Demat account
Encyclopedia
The term "demat", in India
, refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debenture
s in electronic form rather than paper, as required for investors
by the Securities Exchange Board of India (SEBI). In a demat account, shares
and securities are held electronically instead of the investor taking physical possession of certificates. A demat account is opened by the investor while registering with an investment broker
(or sub-broker). The demat account number is quoted for all transactions to enable electronic settlements of trades to take place.
Access to the demat account requires an internet
password
and a transaction password. Transfers or purchases of securities
can then be initiated. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed.
enables quick ownership of securities on settlement resulting in increased
liquidity, avoids confusion in the ownership title of securities, and provides easy receipts for public issue allotments or IPOs
.
A demat account also helps avoid problems typically associated with physical share certificates, for example: delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery
and loss due to damaged stock certificates. Demat account holders also avoid stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds. Demat account holders usually obtain quicker receipts of benefits like stock splits and bonuses.
in India has seen an unprecedented boom in the last 15 years, in terms of number of stock exchange
s, listed companies, trade volumes, market intermediaries, and investor population. However, this surge in activity created many initial problems due to the large volumes of paperwork. Large volumes of trading, clearing and settlements using only paper-based instruments were beset with problems that threatened the very survival of India's capital market.
Until the late eighties, the common man kept away from capital markets, therefore the amount of funds mobilized through the market was relatively meager. Indian markets were overwhelmed by paper shares which were becoming increasingly tedious to maintain. Problems such as fake and stolen shares, fake signatures and signature mismatch, duplication or mutilation of shares, and transfer problems plagued the traditional paper-based trading and settlement system. On top of all these risks, the system had cumbersome procedures and excessive paperwork that deterred both retail and institutional investors from entering the capital market. Investors felt under-compensated for the risks borne by them. Thus, the lack of modernization in a large, inefficient system became a major hindrance to the growth of the capital market.
Real growth and improvement appeared in the early nineties in the wake of the economic liberalization initiatives of the Indian Government. Economic reforms were envisaged in various financial sectors: banking, capital markets, securities, market regulation, mutual fund
s, foreign investments and Government control. Financial institutions and stock exchanges knew that stock certificates were the main cause of investor disputes and arbitration cases. The traditional paper-based system simply could not keep up with the rapid pace of economic growth, and an advanced alternative was mandated.
The Government of India decided to set up a fully automated exchange model that could offer screen-based trading and depositories to eliminate various bottlenecks in the capital market, particularly in the clearing and settlement system in stock exchanges.
, wherein shares and securities are represented and maintained electronically, thus eliminating the troubles associated with paper shares. After the introduction of the depository system by the Depository Act of 1996, the process for sales, purchases and transfers of shares became significantly easier and most of the risks associated with paper certificates were mitigated.
Benefit to the company
The depository system helps in reducing the cost of new issues due to lower printing and distribution costs. It increases the efficiency of the registrars and transfer agents and the secretarial department of a company. It provides better facilities for communication and timely service to shareholders and investors.
Benefit to the investor
The depository system reduces risks involved in holding physical certificates, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to investors. It helps avoid bad delivery problems due to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on transfer of shares. It provides more acceptability and liquidity of securities.
Benefits to brokers
It reduces risks of delayed settlement.
It ensures greater profit due to increase in volume of trading. It eliminates chances of forgery or bad delivery. It increases overall trading and profitability
. It increases confidence in their investors.
In order to dematerialise physical securities, investors must fill in a Demat Request Form (DRF), which is available with the DP and submit the same along with physical certificates. Every security has an ISIN (International Securities Identification Number)
. A separate DRF must be filled for each ISIN.
The complete process of dematerialisation is outlined below:
offering the Demat account facility in India as of September 2011. A comparison of the fees charged by different DPs is detailed below.
