New NSDL Project Report

Analytical Study on NSDL

N.M.D. College, Gondia 1

PREFACE

Although India had a vibrant capital market which is more than a country old,

the paper based settlement of trades caused substantial problem like bad delivery &

delayed transfer of title till recently. The enactment of Depositories Act in August

1996 paved the way for establishment of NSDL, the first depository in India. This

depository ^promoted by substitution of national stature depository promoted by

institution of national stature responsible for economic development of the country

has since established a national infrastructure of international that handles most of

the securities held & settled in dematerialized form in the Indian capital market.

Using innovative & flexible technology system, NSDL works to support the

investors & brokers in the capital market of the country. NSDL aims at ensuring the

safety & soundness of Indian marketplaces by developing settlement solution that

increase efficiency, minimum risk & reduce costs. At NSDL, we play a quiet but

central role in developing lets & service that will continue to nature the growing

needs of the financial services industry.



CHAPTER I



National Securities Depository Limited:

NSDL is the first depository to be setup in INDIA. It was incorporated on

December 12, 1995. The Industrial Development Bank Of India (IDBI) - The largest

development bank in India, Unit Trust Of India (UTI)-The largest Indian mutual

fund and the national stock exchange (NSE) - The largest stock exchange in India,

sponsored the setting up of NSDL and subscribed to the initial capital. NSDL

commenced operation on Nov 08, 1996,

In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank account. Transfer of ownership of

securities is done through simple account transfers. This method does away with all

the risks &, hassles normally associated with paperwork. Consequently, the cost of

transacting in a depository environment is considerably lower as compare to

transacting in certificates.



(NSDL) NATIONAL SECURITIES DEPOSITORY LIMITED

INTRODUCTION;

To overcome various operational difficulties delay in transactions, increase in

cost of transactions, NSDL was established. NSDL is an organization promoted by

IDE I, the UTI, and NSE of India limited.

OBJECTIVE:

To provide electronic depository facilities for securities traded in the equity

and debt market

Origin:

The depository's ordinances promulgated by the government of India in

September 1995 enabled the setting up of the multiple depository system. The SEBI

issued the guide lines for depository's in Mayl996. The bill was passed by the

parliament in July 1996. NSDL was registered by SEBI on 7th June 1996.



Functions:

NSDL performs the following function through its various participants.

1. Enables surrender and withdrawal of securities to and from the depositary.

2. Maintains investor's holdings in the e form.

3. Effects settlement of securities traded on exchanges.

4. Carries out settlements of traders that have not been done on

the stock exchanges .



Structure:

1. NSDL DP can be a publicity Bank, Custodian , Registered stock

broker, or a NBFC subject to a approval from the depository company and

the SEBI.

2. Brokers and NBFC's are required to nave a minimum net worth of Rs50 lakhs.

3. DP has to pay a security deposit of Rs 10 lakhs and admission fee of Rs25000

to NSDL.

4. NSDL operates, on two tyre structures where in it maintains accounts of its

DP and DP's maintain the;, accounts of their clients. With the help of the

continuous electronic connectivity reconciliation of all accounts is done on

daily basis to balance the number of stock if sued and dematerialized.

5. At present the national securities clearing corporation of NSE participate in

the functioning of NSDL. The SEBI has now. made it mandatory for all the

stock exchanges to have clearing corporations.



Transactions of NSDL:

They generally into two categories - new issues allotees , secondary market

transactions. Transfer of shares of one mode to another mode is involved. In the first

case the broker has to withdraw from the account mode into, physical mode to keep

the shares ready for delivery. In the second event the seller has to convert the

physical mode of securities into deposit account by opening an account or by

utilizing the account of another broker.

SERVICE CHARGES:

The stamp duty of 0.50% payable in paper based system is eliminated in the

Demat environment. The DP's charge on an average 0.15% of the market price of

the stock per annum as custodial charges. The DP's have to pay 0.035% to NSDL.

These custodial charges vary from one DP to another. The transaction charges which

range fromO.02 to 0.15% on buy transactions and from 0 to 0.12% on sell

transactions. Apart from custodial charges there are account opening up to Rs 1000

charged by some DP's.



ADVANTAGES TO THE INVESTOR:

1. Depositing the securities with NSDL would give freedom from the worry of

loss of share certificates through theft, mutilation due to careless handling,

fire, etc.

2. In selling shares the paper work required is reduced to 'a minimum. Investors

also prefer to buy shares that are already in the depository mode

3. The investor can become the owner of the shares-within a day of the

settlement being completed, if the shares bought are in depository mode.

4. There is no need to apply to the company for registering the share in

the name of investors.

5. There is no fear of any fake or stolen shares being delivered to the investor.

There is no possibility of loss or theft when the share certificates are posted to

the company.



REMATERIALIZATION:

Some times the investors may like to convert his electronic holdings into physical

share certificates. The process undertaken for this purpose is called

dematerialization. The investor has to make request to the depository participant for

dematerialization. Rematerialization is optimal on the part of investor and can be

done on the request of investor, any time after the same have been rematerialized.

STEPS:

1. Investor request the DP for rematerialization .

2. The DP informs it to the NSDL.

3. NSDL intimates the Registrar;

4. The registrar of the company prints, certificates with new

numbers and informs NSDL.

