NSDL's Guide to Demat - Part I


1. What is a depository?
Ans.
A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities.
2. How can I avail the service of a depository?
Ans.
A depository interfaces with the investors through its agents called Depository Participants (DPs). If an investor wants to avail the services offered by the depository, the investor has to open an account with a DP. This is similar to opening an account with any branch of a bank in order to utilise the bank's services. Suggestions on how to select a DP are given in Section IV.
II. Benefits


1. What are the benefits of participation in a depository?
Ans. The benefits of participation in a depository are:
1. Immediate transfer of securities;
2. no stamp duty on transfer of securities;
3. elimination of risks associated with physical certificates such as bad delivery , fake securities , etc.;
4. reduction in paperwork involved in transfer of securities;
5. reduction in transaction cost;
6. nomination facility;
7. change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately;
8. transmission of securities is done by DP eliminating correspondence with companies;
9. convenient method of consolidation of folios/accounts ;
10. holding investments in equity, debt instruments and Government securities in a single account;
11. automatic credit into demat account, of shares, arising out of split/consolidation/merger etc.

III. Services
1.
What are the facilities offered by NSDL?
Ans.
NSDL offers following facilities: -
dematerialisation i.e., converting physical certificates to electronic form;
rematerialisation i.e., conversion of securities in demat form into physical certificates;
facilitating repurchase / redemption of units of mutual funds;
electronic settlement of trades in stock exchanges connected to NSDL;
pledging/hypothecation of dematerialised securities against loan;
electronic credit of securities allotted in public issues, rights issue;
receipt of non-cash corporate benefits such as bonus, in electronic form;
freezing of demat accounts, so that the debits from the account are not permitted;
nomination facility for demat accounts;
services related to change of address;
effecting transmission of securities;
instructions to your DP over Internet through SPEED-e facility. (Please check with your DP for availing the facility);
account monitoring facility over Internet for clearing members through SPEED facility;
other facilities viz. holding debt instruments in the same account, availing stock lending/borrowing facility, etc.

IV. Account Opening
1.
You mentioned that I would have to open an account with a DP if I want to participate in the depository. Who is a DP?
Ans.
NSDL provides its services to investors through its agents called depository participants (DPs). These agents are appointed by NSDL with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities i.e. Banks, Financial Institutions and Members of Stock Exchanges [brokers] registered with SEBI can become DPs. You can get a list of DPs from NSDL's office or from our website at www.nsdl.co.in.
2.
How do I select a DP?
Ans.
You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be:
Convenience - Proximity to your office/residence, business hours.
Comfort - Reputation of the DP, past association with the organisation, whether the DP is in a position to give the specific service you may need?
Cost - The service charges levied by DP and the service standards.
In order to obtain the complete list of DP locations and their comparative charge structure, you may log on to www.nsdl.co.in or else you may write to NSDL for the same.
3.
Whether all the DPs are same?
Ans.
All the DPs are appointed subject to fulfilment of uniform requirements of SEBI ( Depositories and Participants) Regulations, 1996 and requirements of NSDL. However, the type of services offered and the service standards may differ among various DPs. For example, a DP branch having direct connectivity with the main office having depository set-up may be in a position to execute instructions faster.
4.
What should I do when I want to open an account with a DP?
Ans.
You can approach any DP of your choice and fill up an account opening form. At the time of opening an account, you have to sign an agreement with DP in a NSDL prescribed standard agreement, which details your and your DPs rights and duties. All investors have to submit following proof of identity and proof of address along with the prescribed account opening form
Proof of Identity : Your signature and photograph must be authenticated by an existing demat account holder with the same DP or by your bank . Alternatively, you can submit a copy of Passport, Voters Id Card, Driving License or PAN card with photograph.
Proof of Address : You can submit a copy of Passport, Voters Id Card, Driving License or PAN card with photograph, ration card or bank passbook as proof of address.
Passport-size photograph.
You must remember to take original documents to the DP for verification. You should remember to obtain a copy of the agreement and schedule of charges for your future reference.
5.
Can I open more than one account with the same DP?
Ans.
Yes. You can open more than one account with the same DP. There is no restriction on the number of accounts you can open with a DP.
6.
Am I restricted to having account with only one DP?
Ans.
No. There are no restrictions on the number of DPs you can open accounts with. Just as you can have savings or current accounts with more than one bank, you can open accounts with more than one DP.
7.
Do I have to keep any minimum balance of securities in my account with my DP?
Ans.
No. The depository has not prescribed any minimum balance. You can have zero balance in your account.
8.
Can I open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned along-with my wife ?
Ans.
No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is in your individual name and another certificate is jointly held in your and your wife's name , two different accounts would have to be opened.
9.
What do I do if I have physical certificates with the same combination of names, but the sequence of names is different. i.e. some certificates with husband as first holder and wife as second holder and other set of certificates with wife as first holder and husband as the second holder?
Ans.
In this case you may open only one account with husband and wife as the account holders and lodge the security certificates with different order of names for dematerialisation in the same account. You will fill-up an additional form called " Transposition cum Demat" form. This would help you to effect change in the order of names as well as dematerialise the securities.
10.
Can someone else operate my account on my behalf on the basis of a power of attorney ?
Ans.
Yes. If you authorise any person to operate your account by executing a power of attorney and submit it to your DP, that person can operate the account on your behalf.
11.
Why should I give my bank account details at the time of account opening?
Ans.
It is for protection of your interest. Your bank account number will be mentioned on the interest or dividend warrant, you are entitled to, so that such warrant cannot be encashed by any one else. Further, a DP cannot open the account if bank account number is not given.
12.
Can I change details of my bank account?
Ans.
Yes. Since in the depository system monetary benefits on your security balances are paid as per the bank account details provided by you at the time of account opening , you must ensure that any subsequent change in bank account details is informed to your depository participant.
13.
What is 'Standing Instruction' given in the account opening form?
Ans.
In a bank account, credit to the account is given only when a 'paying in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip everytime you buy securities.
14.
Can I operate a joint account on "either or survivor" basis just like a bank account?
Ans.
No. The demat account cannot be operated on "either or survivor" basis like the bank account.
15.
Can I add or delete names of accountholders (second or third accountholder) after opening the account ?
Ans.
No. Names of the accountholders for a depository account cannot be changed. If you want to change name or add / delete an accountholder, you need to open a new account in the desired holding pattern (names) and transfer the securities to the newly opened account. The old account may be closed.
16.
What should I do if my address is changed? Do I need to write to each company separately?
Ans.
In case your address is changed, you only need to inform the new address to your DP(s). When DP enters the new address in the depository computer system, it will be automatically conveyed to all companies in which you hold shares.
17.
Can I close my demat account with one DP and transfer all securities to my account with another DP ?
Ans.
Yes. You can submit account closure request to your DP in prescribed form. Your DP will transfer all your securities, as per your instruction, and close your demat account.
18.
What would be the charges for account closure and securities transfer due to account closing?
Ans.
The charges would be as per the schedule of charges of your DP, agreed by you at the time of account opening or any subsequent changes therein.

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