NSDL Full Form: The full form of NSDL is National Securities Depository Limited.
It is a financial entity that is set up to hold securities in the form of tangible or non-physical certificates.
What is NSDL?
- NSDL functions similarly to a bank account system for securities such as bonds and shares, which are issued in the form of either tangible or intangible certificates.
- This depository was set up so as to facilitate the fast transfer of securities.
- NSDL tends to maintain the Demat accounts in which financial securities can be held in electronic form.
- NSDL is considered to be the oldest as well as the largest depository in our country.
- The depository was established on August 8, 1996.
- It was the first electronic securities depository at the national level in India.
How does NSDL work?
- NSDL provides basic services to investors, brokers, banks, and other kinds of security issuers that are participating in the Indian financial market.
- The depository account can be of three types as follows:
- There are also different services that are provided by the three accounts mentioned above.
- The main services provided are as follows:
Also Read: What Is NSDL? | NSDL Meaning
- Through dematerialization, investors can convert physical certificates into electronic balances.
- Here, they will have to deface the certificates and then surrender them to the DP, who will also act as an intermediary between the participant and the investor.
- Once the authorities are satisfied, they will then confirm the request to the NSDL, who will then convert the securities into balances that will be credited into the depository account.
- The second process is rematerialization.
- Here, investors can convert the securities in electronic form into physical certificates.
- Here, we will have to follow the entire reverse procedure as in the case of dematerialization.
Other services provided by NSDL:
The following are the other services that are provided by NSDL:
NSDL CAS (consolidated account statement):
- This is going to be in the form of a single statement of all the investments.
- It will enable the subscribers to electronically access their financial assets as a part of a single Demat account.
The following are the best value-added services that are provided by NSDL:
Also Check: What is CDSL?
Hypothecation of services:
For availing of the benefits of credit facilities, the securities can be collateral as long as both the borrowers and lenders have the NSDL Demat accounts.
Automatic delivery of instructions.
Cash corporate benefits such as dividends can easily be distributed to its shareholders.
Lending and borrowing:
Lending and borrowing can only be carried out by intermediaries that are registered with SEBI.
Allotment of public issues in electronic form.
Demat account holders will receive alerts for all transactions without any charge.
The following are the main e-services:
- Internet-based Demat Account Statement
- Securities Trading Information Easy Access and Delivery
- Depository Account Validation
- Submission of Power of Attorney-based Instructions for Clients Electronically
- Simple Instruction Submission via Mobile Phone Login.
Must Know: What are the DP Charges?
Example of NSDL:
- The paper-based settlement of funds created havoc in the country and hence came the Depositories Act of August 1996 that paced with the foundation of the NSDL.
- The basic understanding of this system is that the securities are held inside this system in the depository account, which is also very much similar to the bank accounts that will hold the funds in it.
- Just like in a bank account, the transfer of funds from one to another occurs; similarly, securities are also transferred through simple account transfers.
- It is true that the cost of transactions in a depository manner is lower as compared to those in paperwork and certificates.
Benefits of having an NSDL Demat account:
The following are the benefits of having an NSDL Demat account:
- No bad deliveries.
- Elimination of the risk of a physical certificate
- Elimination of stamp duty
- Easy transmission and changes in investor details
- Status reports
- Immediate transfer and registration of securities
- Faster settlement and more liquidity
- Reduced paperwork
Main concerns about having an NSDL Demat account:
The following are the main concerns associated with having an NSDL Demat account:
- Increase in the number of frauds as everything is online.
- A single depository setup is practically not possible.
- Not efficiently regulated and maintained by SEBI.
- It is not a mandatory provision for a number of companies as they keep it as an option.
- Although everything is online, it has created a lot of problems with coordination.
- A high cost is being experienced amongst the shareholders.
We hope that the above blog has given you clarity about the full form of NSDL and how it will work.
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