5. NSDL adjusts its account and passion the details to the DP.

6. The certificates are dispatched to the investor

Rematerialization , the certificate has a new range of certificates numbers and the

new folio number



DEMATERIALIZATION

Dematerializatiorn is a process in which the physical certificate of an investor

is taken back by the company. The registrar destroys the shares and equivalent

number of shares are credited in the electronic holdings of the investor. This is done

at the request of the investor.

STEPS:

1) Surrendering of certificate to depository participants for dematerialization.

a. NSDL is informed by the DP through electronic connectivity.

b. Original share certificates are submitted to registrar by DP.

c. The request for dematenalization from NSDL to the registrar

d. The registrar credits an equivalent number of shares in the

account and informs NSDL.

e. The "NSDL updates its own account and depository participants are informed.

f. The depository agent credit it in the account of the investor

and the same is informed to the investor.



DEPOSITORY SYSTEM

Depository is an entity which holds securities in the form of electronic

accounts, in same way as a bank holds money Central depository services (India)

limited(CDS) was conceived of and set up as the second depository to meet the

objective of the depository act(1996). CDS secured its certificate for commencement

of business on 8-2-1999, from SEBI. It has been promoted by the BSE and Bank of

India.

Objectives of CDS:

1. To accelerate the growth of scripless trading.

2. To make a major thrust in the individual investor's

participation in the .depository system.

3. To create a competitive environment .and be responsive

to user's interest and demands.

4. To enhance the liquidity.



Advantages of depository:

a. It is faster, and delay in transfer of securities is eliminated .

b. It avoids a lot of paper work

c. There is no stamp duty on transfers so the buyer gets the exemption from

stamp duty on transfer of securities.

d. There are simultaneous payment and delivery instructions.

e. The issuer company can at any time ascertain the principles of the share

holding pattern to keep a watch on takeover threats.

f. The company can substantial amount which it is spending oil printing

certificates, postage expenses and legal compliances.

g. The issuer company is benefited by waiver of duty on the value of securities

as it is not required to affix stamps for duty on certificates.



Disadvantages of depository:

a. Multiple depository system rises the problem of co-ordination between

different accounts of a single individual and deduction TDS and other security

dues.

b. It may increase the number of traders

c. It may increase the threat of corporate takeovers since the company

management may not come to know of the transaction taking place at the

depository.



Functions performed by depository:

a. To enable demit and remit of eligible securities

b. To provide for disbursement of corporate benefits to the beneficial owners.

c. To affect settlement of securities traded on the exchanges as

well as off-market trades through book entry transfers,

d. To facilitate pledging\ hypothecation of eligible securities at a later stage.

e. To provide for securities lending and borrowing when the legal

framework permits.



Depository participants:

a. DP is the agent of the! "depository and the interface between the depository

and the investor. (SHCl is the first DP registered with NSDL in India).

b. A DP is responsible for maintaining the securities account of the investor

and handling in accordance with the investor's instructions.

c. The DP should carry out transaction relating to the depository only through

the USER. Hardware system located at approved locations of the office of

the DP.

d. Each DP should have a unique identification number provided by the DP

called the BP ID.

e. The depository should operate on all days except Sundays and such

holidays as the depository may declare from time to time.

f. The depository should announce the normal working hours for every

calendar year in advance



Constituents of depository system:

1. Issuers or company

2. Issuer registrar

3. Depository participants

4. Clearing members

5. Stockbrokers

6. Investors

7. Clearing corporations



Legal frame work: (Depository in India) It is regulated by

1) The depositories act 1996

2) The SEBI (depositories and participants) regulations, 1996.

3) Bye laws of depository

4) Business rules of depository

5) Certain provisions of the Companies Act 1956, the Indian Stamp act 1899, SEBI

Act 1992, Securities contract (regulation)Act l956, Benami transaction

( prohibition) Act l988, Income tax act 1961, Banker’s books evidence act 1891.

Responsibility of DP:

The participant should be accountable for the functions executed by the depository

of behalf of the participants and should indemnify the depositor against any losses

or costs arising out of the same.



Operational procedure:

The operational procedure to followed by the issuer in the depository system are as

follows.

1) Dematerialization

2) Rematerialization

3) Beneficial owner's reporting ( investor)

4) Reconciliation of records. Accounts with DP:

The investor intending to hold securities in the electronic in a depository system

should open an account with a DP.

In-fact there are 4 categories of accounts a DP will maintain

1. Beneficiary account

2. House account

3. Clearing account

4. Own clearing account



Investor-DP:

The DP may advertise the services offered by them, once they registered. The

investor can choose any DP of his choice and fill up an account opening form.

Reasonable charges are received by the depositories for the opening of accounts and

every transaction in the accounts. The investor receives a pass book or a statement

of holdings, just like the bank pass book from the DP. The statements of holdings is

dispatched to the investor periodically. The investor can contact the DP for any

disparity in the statement of holding. If the discrepancy cannot be resolved the DP

level he could approach NSDL or CDSL for clarification. There is absolutely no

restriction with the number of DP's the investor can open accounts.



PROCESS

3

NSDL

(DEPOSITARY)

4 Register and

Transfer agents

1 Investor

(Beneficial Owner)

2 Depository .

. Participant



SECURITY DEPOSIT

Security management is the identification of an organization's assets, followed

by the development, documentation, and implementation of policies and procedures

for protecting these assets.

