A project report on customer satisfaction towards depository participants at hdfc

“A Study On Customer Satisfaction Towards Depository Participants”

Contents
Sl. No. Titles Page No.
I Chapter 1
 Executive summary
 Introduction 3
 Design of the study
- Statement of the Problem 5
- Objective
- Methodology
Sampling design
Data Collection Method
- Limitation of the study 7

II Chapter 2
 Organization Profile 9
 Introduction to Dematerlisation 24
- Accounting Opening 29
- Clearing member account 34
- Market Type & Settlements Number 37
- Depository 41
- Function of Depository 42
- Depository Participant 43
- Procedure for Dematerialisation 44
- Demat process 48
- Closure of account 50
- Trading & Settlement 51
- Selling And Buying Of Shares 53
- Other Services 54
- Demat Shares: Are They 100% Safe 55

III Chapter 3
 Results & discussion with Charts & graphs 63

IV Chapter 4
 Appendix
• Questionnaire 88
 Bibliography 98

Babasabpatilfreeppimba.com 1


EXECUTIVE SUMMARY



HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit
facilities. With its experience in the financial markets, a strong market reputation,
large shareholder base and unique consumer franchise, HDFC was ideally positioned
to promote a bank in the Indian environment. In addition it also provides demat
services, mutual funds etc.
Dematerialization or "Demat" is a process whereby your securities
like shares, debentures etc, are converted into electronic data and stored in computers
by a Depository. Securities registered in your name are surrendered to depository
participant (DP) and these are sent to the respective companies who will cancel them
after "Dematerialization" and credit your depository account with the DP.

The project emphasis on “Customer satisfaction towards depository
participants” .
Objectives of the Study:
• To know the concept of dematerialization, depository and depository
participants.
• To know the percentage of people satisfied with the services of DP.
• To know the investment habit of people in securities
• To know how Demat account is helping in trading..
• To find out the behavior of respondents towards shares

Research Methodology:
Data source:
Primary Data: Through Questionnaire
Secondary Data: HDFC Bank’s reports, Magazines & Websites.

Sample size: 100 customers of HDFC BANK
Area Covered for research: Only Belgaum HDFC BANKS customers.
Sampling Procedure: Random sampling method from available database.

Findings:



 Most of the investors are small investors (that is about 51%. And about 32%
are long term investors , and 17% are traders.
 The respondents aware of the new services provided by HDFC BANK are
mainly from agents that is about 39%,and from friends is 21%,and from
newspaper is 17%, and broker is 17% and from others is 6%.
 From the analysis it is clear that 33% of the respondents are extremely
satisfied with Demat services and 36% are satisfied and 13% are neither
satisfied/Nor satisfied and 18% of them are unsatisfied.
 From the analysis it clearly states that 16% of the respondents are extremely
satisfied with the service of settlement(Selling/Buying) and 37% are satisfied
and 28% are neither satisfied/Nor unsatisfied,15% are unsatisfied and 4% are
extremely unsatisfied.
 20% of the respondents are extremely satisfied with the service of sell ‘n’
cash and35% are satisfied,33% are neither satisfied nor unsatisfied, 7% are
unsatisfied and 3% are extremely unsatisfied
 46% of the respondents are satisfied by telephone queries,9% are extremely
satisfied,25% are neither satisfied ,11% are unsatisfied,9% are extremely
unsatisfied.
 21% of the respondents are extremely satisfied regarding the co-operation by
staff ,42% are satisfied,33% are neither satisfied nor unsatisfied,4% are
unsatisfied.
 24% of the respondents are 20% satisfied with the services of DP,25% of the
respondents are 40% satisfied with the services of DP, and 32% are 60%
satisfied with the services of DP.
 30.4% of the respondents prefer DP over other DP’s because of quality
service,9.8% because of rates charged,34.8% for nothing in particular, and
25% for safety.



Introduction

India has two hundred years old tradition in Securities. Infact that first India stock
exchange established in Bombay is the oldest in Asia. The earliest security dealings
were Transactions in loan securities of East India Company, the dominant institution
of those days. Corporate Shares came into the picture by 1830’s and assumed
significance with the Companies Act of 1956. In 1887 the broker community gave
birth to the “Native share and stock brokers Association” which is now known as the
Bombay Stock Exchange.

The Indian Capital grew at a very moderate rate from 1951 to 1980. However it
registered an impressive growth in 1980s. the process of liberalization and the
transparency in operation has raised the interest of foreign investors in India. Till
1978 there were only 8 recognized exchanges in India. Initially the exchange operated
on an outcry system i.e. manual system of trading Due to increase in the trading
volumes, the number of issuer increased substantially, and the birth of NSE highly
transparent automated system come into existence Even then there was an increase in
paper work causing a gridlock at every stage in the stock market This delays the
clearance and settlement of traders, registration of securities in the shareholder name
and due this it increased the back office paper work intermediaries These outdated
systems have increased settlement risks and have rendered the implementation of a
delivery of a versus payment system impossible. National Stock Exchange of India
Limited to provide electronic depository facilities for securities traded in the equity
and the debt market. NSDL commenced its operations in the year 1996 and is the first
depository in Indi

Design of the study

Tile of the project:
“Customer satisfaction towards depository participants”
Statement of the Problem: HDFC BANK is providing the Demat service. Hence in
this report an attempt is made to know the present customer satisfaction towards
depository participants



RESEARCH OBJECTIVES:
• To know the concept of dematerialization, depository and depository
participants.
• To know the percentage of people satisfied with the services of DP.
• To know the investment habit of people in securities
• To know how Demat account is helping in trading..
• To find out the behavior of respondents towards shares

Methods and Methodology

Sampling Design:
 Sampling since segment wise investors in HDFC BANK were available the
overall customers were considered for the study... Hence random sampling
survey method was adopted for the purpose of the study.
 Sampling Size: A sample of 100 was chosen for the purpose of the study.
Sample consisted of small investor, large investors and traders of HDFC
BANK.
 Field Study: Directly approached respondents.
DATA COLLECTION METHOD:
1. PRIMARY DATA: For a study of this nature primary data is
collected through Questionnaire.
2. SECOUNDARY DATA: This is been is collected through
HDFC Bank’s Report, Magazine & Websites.

MEASUREMENT TECHNIQUE:
For this purpose measurement technique used for survey is
questionnaire to collect information from the respondent
ANALYTICAL TECHNIQUE:
Statistical technique used for measuring the response is in terms of
percentage



Limitations of study

• Since Sample size is only 100,it does give the entire picture..
• Information is partly based on secondary data and hence the authenticity of the
study can be visualized and is measurable.
• Level of accuracy of the results of research is restricted to the accuracy level
with which the customers have given their answers and the accuracy level of
the answers cannot be predicted.



ORGANISATION PROFILE



HDFC is India's premier housing finance company and enjoys an impeccable track

record in India as well as in international markets. Since its inception in 1977, the

Corporation has maintained a consistent and healthy growth in its operations to

remain the market leader in mortgages. Its outstanding loan portfolio covers well over

a million dwelling units. HDFC has developed significant expertise in retail mortgage

loans to different market segments and also has a large corporate client base for its

housing related credit facilities. With its experience in the financial markets, a strong

market reputation, large shareholder base and unique consumer franchise, HDFC was

ideally positioned to promote a bank in the Indian environment.

The Housing Development Finance Corporation Limited (HDFC) was amongst the

first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set

up a bank in the private sector, as part of the RBI's liberalization of the Indian

Banking Industry in 1994. The bank was incorporated in August 1994 in the name of

'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank

commenced operations as a Scheduled Commercial Bank in January 1995.

BROAD AREAS IN WHICH IT OPERATES

The Bank operates in three segments: retail banking, wholesale banking and treasury

services. The retail banking segment serves retail customers through a branch network

and other delivery channels. The wholesale banking provides loans and transaction

services to corporate and institutional customers. The treasury services segment

undertakes trading operations on the proprietary account, foreign exchange operations

and derivatives trading. The Bank operates in India.

