by a book
entry. The clearing and settlement process will take place in the separate wing of the depository
or in the different entity.


Transfer of Ownership
In the case of trade, ownership in the sha.res are transferred from one account to another. Other
than trade settlement, the transfer can also take place between the same investor's accounts with
the same Depository Agent. The investor may also transfer the shares to another account within
he same Depository Agent. Transfer of securities to immediate family member is also possible.
The transfer of shares can take place on account of the investor offering the shares as collateral
security for a loan. In this process, the institution's lien can be marked in the accounts. In case the
lien is marked the share will not be treated as a 'Free' and could not be available for trade. When
the loan is repaid, the lien is cancelled and therafter the shares will be available for trade.
20

Declaration of Dividend/Bonus/Rights Though the shares are in the names of the Depository
Nominee, the real owners are individuals or institutions. When a company declares
dividend/rights or bonus issues, the Depository will prepare the record of investors as on the
record date and submit it to the Registrar of Company. The dividend will be sent by the Registrar
after calculating the dividend payable to each investor directly. When a company declares bonus
shares, the Registrar will calculate the bonus entitlement and advise the Depository about the
number of shares to be credited to each account holder. In the case of the Rights offer, based on
the Record of Depositories, the Registrar will prepare a letter of offer and send it to the investor.
The Registrar will dvise the Depository the number of shares to be credited to each account on
the basis of the application and allotment. Based on this advise, the investor's account will be
credited by the Depository Reporting System.


DEPOSITORY SYSTEM IN INDIA

The agenda for capital market reform was set in motion by the government in tandem with the
policy of economic liberalisation. Modernisation of stock exchanges and related system and
procedures constituted an integral part of this programme. The stock exchanges inIndia were
characterised by lack of transparency, complex trading procedure and age old settlement system
resulting in inordinate delays and manifold risks. The settlement system called for physical
movement of share certificates in recording ownership changes in, the company books. The
serious risks associated with the paper based settlement system were bad deliveries, delays in
transfer and registration, mutilation, loss, for.gery and theft of certificates. The share transfer in
India takes place on an average about 2 months while in other countries it takes just a few days.
The inadequacies of the settlement mechanism were brought into sharp focus and highlighted on
several investors forums. There was a pressing demand to modernise the infrastructure and
introduce automated trading to bring Indian capital market at par with world standards.
Promulgation of the Depository Act, 1996 is one of the series of steps taken by the government
for removing the shortcomings of the present system. The depository system aims at replacing
the manual system of share transfer, settlement of transactions and physical delivery of shares by
21

a method of simple book entries. The system is envisaged to reduce the total time taken to
complete a transaction and ensure greater liquidity

NATIONAL SECURITIES DEPOSITORY LTD. (NSDL)



The first depository in India - The National Securities Depository Limited (NSDL) was
established in 1996. It has been promoted by the Industrial Development Bank of India, Unit
Trust of India and National Stock Exchange. NSDL started operations in November 1996 and
has made significant progress since then. NSDL performs a wide range of securities related
functions through the DPs: 1. Maintenance of individual investors' beneficial holdings in an
electronic form. 2. Dematerialisation and rematerialisation of securities. 3. Account transfer for
settlement of trade in electronic shares. 4. Allotments in the electronic form in case of initial
public offerings. 5. Distribution of non-cash corporate actions. 6. Facility for freezing/locking of
investor accounts. 7. Facility for pledge and hypothecation of securities. In the first 16 months of
its operation, 186 companies constituting over 50% of the total market capitalisation have signed
up agreements with NSDL to get their securities admitted for dematerialisation. A total of 163
crore shares valued at Rs. 19,600 crores have already been dematerialised.
According to NSDL, the dematerialisations volume has crossed Rs. 4,63,385 crores as on March
2001. There are 341 Depository participants operational as on March 2007 which are providing
services at about 1425 locations in India. Over 24 lakh clients have opened accounts with these
22

DPs. There are 5632 corporates which have signed agreements with NSDL of which securities of
6973 corporates as available for dematerialisation. Right now, seven stock exchanges - the NSE,
BSE, CSE, DSE, OTCEI, Ludhiana and Bangalore Stock Exchanges have established
connectivity with NSDL.



CENTRAL DEPOSITORY SERVICES (INDIA) LTD (CDSL)
The CDSL has been set up by Bombay Stock Exchange and co-sponsored by SBI, Bank of India,
Bank of Baroda and HDFC Bank. It commenced its operation on March 22, 1999. Upto March
2000, 680 companies made available their shares for demat. The market value of dematerialised
securities amounted to Rs. 8,188 crore. The number of beneficial owners stood at 28,545. As on
April 2008 there were 422 depository participants with 5,771 DP service centres. The number of
investors account was 52,68,932. 6063 companies made available their shares for demat as on
April 2008. There were 422 depository participants with 5771 DP service centres.













23

SEBI (DEPOSITORIES AND PARTICIPANTS) REGULATIONS 1996:




The depositories act requires that the registration of the depository, depository participant and the
custodian is mandatory with SEBI. These market intermediaries can function or commence
business only after registration from semi has been obtained and requisite fee paid to SEBI. The
requirement of registration is a continuing one and the moment the registration is cancelled or
revoked or surrendered the person shall cease o act as such.

These regulations also contain provisions for operations and functioning of depositories, form for
application and certificates used and schedule for fees for participants etc. It also contains
provisions for registration of depository and depository participants, rights and obligations of
various users and constituents, inspection and procedure for action in case of default.

Entities desiring to become depository participants must apply to the depository and are required
to be recommended to SEBI by the depository. If approved and registered by SEBI the
depository participant can be admitted on the depository. The depository has to formulate its own
set of criteria for selection of participants. Every participant holding a certificate is required at all
times to abide by the specified code of conduct

The regulations require the depository to list out through its bye-laws the securities which are
eligible to be admitted to the depository for dematerialization. Equity share, debentures,
warrants, bonds, units of mutual funds etc are part of the list of eligible securities. The depository
24

is empowered to set its own criteria for selection of securities and make securities eligible to be
maintained in the form of electronic holdings on the depository.