An organization uses such security management procedures as information

classification, risk assessment, and risk analysis to identify threats, categorise assets,

and rate system vulnerabilities so that they can implement effective controls.

BENEFITS AND SAFETY

Benefits

In the Depository system, the ownership and transfer of securities takes place

by means of electronic book entries. At the outset, this system rides the capital

market of the dangers related to handling of paper.

Elimination of Bad Deliveries - In the depository environment, once the holding of

an investors are dematerialized, the question of bad delivery does not arise, i.e., their

transfer cannot be rejected due to defect in the quality of the security. All possible

records for objecting transfer of title due to deficiencies associated with transfer deed

and share certificates are completely eliminated since both transfer deed and share

certificate are eliminated in the depository system,

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Information_classification

http://en.wikipedia.org/wiki/Information_classification

http://en.wikipedia.org/wiki/Risk_assessment

http://en.wikipedia.org/wiki/Risk_analysis_(engineering)



Elimination of All Risks - Associated with Physical certificates -Dealing in

physical securities has associated security risks of theft of stocks, mutilation or loss

of certificates during movement to and from the registrars. These expose the

investors to the cost of obtaining duplicate certificates, advertisements, etc, such

problem do not arise in the depository environment.

No Stamp Duty -There is no stamp duty for transfer of equity instruments and units

of mutual fund in the depository system. In the case of physical shares, stamp duty

of 0.5% is payable on transfer of shares.

Faster Settlement Cycle - With the introduction of electronic form of settlement,

Indian Capital Markets have moved from 1 5 day long settlement cycle to T+2

settlement cycle where the settlement takes place on 2nd day from the day of trading.

This enables faster turnover of stock and enhances liquidity with the investor.

Buyer is Secured- In the physical environment, seller was secured since the sale

proceeds were always fully realizable but the buyer was not, since it was not certain

whether shares purchased will get transferred or not. The market principle that buyer

is king did not apply to the capital market. This situation has now been corrected.



Safety

NSDL has implemented various checks and measures in the depository system to

ensure safety of the investor's holdings. These include:

Certificate in Depository Operations - NSDL has introduced a certificate

programmer in Depository Operations. This has been made compulsory for all DPs.

They have to appoint at least one qualified in the certification programmer in their

branches. This way, NSDL ensures that each branch of a DP which services investors

has at least one person who has thorough knowledge about depository system.

Investors Grievances - All grievances of the investors are to be resolved by the

concerned business partner within 30 days. If they fail to do so, the investor has the

right to approach NSDL at the investor's grievance cell of NSDL which would work

towards resolution of the grievance.

Insurance Cover- NSDL has taken a comprehensive insurance policy to protect the

interest of the investors in cases of failure of the DP to resolve a genuine loss.

Computer and Communication Infrastructure - NSDL and its business partners

use hardware, software and communication systems which conform to industry

standards.



CHAPTER Ii



RESEARCH METHODOLOGY

The methodology that was adopted for the study includes both primary source

of data as well as the secondary source of data. The methodology of the study can

be explained as follows:

Research means collecting information on a certain ideas or theories to

gain better knowledge on something. Research can be done through reading

source material or performing experiments.

The process used to collect information and data for the purpose of

making business decisions. The methodology may include publication

research, interviews, surveys and other research techniques, and could include

both present and historical information.

http://www.businessdictionary.com/definition/process.html

http://www.businessdictionary.com/definition/information.html

http://www.businessdictionary.com/definition/data.html

http://www.businessdictionary.com/definition/maker.html

http://www.businessdictionary.com/definition/business.html

http://www.businessdictionary.com/definition/decision.html

http://www.businessdictionary.com/definition/methodology.html

http://www.businessdictionary.com/definition/publication.html

http://www.businessdictionary.com/definition/research.html

http://www.businessdictionary.com/definition/interview.html

http://www.businessdictionary.com/definition/survey.html

http://www.businessdictionary.com/definition/technique.html



PRIMARY DATA:

The primary data are those which are collected afresh and for the first time, and thus

happens to be original in character. We can obtain primary data either through

observation or through direct communication with respondents in one form or

another or through personal interview. There are several methods of collecting

primary data, but in this research work primary data collected by using

questionnaire.

Primary data:-

The information given / collection by individuals or group constitute primary

source.

Methods of generating primary data

i) Survey

ii) Personal interview

iii) Group interview

iv) Observation

v) Questionnaire



SECONDARY DATA:

Secondary data means data that are already available i.e. they refer to the data which

have been already been collected and analyzed by someone else. When the

researcher utilizes secondary data, then he has to look into various sources from

where he can obtain them. Secondary data may either be published data or

unpublished data. In this research work, secondary data collected through the

Internet

Company manual and booklets

Books etc.

The source of information is generally classified as primary and secondary.

According to payline V. Young The source of information can be classified into

documentary sources and field sources.

Books, diary, manuscript, letter, magazine, internet etc. are the secondary or

documentary source. The researcher for this dissertation has decided to use primary

source as interview schedule and secondary source as books and internet for data

collection.



Tools Of Data Collection:

a) Interview schedule & questionnaire was used as tool for primary source of

data collection.

b) Interview schedule consist of number of question typed in a definite order

or form.