Retail Banking



This segment raises deposits from customers and makes loans and provides advisory

services to such customers. The objective of the Retail Bank is to provide its target

market customers a range of financial products and banking services, giving the

customer a one-stop window for all his/her banking requirements. The products are

backed by service and delivered to the customers through the growing branch

network, as well as through alternative delivery channels like automated teller

machines (ATMs), phone banking, net banking and mobile banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank

Plus and the Investment Advisory Services programs have been designed keeping in

mind needs of customers who seek distinct financial solutions, information and advice

on various investment avenues. The Bank also has an array of retail loan products,

including auto loans, loans against marketable securities, personal loans and loans for

two-wheelers. It is also a provider of depository participant (DP) services for retail

customers, providing customers the facility to hold their investments in electronic

form.

HDFC Bank has launched an international debit card in association with VISA (VISA

Electron) and also issues the MasterCard Maestro debit card. The Bank launched its

credit card business during the fiscal year ended March 31, 2001. By September 30,

2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The

Bank is also engaged in the merchant acquiring business with over 50,000 point-of-

sale (POS) terminals for debit/credit cards acceptance at merchant establishments.

Wholesale Banking

, The Bank's target market ranges from large, blue-chip manufacturing companies in

the Indian corporate to small and mid-sized corporates and agri-based businesses. For



these customers, the Bank provides a range of commercial and transactional banking

services, including working capital finance, trade services, transactional services and

cash management. The bank is also a provider of structured solutions, which combine

cash management services with vendor and distributor finance for facilitating superior

supply chain management for its corporate customers. It provides cash management

and transactional banking solutions to corporate customers

Treasury Services

Within this business, the bank has three main product areas: Foreign Exchange and

Derivatives, Local Currency Money Market & Debt Securities, and Equities. Risk

management information, advice and product structures, as well as fine pricing on

various treasury products are provided through the Bank's Treasury team. The

Treasury business is responsible for managing the returns and market risk on this

investment portfolio

CUSTOMER FOCUS

HDFC Bank's mission is to be a World-Class Indian Bank.

The objective is to build sound customer franchises across distinct businesses so as to

be the preferred provider of banking services for target retail and wholesale customer

segments, and to achieve healthy growth in profitability, consistent with the bank's

risk appetite. The bank is committed to maintain the highest level of ethical standards,

professional integrity, corporate governance and regulatory compliance. HDFC

Bank's business philosophy is based on four core values - Operational Excellence,

Customer Focus, Product Leadership and People

CAPITAL STRUCTURE

Authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up

capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the



bank's equity and about 19.4% of the equity is held by the ADS Depository (in respect

of the bank's American Depository Shares (ADS) Issue). Roughly 31.3% of the equity

is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000

shareholders. The shares are listed on the The Stock Exchange, Mumbai and the

National Stock Exchange. The bank's American Depository Shares are listed on the

New York Stock Exchange (NYSE) under the symbol "HDB

VARIOUS SERVICES

FOREX AND TRADE SERVICES

., HDFC Bank has a range of products and services that one can choose from to

transact smoothly.

The following are different methods of transacting in foreign exchange and remitting

money.

 Travellers cheques

 Foreign currency cash.

 Foreign currency drafts

 Cheque deposits

 Remittances

 Cash to master

 Trade services

 Foreign services branch locator

Important guidelines and schedules



All Foreign Exchange transactions are conducted by strictly adhering to RBI guidelines. Depending on

the nature of your transaction or point of travel, you will need to understand your Foreign Exchange

limits.

LOANS

 Home Loans

 Personal Loans

 Two Wheeler Loans

 New Car Loans

 Used Car Loans

 Overdraft Against Car

 Express Loans

 Loans Against Securities

 Loans Against Property

PERSONAL BANKING

Savings Accounts

These Accounts are primarily meant to inculcate a sense of saving for the future,

accumulating funds over a period of time. Whatever may be the occupation, bank is

confident that customer will find the perfect banking solution. Open an account in

your name (customer’s name) or register for one jointly with a family member today.



Current Accounts

Now, with an HDFC Bank Current Account, experience the freedom of multi-city

banking! Customer can have the power of multi-location access to his account from

any of banks 500 branches in 220 cities. Not only that, he can do most of his banking

transactions from the comfort of his office or home without stepping out.

At HDFC Bank, it understand that running a business requires time and money, also

that customers business needs are constantly evolving. That's where it come in. It

provides him with a choice of Current Account options to exclusively suit his

business - whatever the size or scope.

Fixed Deposits

Long-term investments form the chunk of everybody's future plans. An alternative to

simply applying for loans, fixed deposits allow the customer to borrow from his own

funds for a limited period, thus fulfilling his needs as well as keeping his savings

secure.

As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tarriffs,

Charges or Fees Brochures will attract Service Tax @10% & Education Cess @2% of

the service tax amount effective 10th September 2004. The same will appear as

separate debits in the statements.

PRIVATE BANKING

HDFC Bank offers Private Banking services to high net worth individuals and

institutions. Banks team of seasoned financial and investment professionals provide



objective guidance backed by thorough research and in-depth analysis keeping in

mind customers financial goals.

Multiple Recognition from Euro money

At HDFC Bank, they have always strived towards providing exceptional service to

each of their esteemed customers. As testament to this dedication, they have earned

the following ranks in a recently conducted Euromoney Survey.

 Rated as the best private bank in the super effluent category in India

HDFC Bank Investment Advisory Services - Helping you take your Investment

portfolio further.

 Dedicated investment advisor

HDFC Private Banking service involves a high degree of personalization. When

customer avail of this facility, a dedicated Investment Advisor serves him. This

seasoned finance professional adds value to his portfolio by keeping him up to

date with financial markets and investment opportunities

.PAYMENT SERVICES

With HDFC Bank's payment services, one can bid goodbye to queues and paper

work. Its range of payment options make it easy for customer to pay for a variety of

utilities and services.

 Verified by visa

If one wants to be worry free for his online purchases. Now he can shop securely

online with yhis existing Visa Debit/Credit card.

 Net safe

Now shop online without revealing your(customers) HDFC Bank Credit Card

number.



 Prepaid refill

If a person is a HDFC Bank Account holder and a prepaid customer, he can now

refill his Prepaid Mobile card with this service.

 Bill pay

One can pay his telephone, electricity and mobile phone bills at his convenience.

Through the Internet, ATMs, his mobile phone and telephone - with Bill Pay, bank’s

comprehensive bill payments solution

 Visa Bill Pay

One can pay his utility bills from the comfort of his home! Pay using his HDFC

Bank Visa credit card and forget long queue and late payments forever

 Insta pay

One can Pay his bills, make donations and subscribe to magazines without going

through the hassles of any registration.

 Direct pay

Shop or Pay bills online without cash or card. Debit your(customers ) account

directly with bank’s Direct Pay service!

 Smart pay(with credit cards)

With Smart Pay, paying customers r electricity, telephone, mobile phone, water

bills, gas and insurance premia payments becomes easy like never before

 Visa money transfer

One can transfer funds to any Visa Card (debit or credit) within India at his own

convenience through HDFC Bank's Net Banking facility.

 e-Monies Electronic Funds Transfer

Transfer funds from customers account to any account in any Bank in India at

15 locations - FREE of cost!



 Online payment of excise and service tax

One can make his Excise and Service Tax payments at his own convenience.

PREFFERED/CLASSIC BANKING

If a customer expects more from everything, even HDFC bank, will invite him

into the world of exclusive banking. Where he will never again have to wait to be

served. With HDFC Bank Preferred Programme, his comfort always comes first.

Ideal for seasoned professionals or businessmen, this programme will provide him

with a banker dedicated to take care of all his banking and investment needs. It

also means he get preferential rates on various banking products and other

exclusive benefits.