The depository is required to ensure that the sufficient safeguards are in place to protect the data
available with it and with the participants. To reduce risk in operations the regulations stipulate
insurance cover be provided by the depository and by the depository participants as well


RIGHTS AND OBLIGATIONS OF DEPOSITORIES AND ITS
CONSTITUENTS:


This regulation deals with rights and obligations of depositories and every depository has to state
in its by-laws the eligible securities for dematerialization which includes shares, scraps, bonds,
stock, debenture stock, etc and include units of mutual funds, rights under collective investment
schemes and venture capital funds, commercial paper, certificate of deposit, securitized debt,
money market instruments and even unlisted securities.

25

Every depository is required to enter into an agreement with the issuer in respect of securities
disclosed as eligible to be held in demat form. No agreement is required to be entered into where
the depository itself is an issuer of securities.

The depository is also required to enter into a tripartite agreement with the issuer, its transfer
agents and itself where company has appointed a transfer agent. Very depository is required to
maintain continuous connectivity with issuers, registrars and transfer agents, participants and
clearing house for clearing corporations. Depositories should take adequate measures including
insurance to protect the interest of the beneficial owners.

Every depository is required to maintain the following records and documents namely:
Records of securities dematerialized and rematerialized
The names of the transferor, transferee and dates of transfer of securities
A register and an index of beneficial owners
Details of holding of the securities of the beneficial owners as at the end of the each day
Records of instructions received from and sent participants, issuers agents and beneficial
owners
Records of approval, notice , entry and cancellation of pledge or hypothecation as the
case may be
Details of participants









26

AUDIT UNDER SEBI (DEPOSITORIES AND PARTICIPANTS)
REGULATIONS 1996:


Regulation 55A of SEBI (depositories and participants) regulations 1996 provides that the issuer
shall submit audit report on a quarterly basis to the concerned stock exchanges audited by a
practicing company secretary or a qualified chartered accountant for the purposes of
reconciliation of the total used capital, listed capital and capital held by depositories in
dematerialized form the details of changes in share capital during the quarter and the in-principle
approval obtained by the issuer from all the stock exchanges where it is listed in respect of such
further issued capital.

The audit report is required to give the updated status of the register of members of the issuer and
confirm that securities have been dematerialized as per requests within 21 days from the date of
receipt of requests by the issuer and where the dematerialization has not been effected within the
said stipulated periods the report would disclose the reasons for such delay.

The issuer is under an obligation to immediately bring to the notice of the depositories and the
stock exchanges, any difference observed and its issued, listed and the capital held by
depositories in dematerialized form








27

Basic Services (no-frills) Demat Account (BSDA)-Features and Benefits:
Recently market regulator SEBI introduced new type of Demat Account to woo small investors
in opting securities in Demat form. This type of demat account is called Basic Services Demat
Account (BSDA). This initiative is to reach the IPOs to retail investors and promoting small
investors to have their securities in Demat form. Let us see few of its features and benefits.
Charges:
1) No annual maintenance charges if investors holding is within Rs.50, 000. If exceeds then
maximum charges will be Rs.100 for your holding of Rs.50, 001 to Rs.2, 00,000.
2) Value of holding is calculated on daily closing price of securities or daily NAV of mutual
fund (If daily closing price not available then last traded price is considered). For unlisted
securities other than mutual funds, face value is considered for calculation.
3) If investors holding cross the maximum limit of Rs.2, 00,000 then DPs can charge as per
normal demat account charges from that day onwards?
4) To avail BSDA, DPs will recess investors eligibility conditions for every billing cycle and
give option to all eligible investors to move to BSDA if they opt so.
Other features:
1) Investors will receive transaction statement on quarterly base. If no transaction within
that quarter then will not receive any statements.
2) If there are no transactions and no balance in investors demats account then they will not
receive any statement.
3) One yearly physical statement will be available showing holding securities, zero balance or no
transactions.
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4) Maximum two free statement can avail on request within one billing cycle. If requested for
more than two then each physical statement will cost Rs.25.
5) Investor can avail SMS alert facility for debit transactions by registering their mobile phone
number.
6) Investor can avail at least two delivery instruction slip during account opening.
7) Apart from the above said special facilities and instructions, all other facilities and instructions
of normal demat account will be applicable to this account too.
8) If investors account have zero balance and no transactions during the year then will receive
annual statement only once. But will receive statement as and when transaction starts.
9) If investor account has zero balance and no transactions then they will not receive any
quarterly statement but only receive annual statement...









29

DEMAT ACCOUNT:
Demat is nothing but a dematerialized account. If one has to save money or make cherub
payments, then he/she needs to open a bank account. Similarly, one needs to open a Demat
account if he/she wants to buy or sell stocks. Thus, Demat account is similar to a bank account
where in the actual money is being replaced by shares. In order to open a Demat account, one
need to approach the Depository Participants [DPs] In India, a Demat account is a type of
banking account that dematerializes paper-based physical stock shares. The Demat account is
used to avoid holding of physical shares: the shares are bought as well as sold through a stock
broker. In this case, the advantage is that one does not need any physical evidence for possessing
these shares. All the things are taken care of by the DP. This account is very popular in India.
Physically only 500 shares can be traded as per the provision given by SEBI. From April 2006, it
has become mandatory for any person holding a Demat account to possess a Permanent Account
Number (PAN).