Pre-study:

After careful study of literature and expert consultation the researcher still

may have only a rather vague idea about the critical element in his problem. As pilot

study sometimes may be launched as a step preliminary to the form scale before

original study are carried out in order to gain some preliminary information of the

main project for this purpose the researcher meet company’s personal manager to

get the pre knowledge of the subject before conduction actual data collection.

Pretesting: -

Pretesting is the process of an advance testing of study design after the interview

schedule has been prepared .The researcher referred books and internet to get

prepared literature for this project & report.



Processing:-

Once the collection of data is over the main step top arranged for processing

and analysis of data. So the interview can be made resulting information theories.

The first step is editing, is a process of examining the data collection in interview

schedule to defect efforts and mission and to see that they are corrected and the

schedules prepared tabulations.

Editing:

The preparation of the data forms for tabulations must include on operational

procedure for accepting, modifying or resection individual questionnaire.

Tabulation:

Tabulation is a process of summarizing raw and display it in compact forms

for further analysis. Analysis of data is made possible through tables. These tables

are made for different variables and to show relationship with each other.



Interpretation of data:-

Analysis and interpretation are central step in research process. The goal of

analysis is to summarize o collected data in such a way that they provide answer to

the and triggered the researcher. Interpretation is the research for the broader

meaning of research finding. The questionnaire is preceded a few uncoded response

are classified the code were verified before transferred to the master chart.



Primary:

Chartered Accountant Agrawal & Associates.

Branch Manager HDFC Bank Gondia (Demat Section).

A member of Indian Journal of Commerce.

Secondary:

Times of India and magazines.

National Security Depository Limited.

RBI Annual Report

The Hindu Article



OBJECTIVES OF THE STUDY

To study the role of NSDL with regards to investment institutions.

To know the contribution of NSDL in the development of nations.

To study about the NSDL functions.

To know how NSDL regulate the depository system with the banks.

To know about the major applications of NSDL in different sector.



HYPOTHESIS

NSDL have smooth functionality towards the management of

securities.

It has sound banking relationship facilitates the coverage of

more and more investors.

It has depository system and online trading as its main function.

It plays vital role in the nations development by creating

awareness among the investors about investment opportunity in

various sectors.



LIMITATIONS

The study of NSDL is too vast, it not possible to cover each and every

aspect.

Sources of collecting this data in this place are very few.

The calculation of figures is not covered in this project.



CHAPTER III



About NSDL

NSDL, the first and largest depository in India, established in August 1996

and promoted by institutions of national stature responsible for economic

development of the country has since established a national infrastructure of

international standards that handles most of the securities held and settled in

dematerialized form in the Indian capital market.

Although India had a vibrant capital market which is more than a century old,

the paper-based settlement of trades caused substantial problems like bad delivery

and delayed transfer of title till recently. The enactment of Depositories Act in

August 1996 paved the way for establishment of NSDL, the first depository in India.

This depository promoted by institutions of national stature responsible for

economic development of the country has since established a national infrastructure

of international standard that handles most of the trading and settlement in

dematerialized form in Indian capital market.

Using innovative and flexible technology systems, NSDL works to support

the investors and brokers in the capital market of the country. NSDL aims at ensuring

the safety and soundness of Indian marketplaces by developing settlement solutions

that increase efficiency, minimize risk and reduce costs. At NSDL, we play a quiet

but central role in developing products and services that will continue to nurture the

growing needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is more

or less similar to holding funds in bank accounts. Transfer of ownership of securities

is done through simple account transfers. This method does away with all the risks

and hassles normally associated with paperwork. Consequently, the cost of

transacting in a depository environment is considerably lower as compared to

transacting in certificates.



Promoters / Shareholders

NSDL is promoted by Industrial Development Bank of India (IDBI) - the largest

development bank of India, Unit Trust of India (UTI) - the largest mutual fund in

India and National Stock Exchange (NSE) - the largest stock exchange in India.

Some of the prominent banks in the country have taken a stake in NSDL.

Promoters

Industrial Development Bank of India Limited (Now, IDBI Bank Limited)

Unit Trust of India (Now, Administrator of the Specified Undertaking of the Unit

Trust of India)

National Stock Exchange of India Limited



Shareholders

• State Bank of India

• HDFC Bank Limited

• Deutsche Bank A.G.

• Axis Bank Limited

• Citibank N.A.

• Standard Chartered Bank

• The Hongkong and Shanghai Banking Corporation Limited

• Oriental Bank of Commerce

• Union Bank of India

• Dena Bank

• Canara Bank



Board of Directors

1 Mr. C.M. Vasudev

Former Secretary, Ministry of Finance

Chairman, Public

Interest Director

2 Mr. G.V. Nageswara Rao

National Securities Depository Limited

Managing Director &

CEO

3 Mr. P. P. Vora

Former Chairman & Managing Director

Industrial Development Bank of India Limited

(Now, IDBI Bank Ltd.)

Public Interest

Director

4 Mr. Sudhir Mankad

Former Chief Secretary, Government of Gujarat

Public Interest

Director

5 Mr. Ravi Narain

Vice Chairman

National Stock Exchange of India Limited

Shareholder Director

6 Mr. B. Babu Rao

President

The Specified Undertaking of the Unit Trust of

India (SUUTI)


7 Mr. Viney Kumar

Executive Director

IDBI Bank Ltd.




