NSDL Project Report PDF

Analytical Study on NSDL
PREFACE
Although India had a vibrant capital market which is more than a country old,
the paper based settlement of trades caused substantial problem like bad delivery &
delayed transfer of title till recently. The enactment of Depositories Act in August
1996 paved the way for establishment of NSDL, the first depository in India. This
depository ^promoted by substitution of national stature depository promoted by
institution of national stature responsible for economic development of the country
has since established a national infrastructure of international that handles most of
the securities held & settled in dematerialized form in the Indian capital market.
Using innovative & flexible technology system, NSDL works to support the
investors & brokers in the capital market of the country. NSDL aims at ensuring the
safety & soundness of Indian marketplaces by developing settlement solution that
increase efficiency, minimum risk & reduce costs. At NSDL, we play a quiet but
central role in developing lets & service that will continue to nature the growing
needs of the financial services industry.
N.M.D. College, Gondia
CHAPTER I
National Securities Depository Limited:
NSDL is the first depository to be setup in INDIA. It was incorporated on

December 12, 1995. The Industrial Development Bank Of India (IDBI) - The largest
development bank in India, Unit Trust Of India (UTI)-The largest Indian mutual
fund and the national stock exchange (NSE) - The largest stock exchange in India,
sponsored the setting up of NSDL and subscribed to the initial capital. NSDL
commenced operation on Nov 08, 1996,
In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank account. Transfer of ownership of
securities is done through simple account transfers. This method does away with all
the risks &, hassles normally associated with paperwork. Consequently, the cost of
transacting in a depository environment is considerably lower as compare to
transacting in certificates.
(NSDL) NATIONAL SECURITIES DEPOSITORY LIMITED

INTRODUCTION;
To overcome various operational difficulties delay in transactions, increase in
cost of transactions, NSDL was established. NSDL is an organization promoted by
IDE I, the UTI, and NSE of India limited.
OBJECTIVE:
To provide electronic depository facilities for securities traded in the equity
and debt market
Origin:
The depository's ordinances promulgated by the government of India in
September 1995 enabled the setting up of the multiple depository system. The SEBI
issued the guide lines for depository's in Mayl996. The bill was passed by the
parliament in July 1996. NSDL was registered by SEBI on 7th June 1996.
Functions:
NSDL performs the following function through its various participants.
1. Enables surrender and withdrawal of securities to and from the depositary.

2. Maintains investor's holdings in the e form.
3. Effects settlement of securities traded on exchanges.
4. Carries
out settlements
the stock exchanges
of traders that have
not been done
on
Structure:
1. NSDL DP can be a publicity Bank, Custodian , Registered stock
broker, or a NBFC subject to a approval from the depository company and
the SEBI.
2. Brokers and NBFC's are required to nave a minimum net worth of Rs50 lakhs.
3. DP has to pay a security deposit of Rs 10 lakhs and admission fee of Rs25000
to NSDL.
4. NSDL operates, on two tyre structures where in it maintains accounts of its
DP and DP's maintain the;, accounts of their clients. With the help of the
continuous electronic connectivity reconciliation of all accounts is done on
daily basis to balance the number of stock if sued and dematerialized.
5. At present the national securities clearing corporation of NSE participate in
the functioning of NSDL. The SEBI has now. made it mandatory for all the
stock exchanges to have clearing corporations.
Transactions of NSDL:
They generally into two categories - new issues allotees , secondary market
transactions. Transfer of shares of one mode to another mode is involved. In the first
case the broker has to withdraw from the account mode into, physical mode to keep
the shares ready for delivery. In the second event the seller has to convert the
physical mode of securities into deposit account by opening an account or by
utilizing the account of another broker.
SERVICE CHARGES:
The stamp duty of 0.50% payable in paper based system is eliminated in the
Demat environment. The DP's charge on an average 0.15% of the market price of
the stock per annum as custodial charges. The DP's have to pay 0.035% to NSDL.
These custodial charges vary from one DP to another. The transaction charges which
range fromO.02 to 0.15% on buy transactions and from 0 to 0.12% on sell
transactions. Apart from custodial charges there are account opening up to Rs 1000
charged by some DP's.
ADVANTAGES TO THE INVESTOR:

1. Depositing the securities with NSDL would give freedom from the worry of
loss of share certificates through theft, mutilation due to careless handling,
fire, etc.
2. In selling shares the paper work required is reduced to 'a minimum. Investors
also prefer to buy shares that are already in the depository mode
3. The investor can become the owner of the shares-within a day of the
settlement being completed, if the shares bought are in depository mode.
4. There is no need to apply to the company for registering the share in
the name of investors.
5. There is no fear of any fake or stolen shares being delivered to the investor.
There is no possibility of loss or theft when the share certificates are posted to
the company.
REMATERIALIZATION:
Some times the investors may like to convert his electronic holdings into physical
share certificates. The process undertaken for
this purpose is called
dematerialization. The investor has to make request to the depository participant for
dematerialization. Rematerialization is optimal on the part of investor and can be
done on the request of investor, any time after the same have been rematerialized.
STEPS:
1. Investor request the DP for rematerialization .
2. The DP informs it to the NSDL.
3. NSDL intimates the Registrar;
4. The
registrar of the
company
prints, certificates
with
new
numbers and informs NSDL.