Documents required for a Demat Account:
The documentation required to open a demat account depend upon to your relationship with the
institution. If you plan to open a demat account with a bank, a savings, current and, or other
account for which the holder has been issued a cherub book, such holder has an edge over a non
account holder. Actually, banks offer additional incentives to customers who open a demat
account with them. Along with the application form, photographs (with co-applicants) and proof
of date of birth/identity/residence need to be submitted. The DPs also ask for a DP-client
agreement to be made on a non-judicial stamp paper. Following is a broad list of documents
required: A cancelled check, preferably MICR Proof of Identification Proof of Address Proof of
PAN card (mandatory) recent photographs (one or more)
Proof of Identity

PAN card
Voter's ID
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Passport
Driver's license
Bank attestation
IT returns
Electricity/ Landline phone bill
ID cards with applicant's Photo, issued by
Central/State Government and its Departments,
Statutory/Regulatory Authorities,
Public Sector Undertakings,
Scheduled Commercial Banks,
Public Financial Institutions,
Colleges affiliated to Universities (this can be treated as valid only till the time the applicant is a
student)
Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members and
Proof Of Address:
Ration card
Passport
Voter ID Card
Driving license
Bank passbook / Bank Statement (NSDL/POLICY/2007/0074 dated December 1, 2007 and
NSDL/POLICY/2008/0037 dated May 27, 2008)
Verified copies of
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Electricity bills (not more than two months old),
Residence Telephone bills (not more than two months old) and
Leave and License agreement / Agreement for sale
Self-declaration by High Court & Supreme Court judges, giving the new address in respect of
their own accounts.
Identity card/document with address, issued by
Central/State Government and its Departments,
Statutory/Regulatory Authorities,
Public Sector Undertakings,
Scheduled Commercial Banks,
Public Financial Institutions,
Colleges affiliated to Universities (this can be treated as valid only till the time the applicant is a
student) and
Professional Bodies such as ICAI, ICWAI, Bar Council etc., to their Members.
Only photocopies of the documents are required for submission, but originals are also required
for verification. The applicant also needs to submit a passport size photograph with the account
opening form.




32

Procedure for Dematerialization:


The shareholder will have to first open on account with the depository participant (DP) which is
similar to opening a savings bank account with a bank. Thereafter he will have to make a request
for dematerialization of the shares to the OP. It is to be noted that only the shares of companies
offering demat facility can be considered. The DP in turn will forward the request along with the
share certificates to the company concerned. Once the dematerialization takes place, the DP will
intimate the shareholder that his shares are now in an electronic form. NSDL offers the facility
for primary market investors to apply for new public issue through demat accounts. To give a
boost to the depository system, SEBI has decided to make it compulsory for domestic financial
institutions, banks, mutual funds and Fills, having a minimum portfolio of Rs.10 cores to make
settlement through depository with effect from January 15, 1998. Debentures have been
exempted from stamp duty in the Union Budget for 1999-2000. The measure would infuse
liquidity in the secondary market.


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BENEFITS OF DEMAT ACCOUNT:
The benefits of demat are enumerated as follows:
Easy and convenient way to hold securities
Immediate transfer of securities
No stamp duty on transfer of securities
Safer than paper-shares (earlier risks associated with physical certificates such as bad
delivery, fake securities, delays, thefts etc. are mostly eliminated)
Reduced paperwork for transfer of securities
Reduced transaction cost
No "odd lot" problem: even one share can be sold
Change in address recorded with a DP gets registered with all companies in which investor
holds securities eliminating the need to correspond with each of them separately.
Transmission of securities is done by DP, eliminating the need for notifying companies.
Automatic credit into demat account for shares arising out of bonus/split,
consolidation/merger, etc.
A single demat account can hold investments in both equity and debt instruments.
Traders can work from anywhere (e.g. even from home).
Benefit to the company:
The depository system helps in reducing the cost of new issues due to lower printing and
distribution costs. It increases the efficiency of the registrars and transfer agents and the
secretarial department of a company. It provides better facilities for communication and timely
service to shareholders and investors.
Benefit to the investor
The depository system reduces risks involved in holding physical certificates, 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 problems 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.
34

Benefits to brokers:
It reduces risks of delayed settlement. It ensures greater profit due to increase in volume of
trading. It eliminates chances of forgery or bad delivery. It increases overall trading
and profitability. It increases confidence in their investors.


DISADVANTAGES OF DEMAT ACCOUNT:
Trading in securities may become uncontrolled in castoff dematerialized securities.
It is incumbent upon the capital market regulator to keep a close watch on the trading in
dematerialized securities and see to it that trading does not act as a detriment to investors.
For dematerialized securities, the role of key market players such as stock-brokers needs to
be supervised as they have the capability of manipulating the market.
Multiple regulatory frameworks have to be conformed to, including the Depositories Act,
Regulations and the various Bye-Laws of various depositories.
Agreements are entered at various levels in the process of dematerialization. These may
cause worries to the investor desirous of simplicity.
There is no provision to close a demat account, which is having illiquid shares. The investor
cannot close the account and he and his successors have to go on paying the charges to the
participant, like annual folio charges etc.
After liquidating the holdings, many Indian investors don't close their dip account. They are
unaware that DPs charge even on accounts with nil holdings.




35

TRANSFER OF SHARES BETWEEN DEPOSITORY PARTICIPANTS:

To transfer shares, an investor has to fill one of two kinds of Depository Instruction Slip (DIS).
The first check made is whether both Demat accounts are at the same depository. There are two
depositories CDSL (Central depository securities limited) and NSDL (national securities
depository limited). If both demat accounts are not at the same depository, then an Inter
Depository Slip (Inter DIS) has to be filled and submitted. For example:
If there is one Demat account with CDSL and the other Demat account with NSDL, then an
Inter-did is needed. (In case the investor needs an Intra-DIS, the investor should check with
the broker, since brokers usually issue an Intra-DIS).
Now that the correct DIS has been determined, information pertaining to the transfer
transaction has to be entered: scrip name, INE number, quantity in words and figures.
Finally, the investor should submit that DIS to the broker with signatures.
The transfer broker shall accept that DIS in duplicate and acknowledge receipt of DIS on
duplicate copy.
The investor should submit the DIS when the market is open. Accordingly, date of submission of
DIS and date of execution of DIS can be same or a difference of one day is also acceptable. The
investor also has to pay the broker some charges for the transfer.