HDFC BANK CLASSIC BANKING

If a person wants to experience banking beyond the ordinary, our HDFC Bank

Classic Programme is just for him.

Becoming an HDFC Bank Classic customer entitles him to a host of benefits,

including a bouquet of preferentially priced products and specialized wealth

management solutions.

AWARDS AND ACHIEVMENTS

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class

Indian Bank". They realized that only a single-minded focus on product quality and

service excellence would help them get there. Today, they are proud to say that they

are well on the way towards that goal.



2006

Business Today Best Bank in India.
Forbes Magazine One of Asia Pacific's Best 50 companies.
Businessworld Best listed Bank of India.
The Asset Best Domestic Bank.
Magazine's Triple A
Country Awards
Asiamoney Awards Best Local Cash Management Bank in Large and Medium
segments.
Euromoney Awards "Best Bank" in India.

2005

Asia money Awards Best Domestic Commercial Bank
Asia money Awards Best Cash Management Bank - India .
The Asian Banker Retail Banking Risk Management Award in India.
Excellence
Hong Kong-based Best Bank India
Finance Asia
magazine
Economic Times "Company of the Year" Award for Corporate Excellence.
Awards

Asiamoney also named the bank:

Best Local Cash Management Bank in India 2004 - US$11-100m
Best Local Cash Management Bank in India 2004 - >US$501m
Best Local Cash Management Bank in India 1989-2004 (poll of polls)
Best Overall Domestic Trade Finance Services in India 2004
Most Improved company for Best Management Practices in India 2004



The Business Today-KPMG Survey published in the leading Indian business

magazine Business Today has named HDFC Bank "Best Bank in India" for the third

consecutive year in 2005.

The Asset magazine named HDFC Bank "Best Cash Management Bank" and "Best

Trade Finance Bank" in India, in 2006.

HDFC Bank named the "Most Customer Responsive Company - Banking and

Financial Services in The Economic Times - Avaya Global Connect Customer

Responsiveness Awards 2005"

HDFC Bank has been named Best Domestic Bank in India in The Asset Triple A

Country Awards 2005.

HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple

A Country Awards 2004 and 2003.

In 2004, HDFC Bank was selected by BusinessWorld as "One of India's Most

Respected Companies" as part of The Business World Most Respected Company

Awards 2004.

In 2004, Forbes Global again named us in its listing of Best Under a Billion, 100 Best

Smaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004 issue.

In 2004, HDFC Bank won the award for "Operational Excellence in Retail Financial

Services" - India as part of the Asian Banker Awards 2003.

In 2003, Forbes Global named us in its ranking of "Best Under a Billion, 200 Best

Small Companies for 2003".



Leading business newspaper The Financial Express named HDFC Bank the "Best

New Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey 2003.

Leading Personal Finance Magazine in India Outlook Money named HDFC Bank the

"Best Bank in the Private Sector" for the year 2003.

Leading Indian business magazine Business Today in a survey rated us "Best Bank in

India" 2003, and "Best Private Sector Bank" in India in 1999.

NASSCOM and economictimes.com have named us the 'Best IT User in Banking' at

the IT Users Awards 2003.

There have been some other proud moments as well:

London-based Euromoney magazine gave us the award for "Best Bank - India" in

1999, "Best Domestic Bank" in India in 2000, and "Best Bank in India" in 2001

and 2002
Asiamoney magazine has named us "Best Commercial Bank in India 2002".
For our use of information technology we have been recognized as a

"Computerworld Honors Laureate" and awarded the 21st Century Achievement

Award in 2002 for Finance, Insurance & Real Estate category by Computerworld,

Inc., USA.
Our technology initiative has been included as a case study in their online global

archives.The Economic Times has conferred on us The Economic Times Awards

for Corporate Excellence as the Emerging Company of the Year 2000-01.
Leading Indian business magazine Business India named us "India's Best Bank" in

2000.
In the year 2000, leading financial magazine Forbes Global named us in its list of

"The 300 Best Small Companies" in the world and as one of the "20 for 2001" best



small companies in the world.

CORPORATE GOVERNARCE

HDFC Bank recognizes the importance of good corporate governance, which is

generally accepted as a key factor in attaining fairness for all stakeholders and

achieving organizational efficiency. This Corporate Governance Policy, therefore, is

established to provide a direction and framework for managing and monitoring the

bank in accordance with the principles of good corporate governance.

BOARD OF DIRECTORS

 Mr. Jagdish Capoor, Chairman

 Mr. Aditya Puri , Managing Director

 Mr. Keki Mistry

 Dr. (Mrs.) Amla Samanta

 Mr.Anil Ahuja

 Dr. Venkat Rao Gadwai

 Mr.Vineet Jain



 Renu Karnad

 Mr.Aravind Pande

 Mr. Ranjan Kanpur(w.e.f January 9, 2004)

 Mr. Bobby Parikh (w.e.f.January 9,2004)

VICE PRESIDENT(LEGAL)& COMPANY SECRETARY

 Mr. Sanjay Dongre

AUDITOTS

 Mr. P.C. Hansotia&Co

(Chartered accountants)

REGISTERED OFFICE

HDFC BANK House

Senapati Bapat Marg

Lower Parel

Mumbai 400013

Tel No: 56521000

Fax No: 24960739

Web –site : www.hdfcbank.co



INTRODUCTION

Dematerialization or "Demat" is a process whereby your securities like shares,

debentures etc, are converted into electronic data and stored in computers by a

Depository. Securities registered in your name are surrendered to depository

participant (DP) and these are sent to the respective companies who will cancel them

after "Dematerialization" and credit your depository account with the DP. The

securities on Dematerialization appear as balances in your depository account. These

balances are transferable like physical shares. If at a later date, you wish to have these

"Demat" securities converted back into paper certificates, the Depose Depository

functions like a securities bank, where the dematerialized physical securities are

traded and held in custody. This facilitates faster, risk free and low cost settlement.

In order to dematerialize certificates; an investor will have to first open an

account with a DP & then request for the dematerialization of certificate by filling up



a dematerialization request form (DRF), which is available with DP & submitting the

same along with the physical certificates. The investor has to ensure that before the

certificate are handled over to the DP For demat, they are defaced by marking

“Surrendered for dematerialisation” on the face of the certificates. Depository is

much like a bank and perform many activities that are similar to a bank.

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 depository participant in order to avail of

depository facilities.

Following table compares the two.

Bank Depository

Holds funds in accounts Holds securities in account

Transfers funds between accounts Transfers securities between accounts

Transfers without handling money Transfers without handling securities

Safekeeping of money Safekeeping of securities

Transacting the depository way has several advantages over the traditional system

of transacting using share certificates. Some of the benefits are:

• Trading in demat segment completely eliminates the risk of bad deliveries,

which in turn eliminates all cost and wastage of time associated with follow up

for rectification. This reduction in risk associated with bad delivery has lead to

reduction in brokerage to the extent of 0.5% by quite a few brokerage firms.

• In case of transfer of electronic shares, you save 0.5% in stamp duty.



• You also avoid the cost of courier/ notarization/ the need for further follow-up

with your broker for shares returned for company objection

• In case the certificates are lost in transit or when the share certificates become

mutilated or misplaced, to obtain duplicate certificates, you may have to spend

at least Rs500 for indemnity bond, newspaper advertisement etc, which can be

completely eliminated in the demat form.

• You can also receive your bonuses and rights into your depository account as

a direct credit, thus eliminating risk of loss in transit.

• You can also expect a lower interest charge for loans taken against demat

shares as compared to the interest for loan against physical shares. This could

result in a saving of about 0.25% to 1.5%. Some banks have already

announced this.

• RBI has increased the limit of loans against dematerialized securities as

collateral to Rs2mn per borrower as against Rs1mn per borrower in case of

loans against physical securities.

• RBI has also reduced the minimum margin to 25% for loans against

dematerialized securities as against 50% for loans against physical securities.