5. NSDL adjusts its account and passion the details to the DP.
6. The certificates are dispatched to the investor
Rematerialization , the certificate has a new range of certificates numbers and the
new folio number
DEMATERIALIZATION
Dematerializatiorn is a process in which the physical certificate of an investor
is taken back by the company. The registrar destroys the shares and equivalent
number of shares are credited in the electronic holdings of the investor. This is done
at the request of the investor.
STEPS:
1)
Surrendering of certificate to depository participants for dematerialization.
a.
NSDL is informed by the DP through electronic connectivity.
b.
Original share certificates are submitted to registrar by DP.
c.
The request for dematenalization from NSDL to the registrar
d.
The
registrar
credits
an
equivalent
number
of shares
in
the
account and informs NSDL.

e.
The "NSDL updates its own account and depository participants are informed.
f.
The depository agent credit it in the account of the investor

and the same is informed to the investor.
10
DEPOSITORY SYSTEM
Depository is an entity which holds securities in the form of electronic
accounts, in same way as a bank holds money Central depository services (India)
limited(CDS) was conceived of and set up as the second depository to meet the
objective of the depository act(1996). CDS secured its certificate for commencement
of business on 8-2-1999, from SEBI. It has been promoted by the BSE and Bank of
India.
Objectives of CDS:
1. To accelerate the growth of scripless trading.
2. To make a
participation in
3. To
to
create a
major
thrust
in
the
individual
investor's
the .depository system.

competitive
environment .and
be
responsive
user's interest and demands.
4. To enhance the liquidity.
11
Advantages of depository:
a.
It is faster, and delay in transfer of securities is eliminated .
b.
It avoids a lot of paper work
c.
There is no stamp duty on transfers so the buyer gets the exemption from
stamp duty on transfer of securities.
d.
There are simultaneous payment and delivery instructions.
e.
The issuer company can at any time ascertain the principles of the share
holding pattern to keep a watch on takeover threats.
f.
The company can substantial amount which it is spending oil printing

certificates, postage expenses and legal compliances.
g.
The issuer company is benefited by waiver of duty on the value of securities

as it is not required to affix stamps for duty on certificates.
12
Disadvantages of depository:
a.
Multiple depository system rises the problem of co-ordination between

different accounts of a single individual and deduction TDS and other security
dues.
b.
It may increase the number of traders
c.
It may increase the threat of corporate takeovers since the company

management may not come to know of the transaction taking place at the
depository.
13
Functions performed by depository:

a.
To enable demit and remit of eligible securities
b.
To provide for disbursement of corporate benefits to the beneficial owners.
c.
To affect settlement of securities traded on the exchanges as

well as off-market trades through book entry transfers,
d.
To facilitate pledging\ hypothecation of eligible securities at a later stage.
e.
To provide for securities lending and borrowing
when
the legal
framework permits.
14
Depository participants:
a.
DP is the agent of the! "depository and the interface between the depository
and the investor. (SHCl is the first DP registered with NSDL in India).
b.
A DP is responsible for maintaining the securities account of the investor

and handling in accordance with the investor's instructions.
c.
The DP should carry out transaction relating to the depository only through
the USER. Hardware system located at approved locations of the office of
the DP.
d.
Each DP should have a unique identification number provided by the DP

called the BP ID.
e.
The depository should operate on all days except Sundays and such
holidays as the depository may declare from time to time.
f.
The depository should announce the normal working hours for every
calendar year in advance
15
Constituents of depository system:

1. Issuers or company
2. Issuer registrar
3. Depository participants
4. Clearing members
5. Stockbrokers
6. Investors
7. Clearing corporations
16
Legal frame work: (Depository in India) It is regulated by

1) The depositories act 1996
2) The SEBI (depositories and participants) regulations, 1996.
3) Bye laws of depository
4) Business rules of depository
5) Certain provisions of the Companies Act 1956, the Indian Stamp act 1899, SEBI
Act 1992, Securities contract (regulation)Act l956, Benami transaction
( prohibition) Act l988, Income tax act 1961, Bankers books evidence act 1891.
Responsibility of DP:
The participant should be accountable for the functions executed by the depository
of behalf of the participants and should indemnify the depositor against any losses
or costs arising out of the same.
17
Operational procedure:
The operational procedure to followed by the issuer in the depository system are as
follows.
1) Dematerialization
2) Rematerialization
3) Beneficial owner's reporting ( investor)
4) Reconciliation of records. Accounts with DP:
The investor intending to hold securities in the electronic in a depository system

should open an account with a DP.
In-fact there are 4 categories of accounts a DP will maintain
1. Beneficiary account
2. House account
3. Clearing account
4. Own clearing account
18
Investor-DP:
The DP may advertise the services offered by them, once they registered. The
investor can choose any DP of his choice and fill up an account opening form.
Reasonable charges are received by the depositories for the opening of accounts and
every transaction in the accounts. The investor receives a pass book or a statement
of holdings, just like the bank pass book from the DP. The statements of holdings is
dispatched to the investor periodically. The investor can contact the DP for any
disparity in the statement of holding. If the discrepancy cannot be resolved the DP
level he could approach NSDL or CDSL for clarification. There is absolutely no
restriction with the number of DP's the investor can open accounts.
19
PROCESS
NSDL
(DEPOSITARY)
Register and
Transfer agents
Depository
Participant
Investor
(Beneficial Owner)
1
20
SECURITY DEPOSIT
Security management is the identification of an organization's assets, followed
by the development, documentation, and implementation of policies and procedures
for protecting these assets.
An organization uses such security management procedures as information

classification, risk assessment, and risk analysis to identify threats, categorise assets,
and rate system vulnerabilities so that they can implement effective controls.
BENEFITS AND SAFETY

Benefits
In the Depository system, the ownership and transfer of securities takes place
by means of electronic book entries. At the outset, this system rides the capital
market of the dangers related to handling of paper.
Elimination of Bad Deliveries - In the depository environment, once the holding of

an investors are dematerialized, the question of bad delivery does not arise, i.e., their
transfer cannot be rejected due to defect in the quality of the security. All possible
records for objecting transfer of title due to deficiencies associated with transfer deed
and share certificates are completely eliminated since both transfer deed and share
certificate are eliminated in the depository system,
21
Elimination of All Risks - Associated with Physical certificates -Dealing in

physical securities has associated security risks of theft of stocks, mutilation or loss
of certificates during movement to and from the registrars. These expose the
investors to the cost of obtaining duplicate certificates, advertisements, etc, such
problem do not arise in the depository environment.
No Stamp Duty -There is no stamp duty for transfer of equity instruments and units
of mutual fund in the depository system. In the case of physical shares, stamp duty
of 0.5% is payable on transfer of shares.
Faster Settlement Cycle - With the introduction of electronic form of settlement,