FEES INVOLVED:
There are four major charges usually levied on a demat account: account opening fee, annual
maintenance fee, custodian fee and transaction fee. Charges for all fees vary from DP to DP.
Account-opening fee
Depending on the DP, there may or may not be an opening account fee. Private Banks, such
as HDFC bank and AXIS bank, do not have one. However, players such as KOTAK securities,
SUSHIL finance, ICICI bank, Globe Capital, Kirby Consultants and Bajaj Capital Limited do
impose an opening fee. State Bank of India does not charge any account opening charge while
other maintenance and transaction charges apply. Most players levy this when re-opening a
36

demat account. However, the Stock Holding Corporation offers a lifetime account opening fee,
which allows the investor to hold on to his/her demat account for a long period. The fee is also
refundable.
Annual maintenance fee
This is also known as folio maintenance charges, and is generally levied in advance. It is charged
on annual or monthly basis.
Transaction fee
The transaction fee is charged for crediting/debiting securities to and from the account on a
monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and
ICICI Bank pay the fee to the transaction value, which is subject to a minimum amount. The fee
also differs based on the kind of transaction (buying or selling). Some DPs charge only for
debiting the securities, while others charge for both. Some DPs also charge the investor even if
the instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.
In addition to the other fees, the DP also charges a fee for converting the shares from the
physical to the electronic form or vice-versa. This fee varies for both demat (physical-to-
electronic) and remit (electronic-to-physical) requests. For demat transactions, some DPs charge
a flat fee per request in addition to the variable fee per certificate, while others charge only the
variable fee.
For instance, Stock Holding Corporation has charged Rs 25 as the request fee and Rs 3 per
certificate as the variable fee. However, SBI has charged only the variable fee, as Rs 3 per
certificate. Remit requests also have charges akin to that of demat. However, variable charges for
remit are generally higher than demat.
Some of the additional features (usually offered by banks) are as follows. Some DPs offer a
frequent-trader account, where they charge frequent traders at lower rates than the standard
charges. Demat account holders are generally required to pay the DP an advance fee for each
account that will be adjusted against the various service charges. The account holder needs to
raise the balance when it falls below a certain amount prescribed by the DP. However, if the
holders also hold a savings account with the DP, they can provide a debit authorization to the DP
for paying this charge. Finally, choosing a DP, it would be prudent to keep all accounts with that
37

DP, so that tracking of capital gains liability is easier. This is because when calculating capital
gains tax, the period of holding will be determined by the DP, and different DPs follow different
methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute the
period of holding. The proof of the cost of acquisition will be the contract note. The computation
of capital gains is done account-wise.
Indian Banking System First, an investor has to approach a DP and fill up an account opening
form. The account opening form must be supported by copies of any one of the approved
documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI
An investor must have his/her PAN card in original at the time of opening of the account
(mandate effective from April 1, 2006).
All applicants should carry original documents for verification by an authorized official of the
depository participant, under his signature. Further, the investor has to sign an agreement with
the DP in a depository prescribed standard format, which details rights and duties of investor and
DP. DP should provide the investor with a copy of the agreement and schedule of charges for
their future reference. The DP will open the account in the system and give an account number,
which is also called BOID (Beneficiary Owner Identification number). The DP may revise the
charges by giving 30 days notice in advance. SEBI has rationalized the cost structure for
dematerialization by removing account-opening charges, transaction charges for credit of
securities, and custody charges vide circular dated January 28, 2005.


Security recommendations:
A Depository Instruction (DIS) is almost like a cherub book so it can be misused if issued blank.
Hence, an investor should exercise sufficient caution while issuing a DIS slip. For example: an
investor should deposit only a completely filled-in slip to the broker. Unfilled rows should be
cancelled out so that they cannot be tampered with.


38

INTRODUCTION TO HDFC BANK:



HDFC Life is a joint venture between Housing Development Finance Corporation Limited
(HDFC), India's leading housing finance institution and Standard Life plc, the leading provider
of financial services in the United Kingdom.

HDFC Ltd. holds 72.37% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in
the joint venture, while the rest is held by others.

HDFC Life's product portfolio comprises solutions, which meet various customer needs such as
Protection, Pension, Savings, Investment and Health. Customers have the added advantage of
customizing the plans, by adding optional benefits called riders, at a nominal price. The company
currently has 23 retail and 8 group products in its portfolio, along with 9 optional rider benefits
catering to the savings, investment, protection and retirement needs of customers.

HDFC Life continues to have one of the widest reaches among new insurance companies with
about 500 branches in India touching customers in over 900 cities and towns. The company has
also established a liaison office in Dubai. HDFC Life has a strong presence in its existing
markets with a strong base of Financial Consultants.
39


NRI banking
Under NRI Banking, HDFC offers:
Accounts & Deposits
Money Transfer
Investments & Insurance
Research Reports
Payment Services
SME banking
Under SME Banking, HDFC offers:
Accounts & Deposits
Business Financing
Trade Services
Payments & Collections
Cards
Wholesale banking:
HDFC offers Wholesale Banking for Corporate and Financial Institutions & Trusts. The Bank
also provides services such as Investment Banking and other services in the Government sector.


.








40

FEATURES OF HDFC DEMAT ACCOUNT:

Preferential pricing for the Imperia, Preferred & Classic customers.
AMC of Rs 250/- only and discounted charges on transactions exclusively for senior
citizens.
No stamp duty on transfer of securities held in Demat form.
Auto credit of rights / bonus / public issues in your Demat Account through ECS
View your Holding cum Valuation Statement and Transaction cum Billing Statement on
Net Banking (DP on Net)


HOW DOES IT WORK?
A Depository is like a bank where securities are held in electronic form. There are two
Depositories in India National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL).
Under the Depositories Act, investors can use the services of these Depositories through
Depository Participants (DP) such as HDFC Bank.
There are a number of benefits:
Settlement of securities are traded on exchanges and as well as off-market transactions
Shorter settlements enhance liquidity
No stamp duty on the transfer of securities held in Demat form
Changing your address, registering a power of attorney and even signatures can be
effected in Demat accounts by submitting requests along with the relevant documents to
the Depository Participant
HDFC Bank also facilitates registration of SPEED-e (NSDL) & Easiest (CDSL). This internet-
based transaction allows you to submit delivery instructions electronically, via the SPEED-e /
Easiest website. This way, you have security when processing transactions, without the hassle of
preparing and submitting instruction slips.
With facilities like 'IDEAS' & Easy, you can view the current transactions and balances of your
Demat Account in real-time.
41

You can also hold mutual funds in a Demat Account. There are three steps to access this facility:
Give your Demat Account details to the Asset Management Company (AMC) / Registrar
and Transfer Agent (RTA).
Submit a request to your Depository Participant (DP) for conversion of existing Mutual
Fund units.
Buy Mutual Fund units through the stock exchange platform.
This way, investors have a single Demat Account Transaction / Holding Statement for Shares,
Debentures and Mutual Fund units.

