NSDL (National Securities Depository Limited) – Benefits & Services
In the world of stocks and investments, depositories play a significant role in storing shares digitally and facilitating seamless transactions. They reduce trading time and allow people to participate in trading/investing activities from anywhere..
If you are new to the stock market, you might have heard of the term National Securities and Depository Ltd. (NSDL) and wondered what it is. Find out all its details in the sections below.
What Is NSDL?
NSDL stands for National Securities Depository Ltd.. It is an entity that aims to digitise the Indian stock market by offering dematerialisation services. Dematerialisation is the process of converting physical share certificates into digital forms.
NSDL stores financial assets like shares, bonds, mutual funds, ETFs, etc., in digital form and lets you access them via special accounts called Demat accounts. It enables you to transfer your assets electronically, thereby saving time and effort..
Market participants like investors, brokers, banks and even companies that issue securities can open a Demat account with NSDL. To do so, you need to take help of a depository participant (DP). Depository Participants are SEBI-registered intermediaries that connect investors with depositories.
NSDL is one of the largest depositories in the world and the pioneer in the introduction of online trading systems.. This entity started operating in August 1996 at Mumbai and is a member of the National Stock Exchange (NSE).
What Are the Benefits of Opening a Demat Account with NSDL?
Opening a Demat account with NSDL offers numerous benefits. They are as follows:
Reduces the Risks of Physical Certificates
One of the main reasons behind the creation of NSDL was to reduce the risks that come with physical certificates. Physical certificates are susceptible to being lost, stolen, or damaged by wear and tear, fire, water and degradation of paper quality over time, etc. Thus, storing them in a Dematerialised (Demat) or digital format safeguards the investor against the aforementioned risks. .In addition,it also saves the duplication costs that come while creating additional physical copies of share/bond certificates.
Zero Stamp Duty
In the traditional method i.e when the certificates of possession are in physical form, you have to pay a certain amount as stamp duty to facilitate the transfer of the underlying security. . The electronic mode of securities’ transfer through depositories however, does not attract stamp duty.
No Chance of Bad Deliveries
As NSDL stores all its assets digitally, there is no need to examine their authenticity prior to purchase.. Further,this has negated the risk of bad deliveries, which was a significant risk in the traditional method involving physical certificates.
Quick Settlement Process
Transacting via NSDL enables you to conduct all your security related transactions online. Due to this, settlement takes place as soon as the day after the deal is made. This further positively impacts liquidity of the security markets.
Reduction in Paperwork
Because all NSDL transactions take place online, there is no need for you to maintain a huge amount of paperwork to keep track of your financial transactions. In addition to this, time and efforts are also preserved.
Reports of Account Statements
When you open a Demat account on NSDL, you periodically receive reports of all activity pertaining to your account. This helps you keep track of all the transactions you have made via your Demat account.
If you wish to change your contact information, you have to do so for each company in which you have invested. However, through NSDL, you can do it instantaneously for all companies by submitting the relevant KYC documents to your depository participant (online).
Fast Disbursal of Non-Cash Corporate Benefits
For companies, NSDL provides options for the fast and easy disbursal of corporate benefits, in the form of bonds, shares, debentures, etc. to their employees’ accounts
What Are the Services Offered by NSDL?
Here are some of the services offered by the National Securities Depository Limited:
It is one of the basic services that NSDL offers. In this process, the depository converts physical securities to their digital counterparts.
To avail it, you must send your share certificates to your depository participant. The DP will then send the submission to NSDL for verification. Post verification, the assets in digital form will be deposited to your depository account. all shares are traded in demat form these days, physical certificates have become more or less redundant
In this service, NDSL converts electronic securities to their respective physical forms. You can initiate this process by sending a rematerialisation request to your depository participant. That DP will then send a notification to NSDL pertaining to the same.
The DP will then ask you for confirmation, and when you agree, NSDL will update the information, and the rematerialisation transaction will be complete.
Apart from these basic services, you can avail ones like market transfer, off-market transfer, transmission, corporate actions, etc. NSDL also takes part in value-added services like dividend distribution, automatic delivery out instruction, lending and borrowing, public issuance, etc.
To start your trading journey with NSDL, you need to find a stock exchange that is registered on this depository. Then, you can open a Demat account and start reaping the benefits this establishment offers.
Frequently Asked Questions (FAQs)
Can I transfer shares from NSDL to CDSL?
Yes, you can transfer shares from your NSDL account to your CDSL account via an inter-depository transfer. To do so, contact the stockbroker with your NSDL Demat account and ask them to start the process.
What is the Early Pay-in feature of NSDL?
The Early Pay-in (EPI) feature is a mechanism traders can use to reduce their margin obligations. It includes a blocking system that can stop the sale transactions of a client’s shares via their Demat account.
Can I sell shares directly from NSDL?
Yes, you can sell shares directly from NSDL. To do this, you must open an online Demat account, post that you can sell your holdings with the click of a button.
Can individuals choose between NSDL and CDSL?
No, generally, the depository participant makes this choice. However, big participants like the State Bank of India have partnered with and thereby offer services of both NSDL and CDSL. In such cases, the investors get an opportunity to choose between the two.