Indian Capital Markets have moved from 1 5 day long settlement cycle to T+2
settlement cycle where the settlement takes place on 2nd day from the day of trading.
This enables faster turnover of stock and enhances liquidity with the investor.
Buyer is Secured- In the physical environment, seller was secured since the sale
proceeds were always fully realizable but the buyer was not, since it was not certain
whether shares purchased will get transferred or not. The market principle that buyer
is king did not apply to the capital market. This situation has now been corrected.
22
Safety
NSDL has implemented various checks and measures in the depository system to
ensure safety of the investor's holdings. These include:
Certificate in Depository Operations - NSDL has introduced a certificate

programmer in Depository Operations. This has been made compulsory for all DPs.
They have to appoint at least one qualified in the certification programmer in their
branches. This way, NSDL ensures that each branch of a DP which services investors
has at least one person who has thorough knowledge about depository system.
Investors Grievances - All grievances of the investors are to be resolved by the

concerned business partner within 30 days. If they fail to do so, the investor has the
right to approach NSDL at the investor's grievance cell of NSDL which would work
towards resolution of the grievance.
Insurance Cover- NSDL has taken a comprehensive insurance policy to protect the
interest of the investors in cases of failure of the DP to resolve a genuine loss.
Computer and Communication Infrastructure - NSDL and its business partners

use hardware, software and communication systems which conform to industry
standards.
23
CHAPTER Ii
24
RESEARCH METHODOLOGY
The methodology that was adopted for the study includes both primary source
of data as well as the secondary source of data. The methodology of the study can
be explained as follows:
Research means collecting information on a certain ideas or theories to

gain better knowledge on something. Research can be done through reading
source material or performing experiments.
The process used to collect information and data for the purpose of
making business decisions. The methodology may include publication
research, interviews, surveys and other research techniques, and could include
both present and historical information.
25
PRIMARY DATA:
The primary data are those which are collected afresh and for the first time, and thus
happens to be original in character. We can obtain primary data either through
observation or through direct communication with respondents in one form or
another or through personal interview. There are several methods of collecting
primary data, but in this research work primary data collected by using
questionnaire.
Primary data:The information given / collection by individuals or group constitute primary
source.
Methods of generating primary data
i) Survey
ii) Personal interview
iii) Group interview
iv) Observation
v) Questionnaire
26
SECONDARY DATA:
Secondary data means data that are already available i.e. they refer to the data which
have been already been collected and analyzed by someone else. When the
researcher utilizes secondary data, then he has to look into various sources from
where he can obtain them. Secondary data may either be published data or
unpublished data. In this research work, secondary data collected through the
Internet
Company manual and booklets
Books etc.
The source of information is generally classified as primary and secondary.
According to payline V. Young The source of information can be classified into
documentary sources and field sources.
Books, diary, manuscript, letter, magazine, internet etc. are the secondary or
documentary source. The researcher for this dissertation has decided to use primary
source as interview schedule and secondary source as books and internet for data
collection.
27
Tools Of Data Collection:

a) Interview schedule & questionnaire was used as tool for primary source of
data collection.
b) Interview schedule consist of number of question typed in a definite order
or form.
Pre-study:
After careful study of literature and expert consultation the researcher still
may have only a rather vague idea about the critical element in his problem. As pilot
study sometimes may be launched as a step preliminary to the form scale before
original study are carried out in order to gain some preliminary information of the
main project for this purpose the researcher meet companys personal manager to
get the pre knowledge of the subject before conduction actual data collection.
Pretesting: Pretesting is the process of an advance testing of study design after the interview
schedule has been prepared .The researcher referred books and internet to get
prepared literature for this project & report.
28
Processing:Once the collection of data is over the main step top arranged for processing
and analysis of data. So the interview can be made resulting information theories.
The first step is editing, is a process of examining the data collection in interview
schedule to defect efforts and mission and to see that they are corrected and the
schedules prepared tabulations.
Editing:
The preparation of the data forms for tabulations must include on operational
procedure for accepting, modifying or resection individual questionnaire.
Tabulation:
Tabulation is a process of summarizing raw and display it in compact forms
for further analysis. Analysis of data is made possible through tables. These tables
are made for different variables and to show relationship with each other.
29
Interpretation of data:Analysis and interpretation are central step in research process. The goal of
analysis is to summarize o collected data in such a way that they provide answer to
the and triggered the researcher. Interpretation is the research for the broader
meaning of research finding. The questionnaire is preceded a few uncoded response
are classified the code were verified before transferred to the master chart.
30
Primary:
Chartered Accountant Agrawal & Associates.
Branch Manager HDFC Bank Gondia (Demat Section).
A member of Indian Journal of Commerce.
Secondary:
Times of India and magazines.
National Security Depository Limited.
RBI Annual Report
The Hindu Article
31
OBJECTIVES OF THE STUDY
To study the role of NSDL with regards to investment institutions.

To know the contribution of NSDL in the development of nations.
To study about the NSDL functions.

To know how NSDL regulate the depository system with the banks.
To know about the major applications of NSDL in different sector.
32
HYPOTHESIS
NSDL have smooth functionality towards the management of
securities.
It has sound banking relationship facilitates the coverage of
more and more investors.
It has depository system and online trading as its main function.