CONCEPTS AND PROCESSES:
Depository Concepts

A Depository is like a bank where securities are held in electronic form. There are two
Depositories in India National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL).
Under the Depositories Act, investors can use the services of these Depositories through
Depository Participants (DP) such as HDFC Bank.
Types of account include:
Resident Individual
Hindu Undivided Family (HUF)
Domestic Corporate
Non-Resident Indian (NRI)
Clearing Member (Pool Account)
Commodities
Margin

Dematerialization of Securities
This involves converting your Physical Securities into an electronic format.
Since Stock Exchange transactions can be handled in Demat form only, it is good to hold your
securities in electronic form. This way, its easy to make a transfer to another account and you
will not attract stamp duty.
42


Points to Remember:
Submit original certificates with a Demat Request Form (DRF)
Ensure that you have signatures from all account holders
Certificates should state Surrendered for De-materialization your client ID and DP ID
Make your DRF submission in triplicate, or as requested by your DP
When HDFC Bank has received the DRF and certificates, we will:
Verify all names as per our records
Verify all signatures as per our records
Forward the certificates to the relevant Registrar or Company
The De-materialization credit process normally takes around 30 days but may vary depending on
the Registrar and Company. If your securities have not been credited after 30 days you can
contact at infodp@hdfcbank.com and assistance shall be provided to coordinate with the
Company / Registrar to receive your demat credits.
If your request is rejected, you contact the branch where it was submitted. Help will be giving to
rectify and resubmit your Demat request.

Dematerialization Credit

After receiving the securities certificates and DRF, the Registrar/Company will process the
request and arrange to credit the equivalent quantity into your Demat Account. This process
takes around 30 days but may vary from one Registrar/Company to another.
You may verify your monthly Demat transaction statement in months when transactions occur.
You can also check your statement on the banks website, if you are a customer and have linked
your Demat Account. The status will be reflected as "Pending Demat" till the time the electronic
credit is made to your account. Once the credit is made, it will be reflected / added in the
beneficiary balance.
An SMS is also sent to you, intimating you of demat credits.



43


Rejection of Demat Requests:

In case your Demat request is rejected, kindly contact the branch where it was submitted for
assistance on receipt, rectification and re-submission of your demat request.
An SMS is also sent to you, intimating you of demat rejection.
You may arrange to re-submit the securities to us for Dematerialisation, after necessary
rectifications. Please ensure that a fresh DRF is submitted and not the one that has just been
rejected.

Transmission-cum-Demat :

In case security certificates are held jointly with a person who is deceased, the surviving holders
can submit the certificates along with an original / notarized / gazette attested copy of the death
certificate of the deceased and a Transmission cum Demat form. The combination of names of
the surviving holders on the certificates and on the account may be in the same or reverse order.
Ensure that an application, in the required format, is submitted along with each DRF.

Transposition cum Demat :

In case security certificates are held jointly but the order of names on the certificates do not
match exactly with the order of names in which the Demat Account is held, then the holders can
submit a 'Transposition cum Demat' form along with the DRF and certificates to enable Demat of
these certificates into such a Demat Account.
Egg. Certificates held by A & B or A & B & C can be dematted into a Demat account held by B
& A or C & B & A respectively.

Instruction Slip Processing :

Instruction slips are just like cherub leaves, but they must be clearly signed by all account
holders. Make sure you keep them securely and submit on time for timely execution.
44

Market Transactions should include:
CMBP ID of your broker
CM name of your broker
Market Type
Settlement Number
ISIN Number
Scrip Name
Quantity in Numbers
Quantity in Words
Execution Date
Off-Market Transactions should include:
DP ID
DP Name
Client ID
ISIN Number
Scrip Name
Quantity in Numbers
Quantity in Words
Execution Date
Please note that you will also need to provide a reason for the Off-Market Transaction, along
with a Consideration amount (if any).
Securities Lending and Borrowing (SLB) should be submitted on the trading day
Electronic Instruction through Speed-E & Easiest can be self-submitted, meaning there is no
need for a physical instruction
Inter-depository Transactions involve a transfer of securities between two Demat Accounts held
in two different depositories





45

Conversion & Redemption of Mutual Funds



Conversion of Mutual Funds

Conversion of Mutual Fund (MF) units held in Statement of Account (SOA) form to Demat
form. This involves converting your MF units held vide physical SOA into an electronic Demat
format similar to dematerialization of Physical Securities.
This way you can conveniently manage all your investments in securities and mutual funds in a
single Demat Account without the hassle of handling physical paper.

Points to Remember:

Submit original SOA with a Conversion Request Form (CRF)
Ensure that you have signatures from all Account holders
Make your CRF submission in triplicate, or as requested by your DP
When HDFC Bank has received the CRF and SOA, we will:
Verify all names as per our records
Verify all signatures as per our records
Forward the request documents to the relevant Registrar or AMC.
46

The Conversion credit process normally takes around 30 days but may vary depending on the
Registrar and AMC. If your MF units have not been credited after 30 days, please contact at the
help site and assistance shall be provided to coordinate with the Company / AMC to receive
your MF demat credits.
If your request is rejected, please contact the branch where it was submitted. Help will be
provided to rectify and resubmit your Conversion request.
An SMS is also sent to you, intimating you of MF demat credits / rejects.
You may avail Transmission cum Demat and Transposition cum Demat services in the
Conversion process also in coordination with your DP & the Registrar / AMC.