MANAGEMENT



Legal Framework

As a part of its on-going market reforms, the Government of India

promulgated the Depositories Ordinance in September 1995. Based on this

ordinance, Securities and Exchange Board of India (SEBI) notified it’s Depositories

and Participants Regulations in May 1996. The enactment of the Depositories

Act the following August paved the way for the launch of National Securities

Depository Ltd.(NSDL) in November 1996.The Depositories Act has provided

dematerialization route to book entry based transfer of securities and settlement of

securities trade.

In exercise of the rights conferred by the Depositories Act, NSDL framed

its ByeLaws and Business Rules. The ByeLaws are approved by SEBI. While the

ByeLaws define the scope of the functioning of NSDL and its business partners; the

Business Rules outline the operational procedures to be followed by NSDL and its

“Business Partners”.

In view of the SEBI (Depositories and Participants) (Amendment)

Regulations, 2012, NSDL has adopted Code of Conduct for its Directors and Code

of Ethics for its Directors and Key Management Personnel as prescribed under

Regulation 9D of the aforesaid regulations. The Code of Ethics for Directors and

Key Management Personnel of NSDL, is aimed at improving the professional and

ethical standards in the functioning of the company thereby creating better investor

confidence in the integrity of the market.

https://nsdl.co.in/downloadables/sebi.pdf

https://nsdl.co.in/downloadables/sebi.pdf

https://nsdl.co.in/downloadables/act.pdf

https://nsdl.co.in/downloadables/act.pdf

https://nsdl.co.in/downloadables/pdf/ByeLaws-Nov-2011.pdf

https://nsdl.co.in/downloadables/pdf/BusinessRules-Nov2011.pdf

https://nsdl.co.in/downloadables/pdf/Legal-CODE-OF-CONDUCT.pdf

https://nsdl.co.in/downloadables/pdf/Legal-CODE-OF-ETHICS.pdf

https://nsdl.co.in/downloadables/pdf/Legal-CODE-OF-ETHICS.pdf



Depository System - Business Partners

NSDL carries out its activities through various functionaries called "Business

Partners" who include Depository Participants (DPs), Issuing companies and their

Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of

Stock Exchanges. NSDL is electronically linked to each of these business partners

via a satellite link through Very Small Aperture Terminals (IPVSAT) or through

MPLS (Multi protocol label switching). The entire integrated system (including the

electronic links and the software at NSDL and each business partner's end) is called

the "NEST" [National Electronic Settlement & Transfer] system.



Depository Participant (DP) :

The investor obtains Depository Services through a DP of NSDL. A DP can be a

bank, financial institution, a custodian, a broker, or any entity eligible as per SEBI

(Depositories and Participants) Regulations, 1996. The SEBI regulations and NSDL

bye laws also lay down the criteria for any of these categories to become a DP.

Just as one opens a bank account in order to avail of the services of a bank, an

investor opens a depository account with a DP in order to avail of depository

facilities. Though NSDL commenced operations with just three DPs, Depository

Participant Services are now available in most of the major cities .

Issuing Companies/ their Registrar & Transfer Agents :

Securities issued by issuers who have entered into an agreement with NSDL can be

dematerialised in the NSDL depository. As per this agreement, issuer agrees to

verify the certificates submitted for dematerialisation before they are dematerialised

and to maintain electronic connectivity with NSDL. Electronic connectivity

facilitates dematerialisation, rematerialisation, daily reconciliation.



Clearing Corporation / House:

The clearing corporations/houses of stock exchanges also have to be electronically

linked to the depository in order to facilitate the settlement of the trades done on the

stock exchanges for dematerialised shares. At present, all the major clearing

corporations/houses of stock exchanges are electronically connected to NSDL.

The following stock exchanges have linked up with NSDL to facilitate trading and

settlement of dematerialised securities:

Madras Stock Exchange Ltd. (MSE)

National Stock Exchange of India Ltd. (NSE)

Inter-connected Stock Exchange of India Ltd. (ISE)

OTC Exchange of India (OTCEI)

The Calcutta Stock Exchange Association Ltd. (CSE)

The Delhi Stock Exchange Association Ltd. (DSE)

The Stock Exchange, Mumbai (BSE)

The Stock Exchange, Ahmedabad (ASE)



CHAPTER Iv



Sample Test

1. ISIN stands for ______.

(a) International Securities Identification number

(b) International Securities Identity number

(c) Indian Securities Identity number

(d) Indian Securities Identification number

2. Can locked in securities be dematerialised?

(a) No.

(b) Yes, provided lock in reason is promoters quota in public issues.

(c) Yes, always irrespective of lock in reason.

(d) Yes, provided lock in reason is employees quota under stock option scheme.

3. Problem:

Details as reflected in the statement of account are as under:

Date of

credit***

Particulars Quantity

5.3.97 Purchased in the demat form on 27.2.1997 1500

16.6.97 Dematerialised shares that were originally purchased in Feb.

1990 6500

24.7.97 Purchased shares from the market on 15.7.1997 2000

7.9.97 Credit of bonus shares (2:5) 4000

12.11.97 Received a gift 2000

https://nsdl.co.in/certification/general





*** The above credits of securities are in the same account.

If 2500 shares were sold from this account on 1st Dec. 1997, then for calculating capital gains,

which of the following shares will be taken into account by income tax authorities?