It plays vital role in the nations development by creating
awareness among the investors about investment opportunity in
various sectors.
33
LIMITATIONS
The study of NSDL is too vast, it not possible to cover each and every
aspect.
Sources of collecting this data in this place are very few.
The calculation of figures is not covered in this project.
34
CHAPTER III
35
About NSDL
NSDL, the first and largest depository in India, established in August 1996
and promoted by institutions of national stature responsible for economic
development of the country has since established a national infrastructure of
international standards that handles most of the securities held and settled in
dematerialized form in the Indian capital market.
Although India had a vibrant capital market which is more than a century old,
the paper-based settlement of trades caused substantial problems like bad delivery
and delayed transfer of title till recently. The enactment of Depositories Act in
August 1996 paved the way for establishment of NSDL, the first depository in India.
This depository promoted by institutions of national stature responsible for
economic development of the country has since established a national infrastructure
of international standard that handles most of the trading and settlement in
dematerialized form in Indian capital market.
Using innovative and flexible technology systems, NSDL works to support
the investors and brokers in the capital market of the country. NSDL aims at ensuring
the safety and soundness of Indian marketplaces by developing settlement solutions
that increase efficiency, minimize risk and reduce costs. At NSDL, we play a quiet
but central role in developing products and services that will continue to nurture the
growing needs of the financial services industry.
In the depository system, securities are held in depository accounts, which is more
or less similar to holding funds in bank accounts. Transfer of ownership of securities
is done through simple account transfers. This method does away with all the risks
and hassles normally associated with paperwork. Consequently, the cost of
transacting in a depository environment is considerably lower as compared to
transacting in certificates.
36
Promoters / Shareholders
NSDL is promoted by Industrial Development Bank of India (IDBI) - the largest
development bank of India, Unit Trust of India (UTI) - the largest mutual fund in
India and National Stock Exchange (NSE) - the largest stock exchange in India.
Some of the prominent banks in the country have taken a stake in NSDL.
Promoters
Industrial Development Bank of India Limited (Now, IDBI Bank Limited)
Unit Trust of India (Now, Administrator of the Specified Undertaking of the Unit
Trust of India)
National Stock Exchange of India Limited
37
Shareholders
State Bank of India
HDFC Bank Limited
Deutsche Bank A.G.
Axis Bank Limited
Citibank N.A.
Standard Chartered Bank
The Hongkong and Shanghai Banking Corporation Limited
Oriental Bank of Commerce
Union Bank of India
Dena Bank
Canara Bank
38
Board of Directors
1 Mr. C.M. Vasudev
Former Secretary, Ministry of Finance
Chairman, Public
Interest Director
2 Mr. G.V. Nageswara Rao

National Securities Depository Limited
Managing Director &

CEO
3 Mr. P. P. Vora
Former Chairman & Managing Director
Industrial Development Bank of India Limited
(Now, IDBI Bank Ltd.)
Public Interest
Director
4 Mr. Sudhir Mankad

Former Chief Secretary, Government of Gujarat
Public Interest
Director
5 Mr. Ravi Narain

Vice Chairman
National Stock Exchange of India Limited
Shareholder Director
6 Mr. B. Babu Rao

President
The Specified Undertaking of the Unit Trust of
India (SUUTI)
7 Mr. Viney Kumar

Executive Director
IDBI Bank Ltd.
39
MANAGEMENT
40
Legal Framework
As a part of its on-going market reforms, the Government of India
promulgated the Depositories Ordinance in September 1995. Based on this
ordinance, Securities and Exchange Board of India (SEBI) notified its Depositories
and Participants Regulations in May 1996. The enactment of the Depositories
Act the following August paved the way for the launch of National Securities
Depository Ltd.(NSDL) in November 1996.The Depositories Act has provided
dematerialization route to book entry based transfer of securities and settlement of
securities trade.
In exercise of the rights conferred by the Depositories Act, NSDL framed
its ByeLaws and Business Rules. The ByeLaws are approved by SEBI. While the
ByeLaws define the scope of the functioning of NSDL and its business partners; the
Business Rules outline the operational procedures to be followed by NSDL and its
Business Partners.
In view of the SEBI (Depositories and Participants) (Amendment)
Regulations, 2012, NSDL has adopted Code of Conduct for its Directors and Code
of Ethics for its Directors and Key Management Personnel as prescribed under
Regulation 9D of the aforesaid regulations. The Code of Ethics for Directors and
Key Management Personnel of NSDL, is aimed at improving the professional and
ethical standards in the functioning of the company thereby creating better investor
confidence in the integrity of the market.
41
Depository System - Business Partners

NSDL carries out its activities through various functionaries called "Business
Partners" who include Depository Participants (DPs), Issuing companies and their
Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of
Stock Exchanges. NSDL is electronically linked to each of these business partners
via a satellite link through Very Small Aperture Terminals (IPVSAT) or through
MPLS (Multi protocol label switching). The entire integrated system (including the
electronic links and the software at NSDL and each business partner's end) is called
the "NEST" [National Electronic Settlement & Transfer] system.
42
Depository Participant (DP) :
The investor obtains Depository Services through a DP of NSDL. A DP can be a

bank, financial institution, a custodian, a broker, or any entity eligible as per SEBI
(Depositories and Participants) Regulations, 1996. The SEBI regulations and NSDL
bye laws also lay down the criteria for any of these categories to become a DP.
Just as one opens a bank account in order to avail of the services of a bank, an
investor opens a depository account with a DP in order to avail of depository
facilities. Though NSDL commenced operations with just three DPs, Depository
Participant Services are now available in most of the major cities .
Issuing
Companies/
their
Registrar
&
Transfer
Agents
Securities issued by issuers who have entered into an agreement with NSDL can be
dematerialised in the NSDL depository. As per this agreement, issuer agrees to
verify the certificates submitted for dematerialisation before they are dematerialised
and to maintain electronic connectivity with NSDL. Electronic connectivity
facilitates
dematerialisation,
rematerialisation,
daily
reconciliation.
43
Clearing Corporation / House:
The clearing corporations/houses of stock exchanges also have to be electronically

linked to the depository in order to facilitate the settlement of the trades done on the
stock exchanges for dematerialised shares. At present, all the major clearing
corporations/houses of stock exchanges are electronically connected to NSDL.
The following stock exchanges have linked up with NSDL to facilitate trading and
settlement of dematerialised securities:
Madras Stock Exchange Ltd. (MSE)
National Stock Exchange of India Ltd. (NSE)
Inter-connected Stock Exchange of India Ltd. (ISE)
OTC Exchange of India (OTCEI)
The Calcutta Stock Exchange Association Ltd. (CSE)
The Delhi Stock Exchange Association Ltd. (DSE)
The Stock Exchange, Mumbai (BSE)
The Stock Exchange, Ahmedabad (ASE)
44
CHAPTER Iv
45
Sample Test
1. ISIN stands for ______.
(a) International Securities Identification number
(b) International Securities Identity number
(c) Indian Securities Identity number
(d) Indian Securities Identification number
2. Can locked in securities be dematerialised?
(a) No.
(b) Yes, provided lock in reason is promoters quota in public issues.
(c) Yes, always irrespective of lock in reason.
(d) Yes, provided lock in reason is employees quota under stock option scheme.
3. Problem:
Details as reflected in the statement of account are as under:
Date of
credit***
Particulars
Quantity
5.3.97
Purchased in the demat form on 27.2.1997
1500
16.6.97
Dematerialised shares that were originally purchased in Feb.