In short the advantages of opening a demat account are

 Shorter settlements thereby enhancing liquidity

 No stamp duties on transfer of securities held in demat form.

 Elimination of risk associated with physical certificated such as bad

delivery, fake securities.

 Reduction in handling large volume of paper;

 Nomination facility



 Transmission of securities (such as shares, debentures, bonds and

units) is done by DP eliminating the need to correspond with each

company separately.

 Change of name, address, dividend mandate, registration of power of

attorney, transmission etc. can be effected across companies held in

demat form by a single instruction to the DP

Though under the Depositories Act, 1996, there is no compulsion and the

investor can hold shares either in physical or in dematerialized form. But according to

Sebi’s directive certain shares have to be traded compulsorily in dematerialized form

where the seller cannot sell in physical form. However, after he has bought the shares

the investor can ask for rematerialization of the shares.

The Depository Account must be opened with a Depository Participant. NSDL

interfaces with investor trough Depository Participants (DPS). A list of names and

addresses of all Authorized DP’s is available with the NSDL and CDSL and one can

meet any of these DP’s place and make a choice at your based on your comfort and

convenience. Opening a depository account is as simple as opening a bank account.

One can open a depository account with any DP.

To open a Depository Account, you have to submit the duly filled in Account

Opening form along with the following documents:

• Fill up the account opening form, which is available with the DP.

• Residential Proof - Copy of Ration Card, Passport, Driving License,

Telephone Bill, Electricity Bill or Rental Agreement.



• Sign the DP-client agreement, which defines the rights and duties of the DP

and the person wishing to open the account.

• Receive your client account number (client ID).

• This client ID along with your DP ID gives you a unique identification in the

depository system.

There is no restriction on the number of depository accounts a person can

open. However, if your existing physical shares are in joint names, you have to open

the account in the same order of names before you submit your share certificates for

demat. A sole holder of the share certificates cannot add more names as joint holders

at the time of dematerializing his share certificates.

However, if the investor wants to transfer the ownership from his individual

name to a joint name, he should first open an account as the sole holder (account A)

and dematerialize the share certificates. He should then open another depository

account (account B) in which he is the first holder and the other person is the second

holder and make an off market transfer of the shares from the account A to account B.

The investor will incur a charge on this transaction. Alternatively, the certificates can

be transferred to the joint ownership and then sent for Dematerialization.

Right now, as per the Companies Act, there is no nomination facility for

shares (whether in the physical or in the electronic form). The nomination facility for

shares can be availed of only when the relevant provisions in the Companies Act are

amended. NSDL captures the details of the nominee when the account is opened so as

to offer the facility as soon as the relevant amendments are effected in the Law.



A client can choose to open more than one account with same DP. In addition

to this, he has a choice of opening accounts with more than one DP. However a broker

can open just one Clearing Member account per card/ stock exchange for clearing

purpose, but he can still open multiple beneficiary accounts Beneficiary is the

personal account wherein brokers can keep their personal holdings.

Account opening

Any investor who wishes to avail depository services must first open an

account with a depository participant of NSDL The process of opening a Demat

account is very similar to a bank account The investor can open an account with any

depository participant of NSDL An investor may open an account with several DPs or

he may open several account with single There are several DPs offering various

depositary related services. Each DP is free to fix its own fee structure Investors have

the freedom to choose a DP based on criteria like convenience , comfort has to enter

into an agreement with the DP The form and contents of this agreement are specified

by the business rules of NSLD

Types of depositary account depends on the operation to be performed There are

three types of Demat accounts which can be opened with a depositary participant viz

(a) Beneficiary Account (b) Clearing member Accounts and (c) intermediary account

Types of accounts



Beneficial owner Clearing member Intermediary

Account Account Account

House Non-House

• A DP may be required to open three categories of accounts for client –

beneficiary account, clearing member account and intermediary account

• A beneficiary account is an ownership account The holder/s of securities in

this type of account own those securities

• The clearing member account and intermediary account are transitory account

The securities in these are held for commercial purpose only

• A clearing member account is opened by a broker or a clearing member for the

purpose of settlement of trades

• An intermediary account can opened by a SEBI registered intermediary for the

purpose of stock leading and borrowing

Beneficiary account

This is an account opened by investor to hold their securities in

dematerialized from with a depository and to carry out the transactions of sale

purchase of such securities in book entry form through the depositary system A

beneficiary account holder is legally entitled for all rights and liabilities attached

to the securities held in that account Therefore, the account is called “beneficial

owner account” a beneficial account can be in the name of individual, corporate,

HUF, minor, bank, financial institution , trust etc or the broker himself for the



purpose of his personal investments in demat form . The account is opened with a

DP

House account vs. non –house account opened by a DP for the custody

of and transactions in its own investment is referred to as a house account DPS

Are required to open house accounts for their own investments to prevent co-

mingling of asset with that of their clients

Neither the depositories ACT nor the regulations made under the act

lay down any specifications about who can open a beneficiary account since all

beneficial owners are deemed to be member of a company (under section 41 (3) of

the companies act) only those who are eligible to become members of a company

act can open a beneficiary account with a depository Thus all legal entities with

the exception of partnership firms can open an account in the depository system

Documents for verification: For the purpose of verification, all

investors have to submit the following documents along with the

prescribed account opening form

Proof of identity- a beneficiary account must be opened only after obtaining a

proof of identity of the applicant The applicants signature and photograph must be

authenticated by an existing account holder or by the applicant bank or after due

verification made with the original of the applicants valid passport , voter id , driving

license or PAN card with photograph and further

Proof of address- The account opening form should be supported with proof of

address such as verified copies of ration card/ passport/ voter ID/ PAN card/driving

license / bank passbook an authorized official of the participant, under his signature,

shall verify the original documents



In case any account holder fails o produce the original documents for

verification within the foreside period of 30 days, it must be immediately brought to

the notice of NSDL Failure to produce the original within the prescribed time would

invite appropriate action against such account holder, which could even include

freezing of their accounts

Common information: The process of opening an account with a depository,

nature of such an account, and various factors to be considered for opening a

depository account are explained below. Some details are common to all types of

accounts. These are:

1. Name of the holder

2. Date of birth (for individual accounts)

3. Occupation

4. Address & phone / fax number

5. Bank details like name of the bank, type of the account (current/savings),

accounts number, branch address, MICR, etc

6. PAN number, if applicable

7. Details of nomination

8. Specimen signatures

Beneficiary account- procedure for opening an account

Investor have the choice of selecting a DP based on their convenience , comfort

,service, levels , safety, reputation charges , etc they have flexibility to have more

than one account with the same DP or any other DPS No minimum balance is

required for opening a depository account Investor also have the freedom to

close an account with one DP and open another one with any other DP



The type of the account opening from to field by an investor and the list of

documents required depend on the type of beneficiary account to be opened –

whether it is for NRI’s or corporate or individual Further, the individual account

can be in a signal name or joint name clearing members and brokers have to open

in a beneficiary account if they have to deal with their own holdings

There are several client types in the depository system and different codes are

allotted to them. These are listed below

1. Resident

o Ordinary

• HUF

2. Financial institutions

• Government –sponsored FI

• State financial corporation

• Other

3. FIIS

• Mauritius –based

• Others

4. NRI

• Repatriable

• Non-Repatriable

• Depository receipt

5. Body corporate

• Domestic company

• Overseas corporate body Repatriable



• Government company

• Central government

• State government

• Co-operative body

• NBFC

• Non –NBFC

• Broker

• Foreign bodies

• Group companies

• Others

• OCB-Nonrepatriable

• Depository receipt

6. CM (clearing member)

7. Foreign national – national /depository receipt

8. Mutual fund –depository receipt

9. Trust, Bank

10. Intermediary

Clearing Member Account

The entities that are authorized to pay out from a clearing corporation/ clearing

house against traders done by them or their clients are known as clearing members.

