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CDSL India: Depository Services & Benefits | Legal Framework, Investors' Benefits & Risk Mitigation Measures

Explore CDSL India's role as a depository, its legal framework, types of accounts, and benefits to investors, including risk mitigation measures. Stay informed about recent innovations and the vast array of securities admitted.

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CDSL India: Depository Services & Benefits | Legal Framework, Investors' Benefits & Risk Mitigation Measures

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  1. Welcome!!

  2. CDSL India Yogesh Kundnani (yogeshk@cdslindia.com) Amit Krishnan (amitk@cdslindia.com)

  3. CDSL’s Major Stakeholders

  4. CDSL Today • BO accounts 5.67 mn • DPs registered 475 • Issuer Companies admitted 6,255 • Securities under custody • Volume 70.08 bn • Value USD 137.02 bn

  5. Depository Structure Clearing Corporation Issuer / Registrar Depository Clearing Members DP DP DP DP DP DP DP DP B e n e f i c i a l O w n e r s

  6. Depository Role

  7. What a depository does • Records ownership of securities in electronic form • Records transfer of securities • Facilitates Pledge/Lock-in/Freezing of securities • Updates records when fresh securities are issued or existing securities are extinguished in case of buy-back • Makes available up-to-date list of Investors (BOs) for corporate actions

  8. Legal Framework

  9. Legal framework The Depositories Act, 1996 • Investor has the option to hold securities in Paper mode or Electronic mode • Depository will be the “Registered Owner” of the securities in the ROM • Rights, Liabilities and Benefits are with Shareholders ( who will be the beneficial owners of the securities )

  10. Depository to have net worth of Rs. 1 bn. Investor holdings in the depository cannot be attached except for orders from competent authorities Mandatory indemnification against negligence Legal Framework

  11. Legal Framework • SEBI (Depository & Participant) Regulations • Criteria for setting up of a Depository and for becoming a Depository Participant • Depository’s Bye-Laws • Every depository to frame detailed Bye-Laws and procedures for its operations • All participants will enter into agreement to follow the rules and regulations

  12. Type of DPs • Public Financial Institution • Bank under RBI act. • Foreign Bank with RBI approval • State Financial Corporation • Custodian • Clearing Corporation or Clearing House of Stock Exchange • Stock Broker (CM) • Non Banking Finance Company (NBFC) • Registrar & Transfer Agent

  13. Securities admitted • Equity shares • Preference shares • Debentures and bonds • Commercial papers • Certificates of deposits • Government securities • Exchange traded funds • Pass – through certificates • Warehouse receipts (Commodities)

  14. Type of accounts • Individual • Clearing Member • Corporate • FII • Bank • Mutual Fund

  15. Background of structure • India is a vast country with large number of investors • Accounts are opened and maintained by DPs • Provide impetus to dematerialisation • BO level holdings are maintained as compared to nominee level holding • Physical structure is replicated in demat

  16. Background of structure • Switchover from physical trading to demat trades – phase wise • Demat initially made mandatory for institutional investors • Subsequently, made mandatory for retail investors

  17. Merits of structure • Vast distribution network of DPs utilised effectively • Competition amongst DPs • Ensures availability of depository services all across the country • Benefits of depository availed by all types of investors • Ensures superior service quality • Cost benefits

  18. Benefits to Investors

  19. Security-related benefits to Investors in the depository system • Offers safety and convenience compared to holding securities in physical form • Enhances liquidity by instantaneous transfers • Operational risk minimised • Settlement cycle reduced from weekly settlement to T+2

  20. Other benefits to Investors in the depository system • Change of name, address, Power of Attorney, deletion of deceased’s name - can be done across companies by one single instruction to DP • Each share is a market lot for the purpose of transaction - so no odd lot problem • Any number of securities can be transferred/delivered with one delivery order. Therefore, paperwork and signing of multiple transfer forms is done away with • No stamp duty on transfer of securities

  21. Risk Mitigation Measures

  22. Internet based services – easi and easiest • SMS Alerts (SMART) • Dormant account monitoring • Concurrent and Internal audit of DP operations • Stringent networth requirements for DPs

  23. easi (electronic access to securities information) • Statement of Holding of Securities in CDSL Demat Account • Last 7 days transactions report for any ISIN • Know rate and valuation of holdings • Balances are updated after every 15 minutes from main system • Information about DPs, Issuers & RTAs • Printing and downloading of Statement of Holding

  24. easiest (electronic access to securities information & execution of secure transactions) • Issue of • On-Market • Early Pay-in • Off-Market • Inter-Depository instructions through internet

  25. Some recent innovations • SMART – SMS Alerts to registered accountholders for all debits and for credits arising from corporate actions and IPOs • Information about corporate announcements to registered users of easi

  26. Thank You!!

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