1990
6500
24.7.97
Purchased shares from the market on 15.7.1997
2000
7.9.97
Credit of bonus shares (2:5)
4000
12.11.97
Received a gift
2000
46

*** The above credits of securities are in the same account.
If 2500 shares were sold from this account on 1st Dec. 1997, then for calculating capital gains,
which of the following shares will be taken into account by income tax authorities?
(a) 2000 which were credited on 12.11.1997 and 500 from the 4000 credited on 7.9.97.
(b) 1500 which were credited on 5.3.1997 and 1000 from the 6500 credited on 16.6.97.
(c) All 2500 from 4000 bonus shares received on 7.9.1997.
(d) All 2500 from the 6500 credited on 16.6.1997.
4. The DP must ensure that clearing members have given the necessary
pay-in instruction (i.e. instruction for transfer from the CM pool to the CM
delivery) to effect settlement,:
(a) Not applicable. No instruction is required for this process.
(b) After the NSDL deadline time for pay-in for the concerned exchange.
(c) No deadline. Can be given at any time.
(d) At least before NSDL deadline time for pay-in for the concerned exchange.
5. Which of the following options are available in case of freezing of a

demat account?
a. Freeze for debits only
b. Freeze for credits only
c. Freeze for debits
as well as credits.
(a) b only
(b) a and c
(c) b and c
(d) a only
47
6. Which of the following provides for inter-connectivity amongst various

depositories in the scenario of multiple depositories?
(a) Operational manual for depositories.
(b) NSDL Business Rules.
(c) NSDL Bye-Laws.
(d) SEBI (Depositories and Participants) Regulations, 1996.
7. Dematerialisation is the:
(a) Process of converting physical shares into electronic shares
(b) Process of selling electronic shares
(c) Process of converting electronic shares into physical shares
(d) Process of transferring electronic shares from one account to another account
8. Which of the following can appoint a nominee?
(a) Body Corporate
(b) Individual
(c) Trust
(d) FI
9. According to SEBI requirements, securities, forming a part of the SEBI

specified compulsory list wherein delivery in demat form is mandatory for all
categories of investors, can be delivered in physical form in the stock
exchanges connected to NSDL. This requirement is applicable to:
(a) There is no such SEBI requirement.
(b) Physical deliveries wherein the number of shares are less than 500.
(c) Physical deliveries valued at less than Rs. 25,000/- or 500 shares whichever is less.
(d) All physical deliveries.
48
10. Mr. Buyer has sold 100 shares on the NSE. Both, Mr. Buyer and Mr.
Seller have opened depository accounts with NSDL. Assuming, Mr. Seller is the
buyer of the same shares, the shares will be credited to:
(a) Mr. Buyer's account directly by the stock exchange.
(b) Mr. Seller' s account directly by Mr. Buyer.
(c) Mr. Seller's account by the DP of his stock broker on the basis of an instruction given by that
stock broker.
(d) Mr. Buyer's account by the DP of his stock broker on the basis of an instruction given by that
stock broker.
11. In an application for opening an account (for corporates/ clearing

members only), which one of the following form part of types of accounts?
(a) NRI- Repatriable
(b) OCB
(c) NRI- Non-Repatriable
(d) HUF
12. Bank particulars captured in the depository account opening form, are
of relevance for which of the following related activities?
(a) Transferring shares to the CM pool account
(b) Stock lending and borrowing
(c) Cash corporate actions
(d) Off-market transfers
49
13. Eligible securities for inter-depository transfers are:
(a) Securities which are available for trading at NSE and BSE.
(b) Securities which are admitted for dematerialisation on both the depositories.
(c) Securities which are announced by SEBI for compulsory settlement in demat form on stock
exchanges connected to the depository for all institutional investors.
(d) Securities which are announced by SEBI for compulsory settlement in demat form on stock
exchanges connected to the depository for all categories of investors.
14. The custody fee is payable by Issuer to NSDL on a _______ basis.
(a) Quarterly
(b) Yearly (calendar year)
(c) yearly (financial year)
(d) Monthly
15. Resolution by arbitration for disputes between NSDL and its business
partners:
(a) Is applicable for disputes between NSDL and bank DPs only
(b) Is not applicable in the NSDL environment
(c) Is applicable for disputes between NSDL and broker DPs only
(d) Has been prescribed in the NSDL Bye-Laws
16. Can a delivery instruction for transferring shares from a beneficiary

account to a CM pool account be canceled?
(a) Yes, but only prior to the execution date indicated in the delivery instruction
(b) Yes always
(c) Never
(d) Yes, but only after the execution date indicated in the delivery instruction
50
17. DVP, in the capital market context, stands for:
(a) Default versus payment
(b) Delivery versus payment
(c) Default versus penalty
(d) Delivery versus penalty
18. Which of the following doesn't form part of Pledge/ Hypothecation

form?
(a) Closure date
(b) Details of securities
(c) Bank account details
(d) Agreement No.
19. Novation means:
(a) Creation of new and complex derivative instruments.
(b) Guarantee of each outstanding position by the stock exchange.
(c) Clearing corporation is the legal counter party to each trade for settlement purposes and
hence, leading to elimination of counter party risk from the system.
(d) Guarantee of settlements by the clearing corporation/ house given to a stock exchange.
20. The route to the depository, as per the Depositories Act, 1996, is:
(a) Dematerialisation or immobilisation, at the option of the Issuer
(b) Dematerialisation or immobilisation, at the option of the depository
(c) Dematerialisation
(d) Immobilisation
51
21. Can shares that are not registered in the name of the account holder
be dematerialised?
(a) Yes, at the discretion of the Issuer/ its R and T Agent
(b) No, shares have to be registered in the name of the concerned investor
(c) Yes, at the discretion of the DP
(d) Yes, provided a duly filled transfer deed is attached
22. "Fungible" means, as shares would not have distinguishing features