Redemption of Mutual Fund Units held in your Demat Account

This is where you opt to redeem Mutual Fund units held electronically in your Demat Account
for their monetary value.
When we receive your Redemption Request, we will:
Verify names
Verify signatures
Process your request and electronically intimate to the Registrar or AMC.
The monetary proceeds are sent by the Registrar or AMC directly to your Bank Account or
address registered for the demat account through which the redemption was requested.

Pledge of Securities :

Demat Accounts of both the pledgor (borrower) and the pledgee (lender) should be in the same
depository.
The Pledgor must initiate the pledge by submitting us the Pledge Request Form (Annexure W)
with the details of the securities to be pledged
The pledgee should confirm the request through his DP.
Post this, the securities are pledged and will lie in the pledgors account in 'Pledge' status.
47

Please note that all the financial transactions between the pledgor and the pledgee are handled
outside the depository system.

Pledge Creation

The Pledgor must initiate the pledge by submitting us the Pledge Request Form (Annexure W)
with the details of the securities to be pledged

Pledge Confirmation

The pledgee(s) should confirm the request through their DP.


Pledge Closure

Any one of the below two options can be excerised for pledge closure-
o a)The Pledgee(s) can close the pledge through the Unilateral closure via their
Demat Account for freeing the shares in the Pledgors Demat Account
o b)The Pledgor needs to submit the Pledge Closure request to his DP, which will
be confirmed by the Pledgee's DP for freeing the shares of the Pledgor



Invocation of Pledge

If a Pledgee(s) wishes to take securities into their Demat Account (typically in case of default by
thePledgor) they can invoke the shares without any further instruction from the Pledgor.




48

Freezing/De- freezing

Its possible to freeze your Demat Account at Account level, ISIN level and Quantity level by
submitting a freeze request signed by all the account holders.
For De-freezing the above level freeze a separate de freeze request in prescribed format is
required.

Nomination

Nomination can be made only by individuals holding beneficiary owner accounts on their own
behalf singly or jointly. Non- individuals including society, trust, body corporate, partnership
firm, Karta of Hindu Undivided Family, Holder of power of attorney cannot nominate. If the
account is held jointly, all joint holders will sign the nomination form. Nomination in respect of
the beneficiary owner account stands rescinded upon closure of the beneficiary owner account.
Similarly, the nomination in respect of the securities shall stand terminated upon transfer of the
securities. Transfer of securities in favour of a Nominee shall be valid discharge by the
Depository against the legal heir. The cancellation of nomination can be made by individuals
only holding beneficiary owner accounts on their own behalf singly or jointly by the same
persons who made the original nomination. On cancellation of the nomination, the nomination
shall stand rescinded and the Depository shall not be under any obligation to transfer the
securities in favour of the Nominee. A minor can be nominated. In that event, the name and
address of the Guardian of the minor nominee shall be provided by the beneficial owner. Birth
certificate of minor nominee, Guardian proof of identity is required.




Corporate Benefits
Monetary
In the case of benefits such as Dividends, Interest and Refunds the company concerned processes
the same through the ECS route, crediting your bank account details available on the date of
49

entitlement. Hence account holders should update their dividend bank details along with the
MICR and IFS code in their Demat Accounts.
Non-Monetary
In the case of benefits such as Bonuses and Rights, the necessary intimation and forms are
dispatched by the Registrar and Transfer Agent or Company on the day of entitlement.
Similarly, in the case of Open Offers and Buybacks, and or any other corporate actions like
Mergers, Demergers and Amalgamations, the necessary communication will be mailed to your
address available in your Demat Account.
With Buybacks and Open Offers the balance shares, if any, will be credited back to your Demat
Account directly by the relevant Registrar and Transfer Agent or Company.
Similarly, in the case of Open Offers and Buybacks, and or any other corporate actions like
Mergers, Demergers and Amalgamations, the necessary communication will be mailed to your
address available in your Demat Account.
With Buybacks and Open Offers the balance shares, if any, will be credited back to your Demat
Account directly by the relevant Registrar or Company.


Statements
Demat statements are sent monthly in case of any transactions or annualy by default. The
customers opted for statement by email facility will get statements through email.
For any queries or information related to Demat Account or you would like to offer feedback,
customers can write at infodp@hdfcbank.com and in case customers have any complaints, please
write at infodp@hdfcbank.com
If the first account holder has a Savings or Current Account with HDFC Bank it is also possible
to register for NetBanking and DP on Net.






50

Change of Address

To change the address in your Demat account, the following documents are required-
Change of address in prescribed format signed by all the account holders.
Self attested proof of identity of all the account holders.
Self attested proof of new (Correspondence/Permanent) address in the name of first holder.
New Address Proof
On updation of new address a confirmation letter will be sent to the old and new address.

Change of Signature

To change the signature of holder(s) in demat account, the following documents are required-
Change of signature request in prescribed format signed by all account holders.
Holder(s) of the demat account whose signature is to be changed should visit the branch for
submitting the application. New signature(s) of holder(s) should be attested by Banker.
Self attested proof of identity of account holder(s) whose signature is/are to be changed. Reason
for change of signature.
New signature affixed on the application must match with the signature affixed in presence of
attesting authority.


Change Bank Account Details

Change of dividend bank account, the following documents are required-
Change of dividend request in prescribed format signed by all account holders. First holder of
demat account should be one of the holder in bank account. Details mentioned on the request
should match with the proof of bank details.
For updation of Dividend Bank details other than HDFC Bank Limited, any of the following
documents are required -
51

Specimen copy of cheque / cancelled cheque leaf having name of account holder where the
cheque book is issued. In case if holder name is not printed on cheque, provide any one of the
document mentioned in serial no. b,c,d.
Copy of Bank Statement having name and address of holder
Copy of Bank Passbook having name and address of holder
Letter from Bank

In case of HDFC Bank Limited, Saving account/Current account / CC OD account the document
mentioned above in sr. no. a, b, c, d are not required.
The documents mentioned above in serial no. a, b, c, d must contain the Bank Name, Branch
Address, IFSC / MICR Code, Name of the Account Holder and Account Number.