There are a few distinct advantages of having a bank as a DP. Having a Demat account with a bank DP, usually provides quick processing, accessibility, convenience, and online transaction capability to the investor. Generally, banks credit the Demat account with shares in case of purchase, or credit a savings account with the proceeds of a sale, on the third day. Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a demat account in any branch, while others restrict themselves to a select set of branches. Some private banks also provide online access to the demat account. Hence, the investors can conveniently check online details of their holdings, transactions and status of requests through their bank's net-banking facility. A broker who acts as a DP may not be able to provide these services.
and AXIS Bank
, do not have one. However, players such as ICICI Bank
, Globe Capital, Karvy Consultants, Bajaj Capital Limited and State Bank of India
do impose an opening fee. Most players levy this when re-opening a demat account. However, the Stock Holding Corporation offers a lifetime account opening fee, which allows the investor to hold on to his/her demat account for a long period. The fee is also refundable.
) held in the account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge a custody fee for an ISIN on which the companies have paid one-time custody charges to the depository.
In addition to the other fees, the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both demat (physical-to-electronic) and remat (electronic-to-physical) requests. For demat transactions, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee.
For instance, Stock Holding Corporation has charged Rs 25 as the request fee and Rs 3 per certificate as the variable fee. However, SBI has charged only the variable fee, as Rs 3 per certificate. Remat requests also have charges akin to that of demat. However, variable charges for remat are generally higher than demat.
Some of the additional features (usually offered by banks) are as follows. Some DPs offer a frequent-trader account, where they charge frequent traders at lower rates than the standard charges. Demat account holders are generally required to pay the DP an advance fee for each account that will be adjusted against the various service charges. The account holder needs to raise the balance when it falls below a certain amount prescribed by the DP. However, if the holders also hold a savings account with the DP, they can provide a debit authorisation to the DP for paying this charge. Finally, once choosing a DP, it would be prudent to keep all accounts with that DP, so that tracking of capital gains liability is easier. This is because when calculating capital gains tax
, the period of holding will be determined by the DP, and different DPs follow different methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute the period of holding. The proof of the cost of acquisition will be the contract note. The computation of capital gains is done account-wise.
card in original at the time of opening of the account (mandate effective from April 1, 2006).
All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature.
Further, the investor has to sign an agreement with the DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give an account number, which is also called BOID (Beneficiary Owner Identification number).
The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account-opening charges, transaction charges for credit of securities, and custody charges vide circular dated January 28, 2005.
Further, SEBI has vide circular dated November 9, 2005 advised that with effect from January 9, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account(s) at transferee DP and at transferor DP are one and the same, i.e. identical in all respects.
In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.
The first check made is whether both Demat accounts are at the same depository. There are two depositories: (CDSL (Central Depository Securities Limited) and NSDL (National Securities Depository Limited)
).
If both demat accounts are not at the same depository, then an Inter Depository Slip (Inter DIS) has to be filled and submitted. Otherwise, and Intra Depository Slip (Intra DIS) has to be filled and submitted.
For example:
The investor should submit the DIS when the market is open. Accordingly, date of submission of DIS and date of execution of DIS can be same or a difference of one day is also acceptable. The investor also has to pay the broker some charges for the transfer.
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, refers to a dematerialised account for individual Indian citizens to trade in listed stocks or debenture
Debenture
A debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note...
s in electronic form rather than paper, as required for investors
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
by the Securities Exchange Board of India (SEBI). In a demat account, shares
Share (finance)
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder, and by acquiring share or shares in...
and securities are held electronically instead of the investor taking physical possession of certificates. A demat account is opened by the investor while registering with an investment broker
Investment broker
Investment brokers are individuals who bring together buyers and sellers of investments. They need a license to operate. They act on behalf of buyers and sellers of stock...
(or sub-broker). The demat account number is quoted for all transactions to enable electronic settlements of trades to take place.
Access to the demat account requires an internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
password
Password
A password is a secret word or string of characters that is used for authentication, to prove identity or gain access to a resource . The password should be kept secret from those not allowed access....
and a transaction password. Transfers or purchases of securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
can then be initiated. Purchases and sales of securities on the demat account are automatically made once transactions are confirmed and completed.
Advantages of demat
A demat account reduces brokerage charges (which are usually around 2.5%), makes pledging/hypothecation of shares easier,enables quick ownership of securities on settlement resulting in increased
liquidity, avoids confusion in the ownership title of securities, and provides easy receipts for public issue allotments or IPOs
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
.