such as distinctive nos., certificate nos. etc.:
(a) Same securities of a company are interchangeable
(b) They are freely transferable
(c) Similar securities of different companies are interchangeable
(d) Different securities of same company are interchangeable
23. NSDL:
(a) Has no role to play in settlement of dematerialised securities that are to be delivered in the
unified (erstwhile physical) segments of connected stock exchanges.
(b) Replaces the clearing corporation/ house of the exchange that has established electronic
connectivity with it.
(c) Facilitates settlement of both funds and dematerialised securities.
(d) Only plays the role of a facilitator in settlement of dematerialised securities in those exchanges
which have established electronic connectivity with it.
24. The account that an Clearing Member needs to open to dematerialise

its own securities, is called _ account in NSDL system:
(a) Beneficial owner
(b) Clearing member
(c) Intermediary
(d) Investor
52
25. The depository account that an investor opens is called as:
(a) Broker account
(b) Intermediary account
(c) Beneficiary account
(d) Clearing member account
26. Shyam has 500 shares of ABC Ltd in his beneficial owner account on
12/10/98. He gives a "Delivery instruction" on the same day to debit his
account with 600 shares of ABC Ltd with the execution day as 14/10/98. At
the end the of the day on 14/10/98 his account shows a credit of 550 shares.
What will happen?
(a) The entire instruction will be cancelled in the system at the end of the day on 14/10/98, as
the account is short by 50 shares.
(b) 500 shares will be debited from his account on 12/10/98, 50 shares on 14/10/98 and the
balance instruction will be cancelled.
(c) The entire instruction will be cancelled in the system on 12/10/98, as the account is short by
100 shares.
(d) On 14/10/98, 550 shares will get debited and the balance instruction cancelled.
27. In case an investor opts for allotment in demat form in case of

bonus/rights issue without opening a depository a/c:
(a) The issuing co. will maintain holdings in their suspense account till investor opens account.
(b) His entitlements will be issued in physical form
(c) His entitlements will be issued in demat form and credited to suspense a/c maintained by the
DP.
(d) His entitlements will be issued in demat form and NSDL will open an a/c for the investor
53
28. What is the main purpose of bank account details in account opening
form?
(a) For DP to debit the savings bank account for charges on the services enjoyed
(b) For the purpose of income tax authorities
(c) For safe distribution of cash corporate actions
(d) For NSDL to debit the savings bank account for charges on the services enjoyed
29. Mr. Gupta having beneficiary account with DP1 sells 100 shares of ABC
company through broker XYZ who has his clearing member account with DP2.
Broker XYZ delivers the same in demat form to the clearing corporation/ house
in settlement no. 1999052. Mr. Sharma having beneficiary account with DP3
buys the same through broker PQR who has his clearing member account with
DP4. Broker PQR gets credit of the same in his account with DP4 in settlement
no. 1999052. The market value of ABC company is Rs. 500/-. What are the
transaction charges levied by NSDL to DP4 as applicable from May 1, 2002?
(a) Re. 1/- subject to minimum Rs. 1000/- and maximum Rs. 5,000/- per quarter.
(b) Rs. 25/- (100*500*0.05/100) i. e. 5 basis points of market value of securities credited to
broker PQR clearing member account from clearing corporation/ house.
(c) Rs. 0.50 (100*50*0.01/100) i. e. 1 basis point of market value of securities credited to broker
PQR clearing member account from clearing corporation/ house, subject to minimum Rs. 2000/and maximum Rs. 20,000/- per quarter.
(d) No charges.
30. The credit of pledged securities remains in the account of______
(a) The pledgor
(b) The pledgee
(c) Both, the pledgor and the pledgee
(d) None of the above. It will lie in pledge account (maintained in NSDL system for all pledge
transactions)
54
31. In case of a partnership firm, the beneficial owner account will be

opened in the name of:
(a) The partnership firm
(b) Any partner(s)
(c) All the partners
(d) Any of the above
32. Mr. Sharechandani, an NRI based in Singapore has purchased 1000

shares of XYZ in March 1995 on a repatriable basis. If he wishes to transfer
the shares to his broker on sale:
(a) He will have to produce the copy of the necessary RBI permission to his DP.
(b) He will need to take special permission from SEBI to do so and then produce the same to DP.
(c) The treaty between India and Singapore exempts Mr. Sharechandani from producing any
permission.
(d) No permission is required for NRIs. He can transfer the same freely.
33. An investor holding shares in demat form will get his bonus
entitlement in:
(a) Demat form
(b) Physical form
(c) Any of the above at the choice of the Issuing Co.
(d) Demat/ physical form at his option
55
34. DP forwards certificates received for dematerialisation along with DRF

to:
(a) NSDL
(b) Issuer/its R and T Agent
(c) Both of the above
(d) None of the above as the DP directly gives an electronic credit to the investor
35. Settlement in the NSE is based on:
(a) Multilateral netting on both funds and securities side
(b) Multilateral netting with respect to funds and bilateral gross positions with respect to funds
(c) Bilateral netting on both funds and securities side
(d) Real time gross settlement
36. On death of any of the joint holder(s), securities lying to the credit of
the joint account can be transmitted in the name of surviving holder(s). What
is the procedure for the same?
(a) The surviving joint holder(s) to have an account in their name(s). They should submit a
notarised death certificate to the Issuer/ its R and T Agent along with transmission form.
(b) On submission of notarised death certificate along with transmission form to the Issuer/ its R
and T Agent, the deceased holders name will be deleted from the existing account.
(c) On submission of notarised death certificate along with transmission form to the DP, the
deceased holders name will be deleted from the existing account.
(d) The surviving joint holder(s) to have an account in their name(s). They should submit a
notarised death certificate to DP along with transmission form.
56
37. Can locked -in securities be dematerialised?
(a) Yes, provided lock-in reason is promoters' quota in public issues.
(b) Yes, provided lock-in reason is employees' quota under stock-option scheme.
(c) Yes, always irrespective of lock-in reason.
(d) No.
38. Name the odd one out:
(a) ICRA
(b) BOISL
(c) CARE
(d) CRISIL
39. Which of the following statements regarding dematerialisation is

false?
(a) Investor has to pay stamp duty for dematerialisation of shares.
(b) NSDL doesn't charge its DPs for dematerialisation.
(c) Odd lot shares can be dematerialised.
(d) Shares not registered in the name of the concerned account holder (street name shares) can't
be dematerialised.
40. Which of the following places does not have a stock exchange?
(a) Delhi
(b) Calcutta
(c) Guwahati
(d) Cuttack
57
41. Which of the following documents is not a valid proof of address

