NSDL and CDSL – Understanding The Depositories Of India

What Is Known As ‘Depository’?

An organisation that facilitates dematerialisation of shares, i.e., they maintain the shares in electronic form and are also accountable for the safe-keeping of securities portfolio, is known as Depository. The depositories function the same as a bank, but banks hold money, whereas depositories hold financial securities such as bonds, shares, debentures etc.

These financial securities are maintained in a special account in an electronic form known as the Demat account. It is responsible for the maintenance and facilitating trade in dematerialised securities. Two depositories in India that perform such functions are NSDL and CDSL.

How To Check Depositories Before Investing?

A person, before starting investment, has to open a Demat account. Now an investor can open a Demat account with any of the depository participants registered to any of the two depositories.

So a person can check the depository participant’s website to know under which depository the participant is registered. The investor should open the Demat account with a good depository participant so that good investment suggestions, maintenance of account and other benefits are available.

NSDL And CDSL – Two Depositories Of India

When a person invests in the shares of a specific company, the company delivers the shares to the investor but not in the physical form. It is delivered in electronic form to the investor’s Demat account.

The depositories maintain the general information about the investors. Therefore, such details are made available to the companies (at the time of dividend payment, bonus, etc.) listed in the stock exchange.

The purpose of a depository is to transact and hold securities in electronic form and facilitate trade settlements on stock exchanges. The securities associated with the depositories include ETFs (Exchange-traded Funds), shares, debentures, and bonds, units of Alternate Investment Funds (AIFs), units of Mutual Funds, Government Securities, commercial papers (CPs), Certificates of deposit (CDs) and Treasury Bills (T-bills).

There was a lot of risk and miscommunication with the paperwork. This new system has done away with all those hassles and risks.

Depository Participants are the agents that work under the depositories to communicate with their investors or clients. To avail of the services offered by the depositories, the investors need to open a Depository account, also called a Demat account, with the depository participants.

There are several entities that can be depository participants, such as a financial institution, a bank or a brokerage house. An eligible depository participant must comply with the norms and regulations and register itself with the Securities and Exchange Board of India (SEBI).

A person cannot choose the depository, but he/she can select the depository participant with whom he/she will open the Demat account. Therefore, the person can check the depository participant’s registration with the depository and can select accordingly. For example, ICICIDirect is registered with NSDL, whereas Zerodha is registered with CDSL.

A person can open an account under two depository participants, and transfer of shares and securities can be done from CDSL and NSDL, and vice versa.

  • National Securities Depository Limited (NSDL) was set up with INR 1 billion ($28 million) as initial capital and promoted by the National Stock Exchange of India Ltd.(NSEIL), Industrial Development Bank of India (IDBI) and Unit Trust of India (UTI).
  • Central Depository Services Limited (CDSL) was set up in 1999 and promoted by the Bombay Stock Exchange (BSE) with other shareholders such as HDFC Bank Ltd. Canara Bank and Standard Chartered Bank.

Services Offered – NSDL And CDSL

  • Opening Account
  • Updating account details
  • Transmission/Nomination
  • Statement of Accounts
  • Maintenance of Demat accounts
  • Dematerialisation and rematerialisation
  • Transfer of Shares
  • Settlement of Trade
  • Distribution of Stock’s bonus splits

How To Identify Demat Account Numbers Of NDSL And CDSL?

A combination of the depository participant’s ID and the Demat account holder’s customer ID forms the Demat account number. The first 8-digits of the Demat account number is the depository participant’s ID, whereas the last 8-digits of the Demat account number is the account holder’s Customer ID.

Under NSDL, the Demat account number is 16 digits which starts with “IN” followed by a 14-digit numeric code.

Under CDSL, the Demat account number will be 16 digit numbers such as 4567895625345945. This is the primary difference through which one can identify whether the depository is NSDL or CDSL.

For example:

  • Under NSDL, if the Demat account number is IN25386213698024, in that case, IN2538621 is the depository participant’s ID, and 3698024 is the Demat account holder’s customer ID.
  • Under CDSL, if the Demat account number is 4567895625345945, 45678956 is the depository participant’s ID, and 25345945 is the Demat account holder’s customer ID. Beneficiary Owner ID or BO ID is the other name of the Demat account number in the case of the CDSL

Comparison Between NSDL And CDSL

There is hardly any difference between NSDL and CDSL. They are both regulated by the Securities and Exchange Board of India (SEBI) under the Indian Government and offer the same service and facilities to investors/clients.

The primary difference between NSDL and CDSL is given in the below table:

Abbreviation National Securities Depository Limited Central Depository Securities Limited
Founded 1996 1999
Operating Market National Stock Exchange (NSE) Bombay Stock Exchange (BSE)
Shareholders/Promoters National Stock Exchange of India Limited (NSEIL), Unit Trust of India (UTI), Industrial Development Bank of India (IDBI). Canara Bank, HDFC Bank Ltd., Standard Chartered Bank
Format of Demat Account Number Alphanumeric code consisting of 16 digit. Account number starts with ‘IN’ and followed by remaining 14 digits. 16 digit numeric code.
Number of registered Depository Participants 278 588
Number of Investor Accounts 1.95 crore 3,04,09,585

List Of Few Dominant Depository Participants On NSDL

  • ICICIDirect
  • HDFC Securities Limited
  • IIFL Securities
  • Indian Overseas Bank
  • Kotak Securities Limited
  • Acumen Capital Market Limited
  • Aditya Birla Money Limited
  • Axis Securities Limited
  • Barclays Securities Private Limited
  • Canara Bank Securities Limited
  • SBICAP Securities Limited
  • Religare Broking Limited
  • Reliance Capital Limited
  • MotilalOswal Financial Services Limited
  • Muthoot Securities Limited
  • JM Financial Services

List Of Few Dominant Depository Participants On CDSL

A complete list of all the depository participants is available on the CDSL website. Few dominant depository participants are mentioned below:

  • SBICAP Securities
  • HDFC Bank Limited
  • IL&FS Securities Services
  • Stock Holding Corporation of India
  • Upstox
  • Zerodha Broking Limited
  • Reliance Securities
  • Motilal Oswal Securities
  • Sharekhan
  • 5Paisa Capital Limited
  • 4 A Securities Limited
  • AnandRathi Share & Stock Brokers
  • A C Agarwal Share Brokers Private Limited
  • Geojit Financial Services Limited
  • The Hongkong& Shanghai Banking Corporation
  • India Infoline
  • J M Financial Services
  • Karvy Stock Broking
  • SMC Global Securities

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