A demat account also helps avoid problems typically associated with physical share certificates, for example: delivery failures caused by signature mismatch, postal delays and loss of certificate during transit. Further, it eliminates the risks associated with forgery
Forgery
Forgery is the process of making, adapting, or imitating objects, statistics, or documents with the intent to deceive. Copies, studio replicas, and reproductions are not considered forgeries, though they may later become forgeries through knowing and willful misrepresentations. Forging money or...
and loss due to damaged stock certificates. Demat account holders also avoid stamp duty (as against 0.5 per cent payable on physical shares) and filling up of transfer deeds. Demat account holders usually obtain quicker receipts of benefits like stock splits and bonuses.
Indian market scenario
The capital marketCapital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
in India has seen an unprecedented boom in the last 15 years, in terms of number of stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
s, listed companies, trade volumes, market intermediaries, and investor population. However, this surge in activity created many initial problems due to the large volumes of paperwork. Large volumes of trading, clearing and settlements using only paper-based instruments were beset with problems that threatened the very survival of India's capital market.
Until the late eighties, the common man kept away from capital markets, therefore the amount of funds mobilized through the market was relatively meager. Indian markets were overwhelmed by paper shares which were becoming increasingly tedious to maintain. Problems such as fake and stolen shares, fake signatures and signature mismatch, duplication or mutilation of shares, and transfer problems plagued the traditional paper-based trading and settlement system. On top of all these risks, the system had cumbersome procedures and excessive paperwork that deterred both retail and institutional investors from entering the capital market. Investors felt under-compensated for the risks borne by them. Thus, the lack of modernization in a large, inefficient system became a major hindrance to the growth of the capital market.
Real growth and improvement appeared in the early nineties in the wake of the economic liberalization initiatives of the Indian Government. Economic reforms were envisaged in various financial sectors: banking, capital markets, securities, market regulation, mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s, foreign investments and Government control. Financial institutions and stock exchanges knew that stock certificates were the main cause of investor disputes and arbitration cases. The traditional paper-based system simply could not keep up with the rapid pace of economic growth, and an advanced alternative was mandated.
The Government of India decided to set up a fully automated exchange model that could offer screen-based trading and depositories to eliminate various bottlenecks in the capital market, particularly in the clearing and settlement system in stock exchanges.
Goal of Demat System
India adopted the Demat System for electronic bookkeepingBookkeeping
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually...
, wherein shares and securities are represented and maintained electronically, thus eliminating the troubles associated with paper shares. After the introduction of the depository system by the Depository Act of 1996, the process for sales, purchases and transfers of shares became significantly easier and most of the risks associated with paper certificates were mitigated.
Demat benefits
The benefits of demat are enumerated as follows:- Easy and convenient way to hold securities
- Immediate transfer of securities
- No stamp duty on transfer of securities
- Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)
- Reduced paperwork for transfer of securities
- Reduced transaction cost
- No "odd lot" problem: even one share can be sold
- Change in address recorded with a DPDepository participantIn India, a Depository Participant is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act...
gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately. - Transmission of securities is done by DPDepository participantIn India, a Depository Participant is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act...
, eliminating the need for notifying companies. - Automatic credit into demat account for shares arising out of bonus/split, consolidation/merger, etc.
- A single demat account can hold investments in both equityEquity (finance)In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
and debtDebtA debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
instruments. - Traders can work from anywhere (e.g. even from home).
Benefit to the company
The depository system helps in reducing the cost of new issues due to lower printing and distribution costs. It increases the efficiency of the registrars and transfer agents and the secretarial department of a company. It provides better facilities for communication and timely service to shareholders and investors.
Benefit to the investor
The depository system reduces risks involved in holding physical certificates, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of shares. It ensures faster communication to investors. It helps avoid bad delivery problems due to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid on transfer of shares. It provides more acceptability and liquidity of securities.
Benefits to brokers
It reduces risks of delayed settlement.