(POA) for opening demat account?
(a) Pan Card
(b) Passport
(c) Voter Identity Card
(d) Bank Passbook
42. If beneficial owner opts for demat securities in the public issue
application form then, the probability of allotment of the shares:
(a) Remains same
(b) Decreases
(c) Depends on the no. of applications he has submitted asking for demat shares
(d) Increases
43. In a share application form, if an applicant applies for part subscription

in demat form and part in physical form, then
(a) The form will be treated as valid but all shares will be issued in demat form
(b) The form will be treated as valid and the shares will be issued as per the request in the form
(c) The form will be treated as invalid and rejected
(d) The form will be treated as valid but all shares will be issued in physical form
44. On rematerialisation the share certificates are:
(a) Issued by Issuer/ its R and T Agent and forwarded to investor through DP
(b) Issued by Issuer/ its R and T Agent and forwarded to investor through NSDL
(c) Issued by Issuer/ its R and T Agent and forwarded to investor directly by Issuer/ its R and T
Agent
(d) Issued by NSDL and forwarded to investor directly by NSDL
58
45. Every Issuer must enter into an agreement with NSDL for offering its
securities for demat. The following is true with respect to the statement
made.
(a) No. Securities which are listed on the NSE are exempt. However, those which are in the
'Permitted-to-trade segment are not exempt.
(b) Yes. All Issuers must sign an agreement with NSDL.
(c) No. Securities issued by the Central and State Governments are exempt from signing an
agreement.
(d) No. Issuers which have a market capitalisation of more than Rs. 125 Cr. are exempt from
signing an agreement.
46. To dematerialise government securities, NSDL has to take prior

approval of:
(a) SEBI and RBI both
(b) RBI
(c) SEBI
(d) Issuing government authority
47. Mr. M is holding securities with DP D. Since he is scheduled to relocate

to Dubai on a special assignment and expects to be away for quite a while,
he wishes to lock (freeze) his account.
He can do so by:
(a) Account freezing is not possible in the NSDL system
(b) Filling up an account freezing form available with the DP D
(c) Transferring his holdings to a special account called 'e-locker' where all such securities are
held in fiduciary capacity by DP D
(d) writing to NSDL to freeze his account
59
48. As a part of the capital adequacy requirement, the base minimum

capital prescribed by SEBI:
(a) Varies from exchange to exchange
(b) Is based on the recommendations of the Kaul committee
(c) Is based on the recommendations of the Justice Bhagwati Committee
(d) Is the same across members of all exchanges
49. Tick the true statement:
(a) A stock broker having a minimum networth of Rs. 50 lakh is eligible to join NSDL as a DP
irrespective of whether registered with SEBI.
(b) A SEBI registered stock broker having a minimum networth of Rs. 50 lakh is eligible to join
NSDL as a DP.
(c) A SEBI registered stock broker is eligible to join NSDL as a DP. There is no minimum networth
requirement.
(d) A SEBI registered stock broker having a minimum networth of Rs. Three crore is eligible to
join NSDL as a DP.
50. Mr. P has 500 shares of a company in his account with DP D. He

pledges these shares with bank B. He now gives a transfer (debit) instruction
to his DP D to transfer 200 of these shares to his broker R. Assuming no
additional credits are expected into P's account with DP D:
(a) The instruction will fail as there is no sufficient quantity of free shares.
(b) DP D will release the pledge to the extent of 200 shares and transfer to broker R as free
balance.
(c) Not applicable. Demat shares cannot be pledged.
(d) The shares will be transferred to broker R on the given execution date as pledged balance.
60
51. Book building:
(a) Is used by stock exchanges for trading as it is more efficient than the traditional open outcry
system.
(b) Is used by speculators to artificially increase share prices.
(c) Is used in the public issue process for efficient price and demand estimation for the Issuer.
(d) Is used by bookies in horse racing.
52. If a DP goes bankrupt, what happens to the dematerialised holdings

of investors with the DP?
(a) The assets of the investor may be used for paying off the creditors of the DP.
(b) The appointed "court receiver" has the discretion to dispose off the assets of the investor in
the manner he deems fit.
(c) NSDL has the discretion to dispose off the assets of the investor in the manner it deems fit.
(d) The investor can opt for rematerialisation or open his account with another DP and transfer
his holdings.
53. A broker (clearing member) gives delivery to clearing corporation/

house instruction to its DP.
What will be the movement of the shares?
(a) Broker's (clearing members) pool account will be debited and buying client's account will be
credited.
(b) Broker's (clearing members) pool account will be debited and his delivery account will be
credited.
(c) Broker's (clearing members) beneficial owner account will be debited and his pool account will
be credited.
(d) Broker's (clearing members) pool account will be debited and DP's house account will be
credited.
61
54. An investor submits 10 share certificates of RPL, all in market lot of 50

shares for dematerialisation to his DP. The face value of the share is Rs. 10/-.
Assuming that DP charges 0.2 % of the face value of securities for
dematerialisation, calculate dematerialisation charges by NSDL to the DP:
(a) Rs. 1.
(b) No charges.
(c) Rs. 10.
(d) Rs. 100.
55. If an investor requests for demat securities in case of public issue