CMs are identified in the system through their CM-BP ID. All pay-in and pay-out

transactions are carried out through their accounts.

There are two types of clearing members:



1. All members of a stock exchange popularly know as brokers, are clearing

members;

2. Custodians who are permitted by the stock exchange to act as a clearing

members.

Procedure to open a clearing member Account

The steps undertaken to open the account are same as those of the individuals,

difference lies in the type of the clearing members has to first register itself with the

depository and obtain a business partner identification number (CM-BP-ID). The

clearing member is identified by the combination of CC-CM-ID given by the DP.

Immediately after opening a clearing account, the DP should inform the

depository the details of clearing members name, CM-BP-ID, client-ID, and date of

the opening the account in DPM system.

The clearing account should only be for clearing and settlement purpose and

nit for any other purpose, e.g., holding of securities received in a settlement received

in a settlement account should be transferred to the transferred to respective beneficial

accounts as soon as possible, but in no case later than the time prescribed by the

depository/ stock exchange/ SEBI in this regard. The opening of clearing members

account constitutes a “standing instruction” to receive credits from the clearing

corporation when there is a pay-out.

The Clearing House deals with ONLY ONE designated account for pay-in

and pay-out with the Broker. This single account allows you to know to which

account securities must be delivered and received from. One Clearing Member Pool

Account is opened per card / Stock Exchange to settle trades in the Dematerialised

form.



STRUCTURE OF CLEARING ACCOUNT

The clearing account is identified in the depository system by its CM-BP-ID. The

internal structure of the Clearing Account consists of three parts to facilitate easy

book keeping

• Arrangement of clearing account

 Pool Account

 Delivery Account

 Receipt Account

Clearing Corporation (CC)/Clearing House (CH)

Clearing Account
Receipt Account
Delivery Account Pool Account

Selling Buying
client Client

a) Pool Account: It has two roles in clearing of Securities, viz., before pay-in,

the selling client of the clearing member transfers securities from his client



Account to the Clearing Account. After receiving pay-out, the clearing

member transfers securities from his Clearing Account to the account of the

buying client.

b) Delivery Account: The securities before pay-in, the securities move from the

Pool Account To the Delivery Account. The movement will be automatic if

clearing member has given such an undertaking to its Clearing If the Clearing

Corporation. It will be effected on the basis of instruction received from the

Clearing house/ Clearing Corporation. If the clearing house/ Clearing

Corporation has not taken such undertaking, the clearing member to its DP

must submit a delivery instruction form. At the time of pay-in, NSDL flushes

out the securities in the Delivery Account & transfers the same to the Clearing

house/ Clearing Corporation.

c) Receipt Account: On pay-out day, the Clearing house/ Clearing Corporation

transfers securities to the Pool Account (to The extent of net receipt) through

the Receipt Account. This account can be used to trace details of settlement-

wise receipt of the clearing member.

• Market Type & Settlements Number: A clearing account can be broken into

compartment and sub-compartments. Each compartment can be called as

market type and be as settlement number. Hence, if securities are moved from

any clearing account, apart from the CM-BP-ID, the combination of market

type and settlement number must be provided. A diagrammatic illustration of

the internal structure of a clearing account is depicted below

Clearing Account
(IN503265)

PhysicalBabasabpatilfreeppimba.com
Rolling 36
Action Rolling
2000016
2000015
2000014 9000153
9000152 2000249
2000248
Delivery Pool Receipt Delivery Pool Receipt
Receipt Delivery Pool Receipt
Receipt
Receipt


Settlement calendar: Settlement calendar is decided by the stock exchange. It

contains details for each market type & settlement number. The detail for each

settlement consists of the date of trading, pay-in time, pay-out date, settlement

number etc. Clearing member can obtain the settlement calendar from its own stock

exchange. This is also available in the depository software of the DP.

 MARKET TRANSFERS: Any trade, which is cleared & settled by

the clearing house/ Clearing Corporation of the stock exchange,

is considered as a market trade in the depository. Consequently,

the transfers routed through the clearing account. Typically, a

market trade has the following legs of transactions.

a. Receiving securities for pay-in from clients (client to clearing members)

b. Delivering securities to the clearing house/clearing corporation for pay-in.

(clearing house/clearing corporation)

c. Receiving pay-out from the clearing house/clearing corporation. (Clearing

House/clearing Corporation to clearing member)

d. Distribution of pay-out to clients. (Clearing member to client)



A diagrammatic illustration of the settlement of a market trade in a depository is

depicted below:

DP of buyer DP of Buyer’s
CM

D C

NSDL CH/CC

A B

DP of Seller DP of Seller’s
CM

 Receiving securities for pay-in from clients (client to clearing member)

A selling client of a clearing member (broker) would transfer securities

from his beneficial owner account to the clearing account of the clearing

member for onwards delivery to the clearing house/clearing corporation. This

transfer is effected by his DP on the basis of a delivery instruction provided by

the selling client. A diagrammatic Illustration for securities received for pay-in

from clients is depicted below:
NSDL

DP2
DP1

Seller Seller Seller Clearing
A B C Member
AAAlle
rA Babasabpatilfreeppimba.com 38


Indicates flow of securities

Indicates paper /electronic instruction given.

 OFF MARKET TRANSFERS: Any trade, which is not cleared and settled

by the clearing house/clearing corporation of the stock exchange, is considered

as an off-market trade in the depository. Consequently, the transfer is not

routed through the clearing account. Such transfers take place directly between

two beneficiary accounts. Both buyer and seller may open account either with

the same DP or with different DPs. The buyer and seller will trade amongst

themselves and later on will exchange money, i.e., settle funds amongst

themselves. The selling client would deliver securities from its beneficiary

account to the beneficiary account of the buying client. This transfer is

effected by the DP of the selling client on the basis of a delivery instruction

provided by the selling clients. A diagrammatic illustration of the settlement of

an off-market trade in depository is depicted below:



Indicates flow of securities

Indicates paper /electronic instruction given.

Depository:

A Depository is a Company where the shares of an individual are held in the

electronic form, at the request of the shareholder. This eliminates the physical form of

holding. IDBI, UTI, SBI and NSE promoted the National Securities Depository

Limited (NSDL). The Central Securities Depository Limited (CDSL) was promoted

by BSE.

Your money may be held in the form of liquid cash at your home or may be

deposited in a bank. The bank holds your funds in the electronic form and



subsequently debits or credits the account. Depending on your issuance of cheques or

deposit of cheques. The advantages of safety and convenience of dealing with a Bank

overweigh the reasons for holding liquid cash in your home. Your financial assets

such as Equity Shares may be compared to the above example. You may hold

physical share certificates in your home and be exposed to the various risks of lack of

safety, mutilation, loss etc. Alternatively, you may deposit your shares in an

organization called a Depository, which holds your shares in the electronic form. You

can dematerialize shares of only those companies that have signed agreement to

dematerialize their shares with the depository. You cannot dematerialize shares if they

are not in your name, i.e. shares held in street name (market deliveries) cannot be

dematerialized. However, when you send shares to the registrar to be transferred to

your name you can request that you want those shares in dematerialized form.

In India depositories are required to be registered with SEBI and are governed

by the provision of the Depositories Act, 1996 and regulation and bylaws framed for

depositories by the SEBI.

The depositories work in a completely computerized environment with

electronic linkages with the point of origination for the transactions that may cause

the change in ownership of securities. A depository will be electrically linked with

the Register of the members maintained by the company/registrar, clearing and

settlement system in the stock exchanges, stock lending organization (if in existence),

custodians of securities, depository participants and brokers.

Functions of Depository



Dematerlisation: one of the primary functions of depository is to eliminate or

minimize the movement of the physical securities in the market. This is achieved

through dematerialization of securities. Dematerlisation is the process of converting

securities held in physical form into holdings in book entry form.

Account Transfer: The depository gives effect to all transfers resulting from the

settlement of trade and other transactions between various beneficial owners by

recording entries in the accounts of such beneficial owners.