(a) 2000 which were credited on 12.11.1997 and 500 from the 4000 credited on 7.9.97.

(b) 1500 which were credited on 5.3.1997 and 1000 from the 6500 credited on 16.6.97.

(c) All 2500 from 4000 bonus shares received on 7.9.1997.

(d) All 2500 from the 6500 credited on 16.6.1997.

4. The DP must ensure that clearing members have given the necessary

pay-in instruction (i.e. instruction for transfer from the CM pool to the CM

delivery) to effect settlement,:

(a) Not applicable. No instruction is required for this process.

(b) After the NSDL deadline time for pay-in for the concerned exchange.

(c) No deadline. Can be given at any time.

(d) At least before NSDL deadline time for pay-in for the concerned exchange.

5. Which of the following options are available in case of freezing of a

demat account?

a. Freeze for debits only b. Freeze for credits only c. Freeze for debits

as well as credits.

(a) b only

(b) a and c

(c) b and c

(d) a only










6. Which of the following provides for inter-connectivity amongst various

depositories in the scenario of multiple depositories?

(a) Operational manual for depositories.

(b) NSDL Business Rules.

(c) NSDL Bye-Laws.

(d) SEBI (Depositories and Participants) Regulations, 1996.

7. Dematerialisation is the:

(a) Process of converting physical shares into electronic shares

(b) Process of selling electronic shares

(c) Process of converting electronic shares into physical shares

(d) Process of transferring electronic shares from one account to another account

8. Which of the following can appoint a nominee?

(a) Body Corporate

(b) Individual

(c) Trust

(d) FI

9. According to SEBI requirements, securities, forming a part of the SEBI

specified compulsory list wherein delivery in demat form is mandatory for all

categories of investors, can be delivered in physical form in the stock

exchanges connected to NSDL. This requirement is applicable to:

(a) There is no such SEBI requirement.

(b) Physical deliveries wherein the number of shares are less than 500.

(c) Physical deliveries valued at less than Rs. 25,000/- or 500 shares whichever is less.

(d) All physical deliveries.











10. Mr. Buyer has sold 100 shares on the NSE. Both, Mr. Buyer and Mr.

Seller have opened depository accounts with NSDL. Assuming, Mr. Seller is the

buyer of the same shares, the shares will be credited to:

(a) Mr. Buyer's account directly by the stock exchange.

(b) Mr. Seller' s account directly by Mr. Buyer.

(c) Mr. Seller's account by the DP of his stock broker on the basis of an instruction given by that

stock broker.

(d) Mr. Buyer's account by the DP of his stock broker on the basis of an instruction given by that

stock broker.

11. In an application for opening an account (for corporates/ clearing

members only), which one of the following form part of types of accounts?

(a) NRI- Repatriable

(b) OCB

(c) NRI- Non-Repatriable

(d) HUF

12. Bank particulars captured in the depository account opening form, are

of relevance for which of the following related activities?

(a) Transferring shares to the CM pool account

(b) Stock lending and borrowing

(c) Cash corporate actions

(d) Off-market transfers










13. Eligible securities for inter-depository transfers are:

(a) Securities which are available for trading at NSE and BSE.

(b) Securities which are admitted for dematerialisation on both the depositories.

(c) Securities which are announced by SEBI for compulsory settlement in demat form on stock

exchanges connected to the depository for all institutional investors.

(d) Securities which are announced by SEBI for compulsory settlement in demat form on stock

exchanges connected to the depository for all categories of investors.

14. The custody fee is payable by Issuer to NSDL on a _______ basis.

(a) Quarterly

(b) Yearly (calendar year)

(c) yearly (financial year)

(d) Monthly

15. Resolution by arbitration for disputes between NSDL and its business

partners:

(a) Is applicable for disputes between NSDL and bank DPs only

(b) Is not applicable in the NSDL environment

(c) Is applicable for disputes between NSDL and broker DPs only

(d) Has been prescribed in the NSDL Bye-Laws

16. Can a delivery instruction for transferring shares from a beneficiary

account to a CM pool account be canceled?

(a) Yes, but only prior to the execution date indicated in the delivery instruction

(b) Yes always

(c) Never

(d) Yes, but only after the execution date indicated in the delivery instruction









17. DVP, in the capital market context, stands for:

(a) Default versus payment

(b) Delivery versus payment

(c) Default versus penalty

(d) Delivery versus penalty

18. Which of the following doesn't form part of Pledge/ Hypothecation

form?

(a) Closure date

(b) Details of securities

(c) Bank account details

(d) Agreement No.

19. Novation means:

(a) Creation of new and complex derivative instruments.

(b) Guarantee of each outstanding position by the stock exchange.

(c) Clearing corporation is the legal counter party to each trade for settlement purposes and

hence, leading to elimination of counter party risk from the system.

(d) Guarantee of settlements by the clearing corporation/ house given to a stock exchange.

20. The route to the depository, as per the Depositories Act, 1996, is:

(a) Dematerialisation or immobilisation, at the option of the Issuer

(b) Dematerialisation or immobilisation, at the option of the depository

(c) Dematerialisation

(d) Immobilisation








21. Can shares that are not registered in the name of the account holder

be dematerialised?