Power of Attorney (POA)

It is possible to register a POA, allowing another individual to operate your Demat account.
Please ensure:
The POA holder meets the KYC guidelines of HDFC Bank
A notarised copy the POA is submitted, including the signature of the Donor and Donee.
At least the minimum clauses advised by NSDL are held by the POA
ID proof of the power of attorney holder is furnished
Photograph is signed across
A Consent Letter is provided
Mobile number for the SMS facility is offered by Depository

Transmission
In the case where an account holder has passed away, it is possible to transfer securities to
surviving holders, valid nominees or legal heirs.
Surviving Holders
Can have the securities transmitted into their accounts by maintaining or opening the Demat
Account in the same holding pattern, excluding the deceased holder.
52

Nominees
In the case of death of the sole or all holders of a Demat Account, and if a valid nomination is
registered, the nominee can make a request. This should be submitted with a notarized copy of
the Death Certificate/s.
Legal Heir(s)
If there are no surviving joint holders, and no nomination registered, the transmission can be
effected to the account of the legal heir. A Succession Certificate or Probate of Will or letter of
administration duly notarized should be submitted.

Demat Fees
Transaction charges are monthly, and include NSDL and CDSL charges.
You will receive these details in your monthly statement.
De-materialisation charges are incurred monthly, and Annual Maintenance Charges are added at
the expiry of every 12 months for the next year.
All charges are debited from the authorised Savings or Current Account.

Closure of Account
Closing an account requires the submission of a form signed by all members. If there is any
holding in the account this should be transferred before closure, which requires a valid Demat
Account number.
If there is a pending de-materialisation, the Account cannot be closed. However Demat Account
holders can request the DP to Cancel their Pending Demat Request electronically in the
Depository system.
Please also ensure there are no pending corporate actions, as this could mean the Registrar or
Company involved cannot credit the securities as required.

DP on Net
Using DP on Net, account holders with an HDFC Bank Savings or Current Account can view
their Demat Account statuses.
They are able to:
View transactions for the last one year only. However the date range should not exceed 10 days
53

HOW TO OPEN A DEMAT ACCOUNT :


A representative will get in touch with the customer for completion of formalities
Alternatively, the customer can visit an HDFC Bank Branch where the bank will help with the
application process.
The customer has to post his application is processed and his Account is opened, he will be be
provided with a Welcome Kit, which includes:
1. A Welcome Letter
2. Your personalized instruction booklet
3. A Client Master List (CML), which includes:
o a) Name of holder/Savings Bank and Address
o b) Bank Account details
o c) Nomination details (if any)
o d) Demat Account Number and DP ID
4. Tariff Sheet
The customer can also download the other Request Forms from the Form Centre


54

DEMAT ACCOUNT TARIFF :
Fee Schedule for HDFC Bank Individual Demat Accounts - NSDL & CDSL


Sr.
No
Fee Head Type Fees Min/Max
1 Account Opening
Charges
NIL - -
2 Dematerialisation Certificate +
Dematerialisation
Request
Rs.5/- per
certificate +
Rs. 35/- per
request
Rs.40/- (min)
3 Rematerialisation Rematerialisation
Request
Rs.30/- per
request +
actuals,
Currently
Rs. 10/- for
every hundred
securities or
part thereof; or
a flat fee of Rs.
10/- per
certificate
whichever is
higher
Rs.40/- (min)
Rs.5,00,000(max)
Redemption of
Mutual Fund units
Reconversion
of Mutual
Funds

Reconversion
55

of Mutual
Funds/ Rs 10/-
per request in
NSDL & Rs
5.50 per
request in
CDSL
Redemption of
Mutual Fund
units
Rs 30/- per
request +
actuals,
Currently Rs
4.50 per
request in
NSDL &
Rs 5.50 per
request in
CDSL
4 Annual
Maintenance
Charges#
Level 1 (less than
10 txns.)
Rs.750/- per
annum
-
Level 2 (between
11 and 25 txns.)
Rs.500/- per
annum
-
Level 3 (greater
than 25 Wis.)
Rs.300/- per
annum
-
5 Pledge Services If Pledge is
marked in favour
of HDFC Bank
0.02% of the
value of the
Txn.
Rs.25/- (min)
56

If Pledge is
marked to other
than HDFC Bank
0.04% of the
value of the
Txn.
Rs.25/- (min)
6 Credit
Transactions
Nil - -
7 Debit
Transactions
(Market / Off
Market)
SPEED-e /
Easiest
0.04% of the
value of the
transction.
*(Max Rs
5000/- for Debt
Instruments)
Rs.20/- (min)
HDFC Securities Rs.25/- (min)
Manual Rs.40/- (min)
8 Mailing Charges
for Non Periodic
statements
Inland Address Rs.35/- per
request
-
Foreign Address Rs.500/- per
request
-













57

HDFC VS ICICI :
ICICI bank is a close competitor with HDFC bank with regards of demat accounts so the
comparions between these two banks helps us to find out which bank is better and who should
open accounts where.



ICICI DIRECT HDFC SECURITIES



About the Broker

ICICIdirect is an online
trading and investment
platform on ICICI Securities,
the largest stock broker firm in
India providing a wide range
of investment options to the
retail and institutional
customers.

HDFC Securities(HDFCsec) is
Equity Trading Company of
HDFC Bank. HDFC Securities
provide both online trading
and trading on phone. The
HDFC Securities trading
account has a unique 3-in-1
feature

Type of Broker

Full Service Broker

Full Service Broker

Supported Exchnage

BSE, NSE

BSE, NSE

Account Type

3-in-1 Account (I-Secure
Plan)

Online Trading






58


STOCK BROKER FEES \CHARGES :


ICICIDirect

HDFC Securities

Trading Account
Opening Fees

Rs 975

Rs 999

Trading account AMC

NIL


Demat Account Opening
Fees


NIL


NIL

Demat Account AMC

Rs 450

Rs 750



PROS CONS AND OTHER REVIEW COMMENTS :


ICICI Direct

HDFC Securities





Offers 3-in-1 account
which makes stock
market investment
very easy for casual
investors.