Transfer and Registration: A transfer is the legal change of ownership of a security in

the records of the issuer. For effecting a transfer, certain legal steps have to be taken

like endorsement, execution of a transfer of security occurs merely by passing book

entries in the records of the depositories, on the instructions of the beneficial owners.

Corporate Actions: A depository may handle corporate actions in two ways. In the

first case, it merely provides information to the issuer about the persons entitled to

receive corporate benefits. In the other case, depository itself takes the responsibility

of distribution of corporate benefits.

Pledge and hypothecation: Depositories allow the securities placed with them to be

used as collateral securities in physical form to the lender or its custodian. These

securities are verified for authenticity and often need to be transferred in the name of

lender. This has a time and money cost by way of transfer fees or stamp duty. If the

borrower wants to substitute the Pledging/Hypothecating the securities makes the

process very simple and collateral accounting through book entries in the records of

the depository.

Linkage with clearing system: whether it is a separating clearing corporation attached

to a stock exchange or a clearing house (department) of a stock exchange, the clearing

system performs the function of ascertaining the pay-in (sell) or pay-out (buy) of



brokers who have traded on the stock exchange. Actual delivery of securities to the

clearing system from the selling and delivery of securities from the clearing system to

the buying broker is done by the depository. To achieve this, depositories and the

clearing system should be electronically linked

Depository Participant:

Depository Participant (DP) is an organization that acts as an Agent of the

Depository and interacts with the investor. A DP is responsible for maintaining your

securities account and operating it only under your written instructions. The

Depositories Acts mandates that investors can use Depository facilities only through

DP’s. The distribution channel and geographical spread of the DP’s offices allows

you to access the Depository at a low cost. DP can only access their own clients'

information. They cannot access the client information of any other DP. The

information of your holdings in the account is completely confidential& it is similar

to your account balance in a bank.

You can select your DP to open a demat account just like you select a bank for

opening a savings account. Some of the important factors for selection of a DP can be:

1. Convenience - Proximity to your office/residence, business hours.

2. Comfort - Reputation of the DP, past association with the organization,

whether the DP is in a position to give the specific service you may need?

3. Cost - The service charges levied by DP and the service standards.

Individual accounts can be opened by Ordinary Resident, HUF, NRI ~

Repatriable and NRI Non-Repatriable. Body Corporate, Banks, Trusts, Financial



Institutions, Foreign Institutional Investors, and Overseas Commercial Banks etc can

open corporate Accounts. An account can be opened in the name of HUF in a similar

way to individual account and mentioning the account category as HUF. However,

Kartha of HUF will sign the application, agreement and all transactions under the

account

An account cannot be opened in the name of the firm. It has to be opened in

the name of any of the Partner as an Individual account only.

Procedure for Dematerialization

Dematerialisation Process
1

Investor DP

2A 2 5

3 NSDL
R & T Agent
4

Steps:

1. Client/ investor submits the DRF (Demat Request Form) and Physical certificates

to DP. DP checks whether the securities are available for demat. Client defaces the

certificates by stamping ‘Surrender for Dematerlisation’. DP punches two holes on the

name of the company and draws two parallel lines across the face of the certificate.

2.DP enters the demat request in his system to be sent to NSDL. DP dispatches the

physical certificates along with the DRF to the R & T Agent.

3.NSDL records the details of the electronic request in the system and forwards the

request to the R&T Agent.



4.R&T Agent, on receiving the physical documents and the electronic request, verifies

and checks them. Once the R&T Agent is satisfied, Dematerialization of the

concerned securities is electronically confirmed to NSDL.

5.NSDL credits the dematerialized securities to the beneficiary account of the investor

and intimates the DP electronically. The DP issues a statement of transaction to the

client.

A. DPs provide Dematerlisation request forms (DRF) to their clients.

B. The client completes the DRF in all respect 7 submits to the DP along with the

security certificates to be dematerialized.

C. The DP checks the DRF for validity, completeness and correctness. The following

points should be checked particularly:

 The security certificate sought to be dematerialized are attached

to DRF.

 The attached security certificates are marked (defaced) with the

words ‘surrendered for dematerialization’. This is a

precautionary measure to prevent misuse of share certificates

by anyone.

 The certificate are not mutilated or defaced in a manner

affecting any material information.

 The name of client on DRF and the certificates is exactly the

same as in the client’s account in DPM. However, minor

variations in the name (like abbreviated name, initials in the

place of first name, middle name, minor name mistake in the

name) may be permitted if it can be reasonably established that



both names are of the same person. The permitted variations

refer to initials not being spelt out fully or put prior to after the

surname. In such cases, if the signature on the DRF matches the

specimen signature available with the DP, the securities can be

considered for demat.

 Details like security type, face value, paid-up value, pari passu

status, certificate numbers, distinctive numbers, number of

certificates, total quantity of securities and lock-in statues are

filled-in correctly.

D. If the DRF & the accompanying security certificates are found in order, the DP

should accept the DRF and certificates.

E. If DRF and the accompanying security certificates are not found in order, the DP

should return the DRF and certificates.

F. The DP should enter the dematerialization request in the DPM. DPM generates a

request number (DRN), which should be mentioned on DRF.

G. An authorized person, other than one who entered the DRF details in the DPM,

should verify the details of DRN and release a request to NSDL.

H. Once the DP has received the certificates defaced by investor, the DP punches two

holes on the name of the issuer or its R&T Agent for dematerialization. DRF and

enclosures have to be sent at the “address to which physical certificate to be sent”

communicated by NSDL. The forwarding letter should refer to the allotted DRN and

should refer to the allotted DRN and should Be sent within seven days of accepting it

from the client.



I. The issuer or its R&T Agent verify the DRF & the accompanying certificate for

validity, completeness and correctness. They also match the details with the

intimation received from NSDL against the same DRN.

J. In case DRF is not found in order, the issuer or its R&T Agent send an objection

memo to the DP, with or without DRF & security certificates depending upon the

reason for rejection.

K. DRFs & Certificate are sent back on the following grounds:

• DRN does not match with message from DM

• Quantity of actual securities is less than DRF

• Quantity of actual securities is more than DRF

L. DRF & certificate are not sent back:

• If the certificate is fake

• If the certificate has been reported to be stolen

• If the duplicates of the original certificates sent for demat have already been

issued

• If the endorsements are forged

• If the securities are not in the name of the account holder as per DRF

• If the details of the certificates do not pertain to the R&T Agent

• If the signatures differ

• If there is any court order on the securities

• If the certificate are received after 15 days of the electronic request.

M. The DP informs the client accordingly & requests removal of reasons for

objection. The DP removes these or provides additional information to the

issuer or its R & T Agent within 15days of receiving the objection memo.



N. The DP, if the client so requires, may generate a new dematerialisation request &

send the securities again to the issuer or R &T Agent.

Precaution to be taken while processing DRF

 Ensure account to have the same sequence of names of holders and name

structure as printed on the physical certificate.

 Ensure ISIN is activated

 Separate DRF for:

• Partly & fully paid-up shares

• Locked & free holding

• Holdings locked in for different reasons

• Locked in holdings having different release date

• Different ISINs of the company

 ISIN to be entered by DP.

 All joint holders to sign DRF.

 Check DRF form with details on certificate.

Demat process

The demat process requires defacing of securities which will make the security

certificate undeliverable unless the demat formalities are completed. Therefore, the

client should be assisted in ascertaining whether the securities in question are

available for demineralisation. Clients should be helped in filling up the demat request



properly. Demat rejection causes great inconvenience to the client. DP should attend

to this area with care and caution. One of the important reasons for demat rejection is

signature mismatch. Taking the following precaution can reduce this:

 If the client is aware that the signature with the company& signature of the

client should be advised to the register the new signature.

 If the signature is slightly different, client should be advised to sign as per the

signature that was recorded by the company and as recorded with the DP.