It ensures greater profit due to increase in volume of trading. It eliminates chances of forgery or bad delivery. It increases overall trading and profitability
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
. It increases confidence in their investors.
Depository Participant (DP)
A depository (in simple terms) is a institution holding a pool of pre-verified shares held in electronic mode that offers efficient settlement of transactions. A Depository Participant (DP) is an intermediary between the investor and the depository. A DP is typically a financial organization like a bank, broker, financial institution, or custodian acting as an agent of the depository to make its services available to the investors. Each DP is assigned a unique identification number known as DP-ID. As of March 2006, there were a total of 538 DPs registered with SEBI.Demat conversion
Converting physical records of investments into electronic records is called "dematerialising" of securities.In order to dematerialise physical securities, investors must fill in a Demat Request Form (DRF), which is available with the DP and submit the same along with physical certificates. Every security has an ISIN (International Securities Identification Number)
ISIN
An International Securities Identification Number uniquely identifies a security. Its structure is defined in ISO 6166. Securities for which ISINs are issued include bonds, commercial paper, equities and warrants...
. A separate DRF must be filled for each ISIN.
The complete process of dematerialisation is outlined below:
- The investor surrenders the certificates for dematerialisation to the DP.
- DP intimates the Depository of the request through the system.
- DP submits the certificates to the registrar of the issuer company.
- Registrar confirms the dematerialisation request from Depository.
- After dematerialising the certificates, the registrar updates accounts and informs depository of the completion of dematerialisation.
- The depository updates its accounts and informs the DP.
- DP updates the demat account of the investor.
Demat options
There are many hundreds of Depository Participants (DPs)Depository participant
In India, a Depository Participant is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act...
offering the Demat account facility in India as of September 2011. A comparison of the fees charged by different DPs is detailed below.
There are a few distinct advantages of having a bank as a DP. Having a Demat account with a bank DP, usually provides quick processing, accessibility, convenience, and online transaction capability to the investor. Generally, banks credit the Demat account with shares in case of purchase, or credit a savings account with the proceeds of a sale, on the third day. Banks are also advantageous because of the number of branches they have. Some banks give the option of opening a demat account in any branch, while others restrict themselves to a select set of branches. Some private banks also provide online access to the demat account. Hence, the investors can conveniently check online details of their holdings, transactions and status of requests through their bank's net-banking facility. A broker who acts as a DP may not be able to provide these services.
Fees involved
There are four major charges usually levied on a demat account: account opening fee, annual maintenance fee, custodian fee and transaction fee. Charges for all fees vary from DP to DP.Account-opening fee
Depending on the DP, there may or may not be an opening account fee. Private banks, such as HDFC BankHDFC Bank
HDFC Bank Limited is a major Indian financial services company based in India, incorporated in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The Bank was promoted by the Housing Development Finance Corporation, a premier housing finance company of India...
and AXIS Bank
Axis Bank
Axis Bank Limited, formerly UTI Bank, is a financial services firm that had begun operations in 1994, after the Government of India allowed new private banks to be established...
, do not have one. However, players such as ICICI Bank
ICICI Bank
ICICI Bank Ltd. is India's second largest financial services company headquartered in Mumbai, India. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of...
, Globe Capital, Karvy Consultants, Bajaj Capital Limited and State Bank of India
State Bank of India
The State Bank of India is the largest Indian banking and financial services company with its headquarters in Mumbai, India. It is state-owned. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest...
do impose an opening fee. Most players levy this when re-opening a demat account. However, the Stock Holding Corporation offers a lifetime account opening fee, which allows the investor to hold on to his/her demat account for a long period. The fee is also refundable.
Annual maintenance fee
This is also known as folio maintenance charges, and is generally levied in advance.Custodian fee
This fee is charged yearly and depends on the number of securities (i.e. ISINsISIN
An International Securities Identification Number uniquely identifies a security. Its structure is defined in ISO 6166. Securities for which ISINs are issued include bonds, commercial paper, equities and warrants...
) held in the account. It generally ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge a custody fee for an ISIN on which the companies have paid one-time custody charges to the depository.