(a) Yes, at the discretion of the Issuer/ its R and T Agent

(b) No, shares have to be registered in the name of the concerned investor

(c) Yes, at the discretion of the DP

(d) Yes, provided a duly filled transfer deed is attached

22. "Fungible" means, as shares would not have distinguishing features

such as distinctive nos., certificate nos. etc.:

(a) Same securities of a company are interchangeable

(b) They are freely transferable

(c) Similar securities of different companies are interchangeable

(d) Different securities of same company are interchangeable

23. NSDL:

(a) Has no role to play in settlement of dematerialised securities that are to be delivered in the

unified (erstwhile physical) segments of connected stock exchanges.

(b) Replaces the clearing corporation/ house of the exchange that has established electronic

connectivity with it.

(c) Facilitates settlement of both funds and dematerialised securities.

(d) Only plays the role of a facilitator in settlement of dematerialised securities in those exchanges

which have established electronic connectivity with it.

24. The account that an Clearing Member needs to open to dematerialise

its own securities, is called _ account in NSDL system:

(a) Beneficial owner

(b) Clearing member

(c) Intermediary

(d) Investor










25. The depository account that an investor opens is called as:

(a) Broker account

(b) Intermediary account

(c) Beneficiary account

(d) Clearing member account

26. Shyam has 500 shares of ABC Ltd in his beneficial owner account on

12/10/98. He gives a "Delivery instruction" on the same day to debit his

account with 600 shares of ABC Ltd with the execution day as 14/10/98. At

the end the of the day on 14/10/98 his account shows a credit of 550 shares.

What will happen?

(a) The entire instruction will be cancelled in the system at the end of the day on 14/10/98, as

the account is short by 50 shares.

(b) 500 shares will be debited from his account on 12/10/98, 50 shares on 14/10/98 and the

balance instruction will be cancelled.

(c) The entire instruction will be cancelled in the system on 12/10/98, as the account is short by

100 shares.

(d) On 14/10/98, 550 shares will get debited and the balance instruction cancelled.

27. In case an investor opts for allotment in demat form in case of

bonus/rights issue without opening a depository a/c:

(a) The issuing co. will maintain holdings in their suspense account till investor opens account.

(b) His entitlements will be issued in physical form

(c) His entitlements will be issued in demat form and credited to suspense a/c maintained by the

DP.

(d) His entitlements will be issued in demat form and NSDL will open an a/c for the investor











28. What is the main purpose of bank account details in account opening

form?

(a) For DP to debit the savings bank account for charges on the services enjoyed

(b) For the purpose of income tax authorities

(c) For safe distribution of cash corporate actions

(d) For NSDL to debit the savings bank account for charges on the services enjoyed

29. Mr. Gupta having beneficiary account with DP1 sells 100 shares of ABC

company through broker XYZ who has his clearing member account with DP2.

Broker XYZ delivers the same in demat form to the clearing corporation/ house

in settlement no. 1999052. Mr. Sharma having beneficiary account with DP3

buys the same through broker PQR who has his clearing member account with

DP4. Broker PQR gets credit of the same in his account with DP4 in settlement

no. 1999052. The market value of ABC company is Rs. 500/-. What are the

transaction charges levied by NSDL to DP4 as applicable from May 1, 2002?

(a) Re. 1/- subject to minimum Rs. 1000/- and maximum Rs. 5,000/- per quarter.

(b) Rs. 25/- (100*500*0.05/100) i. e. 5 basis points of market value of securities credited to

broker PQR clearing member account from clearing corporation/ house.

(c) Rs. 0.50 (100*50*0.01/100) i. e. 1 basis point of market value of securities credited to broker

PQR clearing member account from clearing corporation/ house, subject to minimum Rs. 2000/-

and maximum Rs. 20,000/- per quarter.

(d) No charges.

30. The credit of pledged securities remains in the account of______

(a) The pledgor

(b) The pledgee

(c) Both, the pledgor and the pledgee

(d) None of the above. It will lie in pledge account (maintained in NSDL system for all pledge

transactions)














31. In case of a partnership firm, the beneficial owner account will be

opened in the name of:

(a) The partnership firm

(b) Any partner(s)

(c) All the partners

(d) Any of the above

32. Mr. Sharechandani, an NRI based in Singapore has purchased 1000

shares of XYZ in March 1995 on a repatriable basis. If he wishes to transfer

the shares to his broker on sale:

(a) He will have to produce the copy of the necessary RBI permission to his DP.

(b) He will need to take special permission from SEBI to do so and then produce the same to DP.

(c) The treaty between India and Singapore exempts Mr. Sharechandani from producing any

permission.

(d) No permission is required for NRIs. He can transfer the same freely.

33. An investor holding shares in demat form will get his bonus

entitlement in:

(a) Demat form

(b) Physical form

(c) Any of the above at the choice of the Issuing Co.

(d) Demat/ physical form at his option










34. DP forwards certificates received for dematerialisation along with DRF

to:

(a) NSDL

(b) Issuer/its R and T Agent

(c) Both of the above

(d) None of the above as the DP directly gives an electronic credit to the investor

35. Settlement in the NSE is based on:

(a) Multilateral netting on both funds and securities side

(b) Multilateral netting with respect to funds and bilateral gross positions with respect to funds

(c) Bilateral netting on both funds and securities side

(d) Real time gross settlement

36. On death of any of the joint holder(s), securities lying to the credit of

the joint account can be transmitted in the name of surviving holder(s). What

is the procedure for the same?

