In the Indian financial market, there are various key players playing a crucial role in making the various functions possible for every participant. NSDL is one of them, which we are going to talk about in this article while highlighting its functions, how it works and how to open an account with NSDL, etc.
What is NSDL?
NSDL stands for National Securities Depository Limited, established in 1996, and is India’s first securities depository service provider. It was founded by the National Stock Exchange in association with various other financial institutions like State Bank of India, HDFC Bank, IDBI Bank and Unit Trust of India.
It is offering the demat account facility to keep the various securities held in electronic form or in dematerialised form. Its depository service is available for various securities, including equity, debt securities, mutual funds and other investable securities available in electronic form.
How NSDL Works?
NSDL works through a network of depository participants (DPs) like stockbrokers and banks who act as intermediaries between the investor and the depository. Investors open the demand account with these depository participants to keep their securities in electronic form.
NSDL also facilitates the transfer of these securities when any transactions take place. However, apart from acting as a depository, the function of NSDL is more than that. Let’s explore the same.
Functions of NSDL
NSDL acts as a depository and operates with the following functions:
- Dematerialisation of Securities: The main function of NSDL is to convert all the physical shares and other securities into electronic or dematerialised form to keep it safe from theft and damage.
- Trade Settlement: Another crucial function of NSDL is to ensure the timely and trouble-free settlement of all the transactions in securities done through the exchange.
- Rematerialisation: Apart from dematerialisation, the NSDL also functions to convert the electronic shares into physical shares as per the request of the investors.
- Investment Holding: NSDL provides the security holding services for all the securities, including equity shares, mutual fund units, debentures, bonds and government securities.
- Corporate Actions: When listed companies announce any corporate action like issuing bonus shares, shares, right issue, dividends or interest, it is distributed or reflected in the investor’s account.
- Nomination & Transfer: NSDL also ensure the nomination of investors to transfer the ownership of securities in case of the death of the original investor.
- Pledging of Securities: NSDL also provides the facility to pledge the shares as collateral security against getting loans or availing credit facilities offered by financial institutions.
Services offered by NSDL
The function of NSDL is not only limited to the above-mentioned services, but it also offers a wide range of facilities to investors who need to understand the following services.
- Core Services: The main service of NSDL is providing the demat services with settlement of trades and security transfers for trading accounts, settlements and completing the nominations.
- CAS Services: Apart from that, NSDL also provides the consolidated account statement (CAS) services to its investors to periodically send them the status of their securities holdings.
- Share Mortgages: In this service, NSDL provides the facility of hypothecation of securities to investors to get credit facilities or avail a loan against securities as collateral security.
- Other Value Added Services: Apart from this, NSDL provides various other additional services like distribution of dividends among shareholders, lending or borrowing of securities, sending SMS Alerts and providing E-services to send demat account, DAN and Internet-based Demat Account Statement.
What is DP Id in NSDL?
A DP ID (Depository Participant Identification) in NSDL is a unique 8-character alphanumeric code that identifies the financial institution (broker/bank) managing your demat account. This 8-character DP ID, followed by an 8-digit Client ID, is also used to create your 16-digit Demat Account number.
DP ID in Demat Account is used as a unique identifier for your broker within the NSDL depository system to correctly route the buying or selling transactions. Sometimes it is also referred to as Participant ID or Member ID or simply called DP ID, which you can find mentioned on your monthly demat account statement, or can get when you log in to your broker’s dashboard.
What is NSDL CAS ID?
CAS stands for Consolidated Account Statement, and to get the CAS ID, you can visit the NSDL e-CAS portal and click on “NSDL E-CAS,” and select “Know your CAS ID.” Here, you need to enter your PAN, DP Name/ID, Client ID, and a captcha to retrieve your ID. And CAS by NSDL is a consolidated statement of your demat accounts and mutual fund holdings held with NSDL as of the date.
Is NSDL Safe?
NSDL is recognised by the central government of India and regulated by the Securities and Exchange Board of India (SEBI). It is a completely legal and authorised entity operating in a highly regulated environment to ensure the digital holdings of all the securities in dematerialised format.
It is operating in compliance and follows all the rules governed by the SEBI to ensure the smooth functioning of electronic record-keeping of investors’ demat holdings. Apart from being a recognised and regulated entity, NSDL also have various advantages.
Advantages of NSDL
Having a demat account with NSDL comes with various benefits that you can find below.
- Fast Settlement: NSDL operates a T+2-based trading settlement cycle, one of the fastest rolling settlement cycles in which trades are settled within two working days of the trade date.
- Enhanced Security: Keeping the securities in demat form at NSDL is completely safe from normal wear and tear and secured from the risk of theft, forgery, damage or mutilation.