The 3-in-1 account, which
includes HDFC Bank
Account, HDFC Securities
Trading Account and HDFC
Securities Demat Account, is
59


PROS
Wide range of
investment options
available under one
portal.
Provides a low
bandwidth website
which works well
where internet
connection is slow.
GTC (good till
cancellation) and off-
market hours order
placement facility is
very useful.

the best offering for retail
investors in India as it
provides easiest way to invest
in stock market and other
financial instruments.



CONS

ICICI Security charges
high brokerage in
comparison to most of
the brokers.
Very high 'minimum
brokerage' of Rs 35 per
trade or 2.5% of the
trade value whichever
is lower.
Poor performance of
website is reported in
peak hours of trading.

In addition to opening a
trading account with HDFC
Securities Ltd, you will also
be required to open a savings
bank account (quarterly
minimum balance of Rs.
5000) and a DP (depository
participant) account with
HDFC Bank.

60

DATA INTERPRETATION AND ANALYSIS :

The number of customers were 50

Q1) Do you invest in share market ?
A) Yes B) No





From above given pie chart we analyse that 33 % still left in case of demat accounts because
people have a fear of risk in case of demit accounts thinking that they might go in losses or not
enough trust in the broking firm.




yes
no
33%
67%
61



2) Are you aware of demat account ?

A) Yes B) No






63% of the respondants are aware of demat acounts. More people are aware of demat and so that
more people start using it HDFC should make proper advertisements or publicity.






yes
no
63%
37%
62



3) For how long have you been transaction on the stock exchange ?


a) less than 1 year b) 1 year c) 2 years d) more than 2
years





This shows that 47% hav been less than 1 year, 7% for one year, 26% for 2 years and 20% for
more than 2 years. people have to become more aware about trading in stock exchanges.



less than 1 year
1 year
2 years
more than 2 years
47 %
7%
26%
20%
63



4) Do you trade frequently or ocassionaly ?


A) Frequently B) Ocassionally





This shows that 46% people trade occasionally and 54% trade frequently because more of the
customers are active on the stock market.






frequently
ocassionally
56%
44%
64




5) what type of scrips you have ?


A) physical B) dematerialized






This chart shows that 29%hav physical scrips while 71% have dematerialized scraps . So this
means that majority of the people are aware of dematerialization and demit accounts.



0%
10%
20%
30%
40%
50%
60%
70%
80%
physical dematerialized
Series1
65




6) Are you satisfied in trading with HDFC ?



A) Yes B) No C) Average D) Bad E) Worst






This shows that 56% are satisfied. So it means the bank is doing a good job in context of demat
accounts by helping their customers.



yes
no
average
bad
worst
56%
21%
12%
7
4
66


7) Are you aware of the products and services offered by HDFC ?


A) Yes B) No






This shows that 63% are aware of the products and services provided but inorder for more people
to become aware of the products and services more advertising should be done.






8) Are you satisfied with them ?
yes
no
63%
37%
67



A)Yes B) No C) Average D) Bad E) Worst






This shows that people are moderately satisfied because the services and products offered by
HDFC are of top quality.






9) Are you satisfied by the charges charged by HDFC for opening demat
accounts?
68


A) Yes B) No C) Average D) Bad E) Worst






This shows that large amount of people are satisfied with the charges because it is not costly and
very affordable to all who want to open demit accounts.










10) What is your perception regarding HDFC ?
best
good
average
bad
worst
57%
22%
16%
3
2
69


A) Yes B) No C) Average D) Bad E) Worst






This shows that most of the peoples perception about HDFC is best because people are very
happy with the charges and all the facilities provided to them at affordable prices.







CONCLUSION :

best
good
average
bad
worst
49%
27%
13%
6%
5%
70

Notwithstanding many problems, Indian stock market has emerged as a significant financial
intermediary, assisting efficient resource allocation, providing strong support to Indian
economy and help investors to realize the benefits of stock market investing. The growing
importance of the Indian stock market place may be noted in terms of increased mobilization of
funds and growing number of investors account. Indian stock market industry has remained
centered around a limited product range. This has happened due to the tendency to avoid risk,
inability to understand future market development and changes in investor preference. The
absence of product diversification and a confused market situation has been made more by
the absence of an innovative marketing network. Online is considered as one of the innovative
network. The product range offered by stock broking firms needs to be redesigned to cater the
changes in the short term, medium term and long term savings and investment markets.
Management is considered to be a key for the operational efficiency of any business venture.
This factor becomes even more crucial for service ventures such as stock broking business
venture. Stock market industry must undertake a well-designed and comprehensive program of
investor education especially aimed at investors in rural and semi-urban areas. However this has
been mostly neglected in India. In India most of the broking business comes from the small
investors and efforts are concentrated on serving them efficiently, and this would help them in
being a good intermediary for providing various financial services due to its reach to the last
mile. SEBI has been playing a significant role in the regulation of stock market. SEBIs steps
like dematerializing, and trading through net etc. has increased the transparency of the trading
than before. In the global market place no industry can afford to be struck by inertia. But it is
management which is crucial to the success of any business operation.







RECOMMENDATIONS :
71


As many of the people who dealt in share market are aware of HDFCs
name but not its services. So company should advertise its services so that
people can be made aware of all the services provided by the company

Most of the people are not finding any spare time to convert their shares
electronically. So company should approach to such people at their doorstep
to open their demat account

As far as people preference regarding opening of demat account is
concerned then they mainly prefer two factors i.e. servic and trust. So it
becomes necesarry for the company to take care of these two factors













BIBLIOGRAPHY :

72

BOOKS
Working of Stock Exchanges in India : Machiraju H.R
Financial Services and Markets : Gordon .E.
Financial services, Markets and regulations : Agashe Anil
Capital markets and Securities laws : ICSI


WEBLIOGRAPHY :

www.caclubindia.com
www.chateredclub.com
www.chittorgarh.com
www.hdfcbank.com
www.icsi.edu