 Ensure dispatch of DRFs and certificate to R &T Agents within seven days.

 Client may be encouraged to use the Transfer-cum-demat facility if it is

offered by the company. They should be made aware of the procedures of the

scheme.

 In case of joint holdings, the clients should be informed about the availability

of Transposition cum Demat facility.

Closure of account:

Closure on Client’s Request- A DP can close a depository account on receipt of an

application in the prescribed format. The application should be made by the account.

In case joint-holders. An account can be closed sought to be closed, the following

steps are necessary.

a. Re-materialization of all securities standing to the credit of the same account

making the application for closure; or

b. Transferring the balance to the credit of another account opened by the same

account holder(s) either with the same participant or with a different participant.



Before closing the account the DP should ensure that all pending transactions have

been settled. The request for closure should be processed only after ensuring that there

is no balance lying in the account.

Consolidations of accounts- Some clients have opened multiple accounts to

dematerialize their shares held in multiple combination and sequence of names.

However, they may not need so many accounts after they have dematerialized their

shares and may want to bring all their share holdings into one or fewer accounts. This

can be achieved by using normal off Market transfer instruction.

Closure by DP – the DP may also initiate closure of a client’s account if the client has

defaulted in performing should give sufficient notice to the client before initiating

closure of his account. The notice should clearly state the reasons for closure of his

account. The notice should clearly state the reasons for closure of account. The

process of closing account in such a case is the same that of client-initiated closure.

Closure/ Shifting of Clearing Account –A clearing member may transfer its clearing

account from one DP to another DP. For this, simultaneously applications have to be

made for closure of account to the earlier DP and for opening of new clearing member

account to the new DP. On receipt of the application, the new DP forwards the

application to the depository for approval and allotment of a new CM-BP-ID is

allotted, the new DP opens a new Clearing account and intimates the depository about

the new client- ID. On receipt of intimation from the intimates the clearing member.

All pay-out of securities, subsequent to the closure of old clearing account, take place

in the new account. Pg-17-3

Trading & Settlement:



This is the an area where the DP must the DP must take immense care while accepting

and processing request listed below should from the account of his client to another

account. The aspects listed below should be kept in mind.

 Ensure that the delivery instruction book given to each client has pre-printed

serial number and client-ID.

 Inform clients about the pay-in deadline of the stock exchange and the

deadline of the DP.

Settlement

The settlement of trades in the stock exchanges is undertaken by the clearing

corporation (CC)/ clearing house (CH) of the corresponding stock exchanges. While

the settlement of dematerialized securities is effected through depository, the funds

settlement is effected through the clearing banks. The clearing members directly with

the CC/ CH settle the physical securities.

Exclusive demat segment follows rolling settlement (T+5) cycle and the unified

(erstwhile - physical) segment follows account period settlement cycle. In case of

rolling settlement cycle, the account period is reduced to one day.

• In case of settlement of trades done in exclusive demat segments, the pay-in

and pay out of funds and securities are effected on the same day afternoon and

evening (same day) thus reducing the blockage of funds and limiting exposure

to the clearing corporation.

• Settlement of funds is effected through the clearing banks and depository

plays no role in this.



• Settlement of securities is effected through NSDL depository system.

• Clearing and settlement of the regular market trades is effected through the

clearing members of the clearing houses of respective stock exchanges. All

trading members of stock exchanges are clearing members of clearing houses.

In addition, for settlement of institutional trades, custodians are also allowed

to act as clearing members.

• Clearing members of clearing house, dealing in dematerialized securities are

expected to open a clearing account with any DP for the purpose of settling

trades in dematerialized securities. As, in the mixed (unified) segment, there is

a possibility for all clearing members to receive dematerialized securities, they

are expected to open clearing accounts.

If there is any short delivery at the time of pay-in of securities, these short

positions are auctioned in the Demat segment as done in the Unified (erstwhile-

physical) segment.

Selling And Buying Of Shares: Selling dematerialized shares in stock exchanges

is similar to the procedure for selling physical shares. Instead of delivering physical

shares to the broker, you instruct your DP to debit your account with the number of

shares sold by you and credit your broker's clearing account.

For this, a delivery instruction has to be given to your DP in a standardized format,

which will be available with your DP.



In short, for selling demat shares;

• You can sell shares in any of the stock exchanges linked to a depository

through a broker of your choice.

• Give an instruction to your DP to debit your account and credit your broker's

clearing member pool account. (this is a depository account used exclusively

for settling transactions by a broker)

• On the pay-in day, your broker gives instruction to his DP for delivery of the

shares to clearing corporation of the relevant stock exchange.

• The broker receives payment from the clearing corporation

• You receive payment from your broker for the sale in the same manner you

would receive payment for a sale in the physical mode.

Buying Demat Shares: The procedure for buying dematerialized shares in stock

exchanges is similar to the procedure for buying physical shares. When

you want to purchase shares in electronic form, you have to instruct your

broker to purchase the dematerialized shares from the stock exchanges

linked to a depository.

Once the order is executed, you have to instruct your DP (vide a simple format

which is available with the DP) to receive securities from your broker's clearing

account.



Alternatively, you may give a standing instruction to receive credits into your

account and do away with giving a separate receipt instruction each time you expect a

credit. You have to ensure that your broker too gives a matching instruction to his DP

to transfer the shares purchased on your behalf into your depository account.

You should also ensure that your broker transfers the shares purchased from

his clearing account to your depository account, before the book closure. This is really

important because shares that remain in the clearing account of the broker on the book

closure/ record date will not be eligible for corporate benefits.

In brief, the transactions relating to purchase of shares are:

• You can purchase shares in any of the stock exchanges connected to a

depository through a broker of your choice and make a payment to your

broker;

• Your broker receives credit in his clearing account with his DP on the pay-out

day;

• Broker gives instructions to his DP to debit his clearing account and credit

your account;

• You instruct your DP for receiving credit into your depository account either

through a specific receipt instruction or using the "standing instruction"

facility.

• In case you are not using the "standing instruction" facility then, your

depository account is credited only if the instructions given by you and your

broker match.

Other Services



Besides demat and trading Depositories also offer other services, these are:

o Pledging/ hypothecation of dematerialized securities.

o Electronic credit in public offerings of companies.

o Receipt of non-cash corporate benefits such as bonus, rights in electronic

form.

o Stock lending and borrowing.

o Transmission of securities.

Pledging: Dematerialized shares could be pledged; in fact, this is more advantageous

as compared to pledging share certificates.

To pledge your Demat shares

• Both you (pledgor) as well as the lender (pledgee) must have depository

accounts.

• You must initiate the pledge by submitting the details of the securities to be

pledged in a standard format (available with DPs).

• The pledgee should confirm the request through his DP.

• Once this is done, your securities are pledged

• All commercial documentation between the pledgor and the pledgee are

handled outside the depository system.

After you have repaid your loan, you can request for a closure of pledge by

instructing your DP through a standard format. The pledgee on receiving the



repayment as well as the request for closure of pledge will instruct his DP

accordingly.

Even the locked-in securities can be pledged, however they cannot be invoked before

the lock-in release date.

Even after the securities are pledged, the pledgor continues to remain the beneficiary

holder of those securities and will receive benefits of a corporate action, if any.

Initial Public Offerings: Credits for public offers can be directly received into

demat account. In the public issue application form of depository eligible companies,

there will be a provision to indicate the manner in which securities should be allotted

to the applicant. All you have to do is to mention your client account number and the

name and identification number of your DP.

Any allotment due to you will be credited into your account.

If the applicant is allotted securities in dematerialized form, but the details

regarding the beneficiary account are incomplete/ wrong, the person will get physical

delivery of allotted securities.

If securities were allotted in the dematerialized form, these would be credited

to applicant’s account any day between allotment date and listing date, at the

discretion of the company.