Transaction fee
The transaction fee is charged for crediting/debiting securities to and from the account on a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI Bank peg the fee to the transaction value, which is subject to a minimum amount. The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities, while others charge for both. Some DPs also charge the investor even if the instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs.In addition to the other fees, the DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. This fee varies for both demat (physical-to-electronic) and remat (electronic-to-physical) requests. For demat transactions, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee.
For instance, Stock Holding Corporation has charged Rs 25 as the request fee and Rs 3 per certificate as the variable fee. However, SBI has charged only the variable fee, as Rs 3 per certificate. Remat requests also have charges akin to that of demat. However, variable charges for remat are generally higher than demat.
Some of the additional features (usually offered by banks) are as follows. Some DPs offer a frequent-trader account, where they charge frequent traders at lower rates than the standard charges. Demat account holders are generally required to pay the DP an advance fee for each account that will be adjusted against the various service charges. The account holder needs to raise the balance when it falls below a certain amount prescribed by the DP. However, if the holders also hold a savings account with the DP, they can provide a debit authorisation to the DP for paying this charge. Finally, once choosing a DP, it would be prudent to keep all accounts with that DP, so that tracking of capital gains liability is easier. This is because when calculating capital gains tax
Capital gains tax
A capital gains tax is a tax charged on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property...
, the period of holding will be determined by the DP, and different DPs follow different methods. For instance, ICICI Bank uses the first in first out (FIFO) method to compute the period of holding. The proof of the cost of acquisition will be the contract note. The computation of capital gains is done account-wise.
Opening a demat account
First, an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. An investor must have his/her PANPermanent account number
Permanent Account Number is unique alphanumeric combination issued to all juristic entities identifiable under the Indian Income Tax Act 1961. It is issued by the Indian Income Tax Department under the supervision of the Central Board for Direct Taxes and is almost equivalent to a national...
card in original at the time of opening of the account (mandate effective from April 1, 2006).
All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature.
Further, the investor has to sign an agreement with the DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give an account number, which is also called BOID (Beneficiary Owner Identification number).
The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account-opening charges, transaction charges for credit of securities, and custody charges vide circular dated January 28, 2005.
Further, SEBI has vide circular dated November 9, 2005 advised that with effect from January 9, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account(s) at transferee DP and at transferor DP are one and the same, i.e. identical in all respects.
In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.
Disadvantages of Demat
- Trading in securities may become uncontrolled in case of dematerialized securities.
- It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors.
- For dematerialized securities, the role of key market players such as stock-brokers needs to be supervised as they have the capability of manipulating the market.
- Multiple regulatory frameworks have to be conformed to, including the Depositories Act, Regulations and the various By-Laws of various depositories.
- Agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity.
Transfer of shares between DPs
To transfer shares, an investor has to fill one of two kinds of Depository Instruction Slip (DIS).The first check made is whether both Demat accounts are at the same depository. There are two depositories: (CDSL (Central Depository Securities Limited) and NSDL (National Securities Depository Limited)
National Securities Depository Limited
National Securities Depository Limited , is the first central securities depository in India based in Mumbai. It is promoted by institutions of national stature responsible for the economic development of India and has established a national infrastructure of international standards that handles...
).
If both demat accounts are not at the same depository, then an Inter Depository Slip (Inter DIS) has to be filled and submitted. Otherwise, and Intra Depository Slip (Intra DIS) has to be filled and submitted.
For example:
- If there is one Demat account with CDSL and the other Demat account with NSDL, then an Inter-DIS is needed. (In case the investor needs an Intra-DIS, the investor should check with the broker, since brokers usually issue an Intra-DIS).
- Now that the correct DIS has been determined, information pertaining to the transfer transaction has to be entered: scrip name, INE number, quantity in words and figures.
- Finally, the investor should submit that DIS to the broker with signatures.
- The transfer broker shall accept that DIS in duplicate and acknowledge receipt of DIS on duplicate copy.
The investor should submit the DIS when the market is open. Accordingly, date of submission of DIS and date of execution of DIS can be same or a difference of one day is also acceptable. The investor also has to pay the broker some charges for the transfer.