Description
The PPT describes on Demat. It describes the need of Demat in Indian Market.
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Dematerialization (“Demat” in short form) signifies conversion of a share certificate from its physical form to electronic form for the same number of holding which is credited to your demat account which you open with a Depository Participant (DP).
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Indian capital market has seen extraordinary boom in its activity in the last 15 years in terms of number of stock exchanges, listed companies, trade volumes, market intermediaries, investor population, etc. However, this surge in activity has brought with it numerous problems that threaten the very survival of the capital markets in the long run, most of which are due to the large volume of paper work involved and paper based trading, clearing and settlement.
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The Indian markets were drowned in shares in the form of paper and hence it was problematic to handle them Fake and stolen shares Fake signatures and signature mismatch Duplication and damage of shares Transfer problems
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Depository is an organization where the shares are held in an electronic form. It also provides services related to transactions in securities. There are only two Depositories in India registered with SEBI. They are 1) National Securities Depository Ltd (NSDL) 2) Central Depository Services Ltd (CDSL)
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A DEPOSITORY PARTICIPANT (DP) 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,1996.
NSDL-BANK--ANALOGY
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BANK Holds funds in accounts Transfers funds between accounts Transfers without handling cash Safekeeping of money
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?
?
?
?
?
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NSDL Holds securities in accounts Transfers securities between accounts Transfers without handling physical securities Safekeeping of securities
Present Scenario
Shares held in Electronic form
Past Scenario
Shares held in Certificate form
Transfer of Shares is done within 3 working days Easy dealing in Shares without rigid procedure
Lengthy Process i.e. 2 to 3 months Complicated procedure for trading
The depository system reduces Share certificate may sometimes risks involved in holding physical lost in transit, theft etc. certificated, e.g., loss, theft, mutilation, forgery, etc. Pan card is mandatory. Pan card was not mandatory.
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?
?
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A safe and convenient way to hold securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays etc. Immediate transfer of securities Reduction in paperwork involved in transfer of securities No stamp duty on transfer of securities Reduction in transaction cost
? ? ?
?
No odd lot problem, even one share can be sold Nomination facility Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately Transmission of securities is done by DP eliminating correspondence with companies
Dematerialization Process
INVESTO R
2 A
DP
1
2
5
R&T AGENT
3
4
NSD L
? ? ? ? ? ?
Increase in maximum limit of advances. Faster settlement cycle. Periodic status reports. It provides more acceptability and liquidity of securities. Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. Holding investments in equity and debt instruments in a single account.
doc_665107418.ppt
The PPT describes on Demat. It describes the need of Demat in Indian Market.
?
Dematerialization (“Demat” in short form) signifies conversion of a share certificate from its physical form to electronic form for the same number of holding which is credited to your demat account which you open with a Depository Participant (DP).
?
?
Indian capital market has seen extraordinary boom in its activity in the last 15 years in terms of number of stock exchanges, listed companies, trade volumes, market intermediaries, investor population, etc. However, this surge in activity has brought with it numerous problems that threaten the very survival of the capital markets in the long run, most of which are due to the large volume of paper work involved and paper based trading, clearing and settlement.
?
? ? ? ?
The Indian markets were drowned in shares in the form of paper and hence it was problematic to handle them Fake and stolen shares Fake signatures and signature mismatch Duplication and damage of shares Transfer problems
?
Depository is an organization where the shares are held in an electronic form. It also provides services related to transactions in securities. There are only two Depositories in India registered with SEBI. They are 1) National Securities Depository Ltd (NSDL) 2) Central Depository Services Ltd (CDSL)
?
A DEPOSITORY PARTICIPANT (DP) 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,1996.
NSDL-BANK--ANALOGY
? ?
BANK Holds funds in accounts Transfers funds between accounts Transfers without handling cash Safekeeping of money
? ?
?
?
?
?
?
?
NSDL Holds securities in accounts Transfers securities between accounts Transfers without handling physical securities Safekeeping of securities
Present Scenario
Shares held in Electronic form
Past Scenario
Shares held in Certificate form
Transfer of Shares is done within 3 working days Easy dealing in Shares without rigid procedure
Lengthy Process i.e. 2 to 3 months Complicated procedure for trading
The depository system reduces Share certificate may sometimes risks involved in holding physical lost in transit, theft etc. certificated, e.g., loss, theft, mutilation, forgery, etc. Pan card is mandatory. Pan card was not mandatory.
? ?
?
?
? ?
A safe and convenient way to hold securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays etc. Immediate transfer of securities Reduction in paperwork involved in transfer of securities No stamp duty on transfer of securities Reduction in transaction cost
? ? ?
?
No odd lot problem, even one share can be sold Nomination facility Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately Transmission of securities is done by DP eliminating correspondence with companies
Dematerialization Process
INVESTO R
2 A
DP
1
2
5
R&T AGENT
3
4
NSD L
? ? ? ? ? ?
Increase in maximum limit of advances. Faster settlement cycle. Periodic status reports. It provides more acceptability and liquidity of securities. Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc. Holding investments in equity and debt instruments in a single account.
doc_665107418.ppt