- Less Paperwork: The digitalisation of holding and keeping the record of securities has reduced the paperwork to the zero level that has also reduced the cost of transaction and stamp duties required at the time of buying, selling or transferring the physical shares.
- Transmission Process: Transferring the ownership of the securities with a demat account at NSDL is very fast and trouble-free. The nominee can provide all the required documents and can easily get the ownership transfer of the securitised held with the NSDL demat account.
- Auto Corporate Actions: The effect of corporate actions like dividend declared, right issue and bonus issue quickly takes place and is directly transferred into the investor’s demat or linked bank account.
Disadvantages of NSDL
Though being a legal entity, NSDL don’t have any significant risk or drawbacks, or there are a few disadvantages when you compare with other depositories like CDSL. The operational costs, like maintenance, transaction, and closure fees of NSDL, are high.
And due to fewer depository participants registered with NSDL, the reach of NSDL is less. And another disadvantage of holding onto such dematerialised form is the risk of system crash or failure of the network, technical glitches, and risk of hacking attempts.
Difference Between CDSL and NSDL Demat Account
NSDL and CDSL are the recognised and SEBI-regulated depositories in India providing highly secured demat services for holding the various securities, including stocks, bonds and mutual funds. Though there is not much difference between them except for their number of DP members and demat account holders, or their association with different categories of investors.
NSDL vs CDSL, Which is Bigger?
If you compare both in terms of assets under custody, NSDL is bigger than CDSL. Currently, NSDL holds over Rs 464 lakh cr of assets compared to Rs 71 lakh cr held with CDSL. On the other hand, when you compare with the number of demat accounts, NSDL has only 3.95 crore demat accounts, but CDSL has 15.3 crore account holders.
NSDL or CDSL, Which is Better?
NSDL and CDSL are safe and secure, operating under the SEBI-regulated rules and norms. However, NSDL is more preferred by the institutional investors, and CDSL is more user-friendly and popular for the retail investors, but both have both types of account holders.
While opening a demat account, choosing between them would not depend on your choice, but you need to check the broker or DPs’ register with NSDL or CDSL. However, CDSL is often linked with BSE and has a larger number of DPs, while NSDL is more closely associated with NSE.
Both operate in a strictly regulated environment and provide a highly secured dematerialisation service to investors. However, CDSL is more economical in terms of charging lower fees for its services, making it the preferred choice at the time of opening a demat account by most of the retail investors.
How to Open Demat Account in NSDL?
You can’t approach NSDL directly to open the demat account with that; here, you need to choose a depository participant registered with NSDL that provides the demat services. Most of the banks offering broking services and broking houses provide this facility. Once you have found the right DP to open a demat account, you have to follow the steps given below.
Step 1: The first step towards opening a demat account is to find and choose the right DP, like Religare Broking, which is registered with NSDL and authorised to open demat accounts for the investors.
Step 2: Now ask the DP for the demat account opening form to apply for the same. You can choose to apply online or offline and fill in the required details as mentioned in your KYC documents.
Step 3: Now you have to submit all the essential documents like PAN Card, Address Proof and Identity Proof to complete your KYC documentation.
Step 4: After filling in all the details and submitting the documents, the DP will verify all your details as per the KYC documents, and once the verification process is completed, your demat account will be activated, and you will receive all details of your account number and login details.
Step 5: Now you can link your demat account with your trading account and start trading in the stock market or buy and sell the various other securities held in dematerialised form.
Once you start using the demat account, the NSDL will send you the Consolidated Account Statement (CAS) periodically to keep you updated about the holdings of your securities. Along with your demat account details like DP ID and Client ID, the CAS statement contains the information on the value of your holdings in detail for all the transactions done in that month.
How to Get NSDL CAS Statement Online?
Though if you have a demat account with your DP, which is registered or a member of NSDL, then NSDL will automatically send you the CAS statement every month to your registered email ID.
However, if you still want to get the CAS statement, you can visit the NSDL e-CAS website, enter details like PAN, DP ID/Client ID, date of birth, and captcha, to download the PDF copy of the same. The CAS statement is password-protected, usually with your PAN in uppercase.
Conclusion
NSDL is one of the leading depositories in India, regulated by SEBI, providing the demat account opening and trade settlement services for various investable securities like stocks, bonds and mutual fund units. It is a completely safe and legal entity that operates as per the norms set by the SEBI.
Depository participants like banks or broking houses involved in providing the trading facility in various investable securities become members of NSDL and provide the demat opening services. You can choose any of them to open demat account and keep all your holdings in a digital form secured, safe from theft, forgery or misuse, and free from risk of physical damage.