The issuer company/ their R&T agent will forward the applicant the allotment

advice giving the number of shares allotted in dematerialized form. Through this you

can come to know that you have been allotted shares.



An amendment to the company law requiring all future public issues above

Rs100mn to compulsorily offer securities in dematerialized form is awaiting

legislative approval. After this all the issues above Rs100mn will require investors to

trade only in demat way.

Partly paid up and fully paid up shares in the depository, will be given

separate ISINs (International Securities Identification Number). These are also traded

separately at the stock exchanges.

The company issues call notices to the beneficial holders of securities in the

electronic form. The details of such beneficial holders will be provided to the issuer/

their R&T agent by NSDL. After the call money realization, issuer/ their R&T agent

will electronically convert the partly paid up shares to fully paid up shares.

Receipt Of Cash/ Non-Cash Benefits: When any corporate event such as rights or

bonus or dividend is announced for a particular security, depository will give the

details of all the clients having electronic holdings in that security as of the record

date to the registrar. The registrar will then calculate the corporate benefits due to all

the shareholders. The disbursement of cash benefits such as dividend/ interest will be

done directly by the registrar. In case of non-cash benefits, depository will directly

credit the securities entitlements in the depository accounts of all those clients who

have opted for electronic allotment based on the information provided by the registrar.

The bonus/ rights issue against holding in dematerialized form can be either in

the physical/ dematerialized form as per the choice of the investor. If no choice is

given, by default, the securities will be issued in the physical form.



Even if an investor has holdings in physical form, he can receive the bonus/

rights issue against this in the dematerialized form.

In case of fractional part, as in the physical segment, it would be paid in cash

and the remaining whole part would be credited to the investors account.

The statement of holding and transaction statement is sent by the investors DP,

it will show the bonus/ rights credit into investor’s account. This report is sent to the

investor every fifteen days. In addition, an allotment advise will be send by the issuer/

their R&T agent for bonus/ rights entitlement.

Stock Lending and borrowing: Through the depository account securities in the

demat form can be easily lent/ borrowed. Securities can be lent or borrowed in

electronic form through an approved intermediary, who has opened a special

'intermediary' account with a DP.

To Lend Securities: You have to instruct your DP through a standard format (which

is available with your DP) to deposit your securities with the intermediary.

If the intermediary accepts your deposit of securities, the securities will be moved

from your account into the intermediary's account. If you wish to recall the securities

lent by you, you can make a request vide a standard format available with your DP.

To Borrow Securities: You have to instruct your DP through a standard format

(which is available with your DP) to borrow securities from the intermediary.

If the intermediary accepts your request, the securities will be moved from the

intermediary's account to your account. If you wish to return the securities borrowed

by you, you can make a request vide a standard format available with your DP.



Transmission Of Securities: Transmission of securities due to death, lunacy,

bankruptcy, and insolvency or by any other lawful means other than transfer is also

possible in the depository system. In the case of transmission, the claimant will have

to fill in a transmission request form, (which is available with the DP) supported by

valid documents. The DP, after ensuring that the application is genuine, will transfer

securities to the account of the claimant. For this, the claimant must have a depository

account. The major advantage in transmission of dematerialized holdings is that the

transmission formalities for all securities held with a DP can be completed in one go,

unlike in the case of share certificates, where the claimant will have to interact with

each issuing company or its R&T Agent.

In case where the deceased was one of the joint holders in the Client account,

the surviving client(s) shall be the person(s) recognized by depository as having title

to the securities held in that joint Client account. In case where the deceased was a

sole holder of the Client account, his legal heir(s) or the legal representative(s) will be

the person(s)

recognized by depository as having title to the securities held in that sole Client

account.

Security: National Security and Depository Limited claims to have undertaken

sufficient security measures. These measures are:

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

recommendation from NSDL and Sebi’s own independent evaluation. Sebi has

prescribed criteria for becoming a DP in the regulations.



• DPs are allowed to effect any debit and credit to an account only on the basis

of valid instruction from the client.

• Every day, there is a system driven mandatory reconciliation between the DP

and NSDL.

• There are periodic inspections into the activities of both DP and R&T agent by

NSDL. This also includes records based on which the debit/ credit are

effected.

• The data interchange between NSDL and its business partners is protected by

standard protection measures such as encryption. This is a SEBI requirement.

• There are no direct communication links between two business partners and

all communications between two business partners are routed through NSDL

• All investors have a right to receive their statement of accounts periodically

from the DP.

• Every month NSDL forwards statement of accounts to a random sample of

investors as a counter check.

• In the depository, the depository holds the investor holdings on trust.

Therefore, if the DP goes bankrupt the creditors of the DP will have no access

to the holdings in the name of the clients of the DP. These investors can then

either dematerialize their holdings or transfer them to a different account held

with another DP.



• Investor grievance: All grievances of the investors are to be resolved by the

concerned DP. If they fail to do so the investor has the right to approach

NSDL.

• 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. The details of the policy is as under:

• Upper limit per claim: Rs200mn.

• Number of claims allowed: unlimited

• Minimum value of the claim: Rs150, 000

• To cover claims valued less than Rs150, 000 NSDL has an investor protection

fund in place.

Besides all these safety measures efforts have been done to make this electronic

system foolproof.



Analysis of customer satisfaction

1.Scheme of holding shares

Small investors Longterm investors Traders
51 32 17
51% 32% 17%

In which scheme you are holding shares
60

50

40

30

20
Percent

10

0
Small investors Long term investors Traders

In which scheme you are holding shares

Interpretation:

The above table and graph shows that most of the investors are small investors (that is

about 51%. And about 32% are long term investors , and 17% are traders.

2 Awareness about new services will come to be known by

Friends Newspaper Broker Agents Other
21 17 17 39 6
21% 17% 17% 39% 6%



If you are the new services, then how do you come to know the se
50

40

30

20
Percent

10

0
Friends New spaper Broker Agents Others

If you are the new services, then how do you come to know the services

Interpretation:

The above table and chart shows that the respondents aware of the following services

is mainly from agents that is about 39%,and from friends is 21%,and from

newspaper is 17%, and broker is 17% and from others is 6%.

3a.Schemes/Services awareness and the availed services

Schemes/Services I have availed the service I am aware of the service
Share trading 80 20
% of respondents 80% 20%
Please tick fromthe following service(share trading)
100

80

60

40
Percent

20

0
I have availed the f I m aw are of the f ol

Please tick fromthe following service(share trading)

Interpretation:

From the above graph and chart it shows that 80% of the customers have availed the

service of share trading and 20% of them are aware of the service.



3b. Settlement(selling/Purchasing)

Service/Scheme I have availed the service I am aware of the service
Settlement 65 35
65% 35%

Please tick from the following service(Settlement that is selling/purc
70

60

50

40

30

20
Percent

10

0
I have availed the f I am aw are of the fo

Please tick from the following service(Settlement that is selling/purcha

Interpretation:

From the above graph and chart it shows that 65% of the respondents have availed the

service(Settlement) and 35% are aware of the service.

3c. Freezing/Defreezing

Service/Schemes I have availed the service I am aware of the service
Freezing/Defreezing 5 95
5% 95%



Please tick from the following service(Freezing/Defreezing)
120

100

80

60

40

20
Percent

0

Please tick from the following service(Freezing/Defreezing)

Interpretation:

From the above graph and chart 95% of the respondents are aware of the

service(Freezing/Defreezing) and 5% of them have availed the service.

3d.Loan against shares

Loan and shares 20 80
20% 80%



Please tick from the following service(Loan against shares)
100

80

60

40

20
Percent

0

Please tick from the following service(Loan against shares)

Interpretation:

From the above table and chart is shows that 20% of the respondents have availed the

service (Loan against shares) and 80% are aware of the service

3e. Sell ‘n’ cash

Sell ‘n’ cash 67 33
67% 33%


A project report on customer satisfaction towards depository participants at hdfc

A project report on customer satisfaction towards depository participants at hdfc

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