without having a depository account, then
(a) Issuer/ R and T Agent will open the account on behalf of the investor and credit it with allotted
shares.
(b) NSDL will open the account on behalf of the investor and credit it with allotted shares.
(c) Allotted shares will be issued in physical form.
(d) DP will open the account on behalf of the investor and credit it with allotted shares.
56. Physical securities registered in the name of more than three joint
holders, can be dematerialised by:
(a) Sending the same for registration in the name of three or less jointholders and then
dematerislising them. They cannot be directly dematerialised in the name of more than three
jointholders.
(b) Writing to NSDL and NSDL will decide on a case to case basis.
(c) Opening an account in the name of first three joint holders for the purpose of dematerialising
these securities.
(d) Opening an account in the name of all the jointholders which account can be used only for
the purpose of dematerialising these securities and delivering the same on sale.
62
57. For a stock exchange/clearing house to settle demat securities, the

stock exchange/ house must have a mechanism to ensure payment against
delivery or guarantee settlement. This requirement is drawn from:
(a) The Byelaws of the respective stock exchanges.
(b) The NSDL Byelaws.
(c) The SEBI (Depository and Participants) Regulations, 1996.
(d) The Depositories Act, 1996.
58. Is it true that according to SEBI's April 6, 1998 directive demat shares
will be treated as good delivery in the physical segments of stock exchanges
connected to NSDL?
(a) Yes, for all category of investors.
(b) No.
(c) Yes, for all category of investors but only at NSE and BSE.
(d) Yes, but only for institutional investors.
59. UTI:
(a) Is the largest mutual fund in the world.
(b) Was set by an act of Parliament in India.
(c) Has floated only one mutual fund scheme till date viz., UNIT-64, but the same happens to be
the most popular.
(d) Is the self-regulatory body for mutual funds.
60. All dematerialised securities are:
(a) Mandatorily registered in the name of the individual investor.
(b) Registered both in the name of the individual investor and the depository.
(c) Mandatorily registered in the name of the depository.
(d) Registered in the name of either the depository or the individual investor.
63
Answers
1. a
13. b
25. c
37. c
49. d
2. c
14. c
26. a
38. b
50. a
3. b
15. d
27. b
39. a
51. c
4. d
16. a
28. c
40. d
52. d
5. b
17. b
29. a
41. a
53. b
6. d
18. c
30. a
42. a
54. b
7. a
19. c
31. b
43. c
55. c
8. b
20. c
32. a
44. c
56. d
9. b
21. b
33. d
45. c
57. c
10. c
22. a
34. b
46. b
58. a
11. b
23. d
35. a
47. b
59. b
12. c
24. a
36. d
48. a
60. c
64
INTERPRETATION
Analysis and interpretation are central step in research process. The goal of analysis
is to summarize o collected data in such a way that they provide answer to the and
triggered the researcher. Interpretation is the research for the broader meaning of
research finding.
The questionnaire is preceded a few uncoded response are
classified the code were verified before transferred to the master chart.
65
CHAPTER v
66
67
RECOMMENDATION
The Government of India has to add the overview of NSDL in the syllabus
of Bachelor Degree of Commerce. So people know about short knowledge
of that.
Create the awareness about Capital Market.
68
69
CONCLUSION
1) The NSDL helps to regulate the financial Institutions.
2) The working terms and conditions are regulated by the NSDL and the
Financial Institutions have to run on that.
3) The daily and routine activity is run the guidelines of NSDL.
4) The NSDL have their own Bye-Laws and all those regulations which
bounded for the Dematerialization, Rematerialisation & for account
open or close.
5) I have also concluded that It is very vast concept, the study of NSDL is
short period is not possible but I tried to cover the important things and
their clarification on that topic.
70
71
BIBLIOGRAPHY
Second book for NSDL Depository Operation Module.
The website of BSE. Com. National Security Depository Limited.
Indian Journal of Commerce.
Charted Accountant of Agrawal & Associates.
Newspapers & Magazines.
WEBSITE
www.nsdl.co.in
www.wikipidia.in
72

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Analytical Study on NSDL

N.M.D. College, Gondia

Analytical Study on NSDL

N.M.D. College, Gondia

Analytical Study on NSDL

National Securities Depository Limited:

NSDL is the first depository to be setup in INDIA. It was incorporated on

In the depository system, securities are held in depository accounts, which is

N.M.D. College, Gondia

Analytical Study on NSDL

(NSDL) NATIONAL SECURITIES DEPOSITORY LIMITED

N.M.D. College, Gondia

Analytical Study on NSDL

1. Enables surrender and withdrawal of securities to and from the depositary.

the stock exchanges

N.M.D. College, Gondia

of traders that have

not been done

Analytical Study on NSDL

N.M.D. College, Gondia

Analytical Study on NSDL

N.M.D. College, Gondia

Analytical Study on NSDL

ADVANTAGES TO THE INVESTOR:

N.M.D. College, Gondia

Analytical Study on NSDL

this purpose is called

numbers and informs NSDL.

N.M.D. College, Gondia

Analytical Study on NSDL

Surrendering of certificate to depository participants for dematerialization.

NSDL is informed by the DP through electronic connectivity.

Original share certificates are submitted to registrar by DP.

The request for dematenalization from NSDL to the registrar

account and informs NSDL.

The depository agent credit it in the account of the investor

N.M.D. College, Gondia

Analytical Study on NSDL

the .depository system.

user's interest and demands.

4. To enhance the liquidity.

N.M.D. College, Gondia

Analytical Study on NSDL

It is faster, and delay in transfer of securities is eliminated .

It avoids a lot of paper work

There are simultaneous payment and delivery instructions.

The company can substantial amount which it is spending oil printing

The issuer company is benefited by waiver of duty on the value of securities

N.M.D. College, Gondia

Analytical Study on NSDL

Multiple depository system rises the problem of co-ordination between

It may increase the number of traders

It may increase the threat of corporate takeovers since the company

N.M.D. College, Gondia

Analytical Study on NSDL

Functions performed by depository:

To enable demit and remit of eligible securities

To provide for disbursement of corporate benefits to the beneficial owners.

To affect settlement of securities traded on the exchanges as