(a) The surviving joint holder(s) to have an account in their name(s). They should submit a

notarised death certificate to the Issuer/ its R and T Agent along with transmission form.

(b) On submission of notarised death certificate along with transmission form to the Issuer/ its R

and T Agent, the deceased holders name will be deleted from the existing account.

(c) On submission of notarised death certificate along with transmission form to the DP, the

deceased holders name will be deleted from the existing account.

(d) The surviving joint holder(s) to have an account in their name(s). They should submit a

notarised death certificate to DP along with transmission form.









37. Can locked -in securities be dematerialised?

(a) Yes, provided lock-in reason is promoters' quota in public issues.

(b) Yes, provided lock-in reason is employees' quota under stock-option scheme.

(c) Yes, always irrespective of lock-in reason.

(d) No.

38. Name the odd one out:

(a) ICRA

(b) BOISL

(c) CARE

(d) CRISIL

39. Which of the following statements regarding dematerialisation is

false?

(a) Investor has to pay stamp duty for dematerialisation of shares.

(b) NSDL doesn't charge its DPs for dematerialisation.

(c) Odd lot shares can be dematerialised.

(d) Shares not registered in the name of the concerned account holder (street name shares) can't

be dematerialised.

40. Which of the following places does not have a stock exchange?

(a) Delhi

(b) Calcutta

(c) Guwahati

(d) Cuttack








41. Which of the following documents is not a valid proof of address

(POA) for opening demat account?

(a) Pan Card

(b) Passport

(c) Voter Identity Card

(d) Bank Passbook

42. If beneficial owner opts for demat securities in the public issue

application form then, the probability of allotment of the shares:

(a) Remains same

(b) Decreases

(c) Depends on the no. of applications he has submitted asking for demat shares

(d) Increases

43. In a share application form, if an applicant applies for part subscription

in demat form and part in physical form, then

(a) The form will be treated as valid but all shares will be issued in demat form

(b) The form will be treated as valid and the shares will be issued as per the request in the form

(c) The form will be treated as invalid and rejected

(d) The form will be treated as valid but all shares will be issued in physical form

44. On rematerialisation the share certificates are:

(a) Issued by Issuer/ its R and T Agent and forwarded to investor through DP

(b) Issued by Issuer/ its R and T Agent and forwarded to investor through NSDL

(c) Issued by Issuer/ its R and T Agent and forwarded to investor directly by Issuer/ its R and T

Agent

(d) Issued by NSDL and forwarded to investor directly by NSDL










45. Every Issuer must enter into an agreement with NSDL for offering its

securities for demat. The following is true with respect to the statement

made.

(a) No. Securities which are listed on the NSE are exempt. However, those which are in the

'Permitted-to-trade segment are not exempt.

(b) Yes. All Issuers must sign an agreement with NSDL.

(c) No. Securities issued by the Central and State Governments are exempt from signing an

agreement.

(d) No. Issuers which have a market capitalisation of more than Rs. 125 Cr. are exempt from

signing an agreement.

46. To dematerialise government securities, NSDL has to take prior

approval of:

(a) SEBI and RBI both

(b) RBI

(c) SEBI

(d) Issuing government authority

47. Mr. M is holding securities with DP D. Since he is scheduled to relocate

to Dubai on a special assignment and expects to be away for quite a while,

he wishes to lock (freeze) his account.

He can do so by:

(a) Account freezing is not possible in the NSDL system

(b) Filling up an account freezing form available with the DP D

(c) Transferring his holdings to a special account called 'e-locker' where all such securities are

held in fiduciary capacity by DP D

(d) writing to NSDL to freeze his account












48. As a part of the capital adequacy requirement, the base minimum

capital prescribed by SEBI:

(a) Varies from exchange to exchange

(b) Is based on the recommendations of the Kaul committee

(c) Is based on the recommendations of the Justice Bhagwati Committee

(d) Is the same across members of all exchanges

49. Tick the true statement:

(a) A stock broker having a minimum networth of Rs. 50 lakh is eligible to join NSDL as a DP

irrespective of whether registered with SEBI.

(b) A SEBI registered stock broker having a minimum networth of Rs. 50 lakh is eligible to join

NSDL as a DP.

(c) A SEBI registered stock broker is eligible to join NSDL as a DP. There is no minimum networth

requirement.

(d) A SEBI registered stock broker having a minimum networth of Rs. Three crore is eligible to

join NSDL as a DP.

50. Mr. P has 500 shares of a company in his account with DP D. He

pledges these shares with bank B. He now gives a transfer (debit) instruction

to his DP D to transfer 200 of these shares to his broker R. Assuming no

additional credits are expected into P's account with DP D:

(a) The instruction will fail as there is no sufficient quantity of free shares.

(b) DP D will release the pledge to the extent of 200 shares and transfer to broker R as free

balance.

(c) Not applicable. Demat shares cannot be pledged.

(d) The shares will be transferred to broker R on the given execution date as pledged balance.










51. Book building:

(a) Is used by stock exchanges for trading as it is more efficient than the traditional open outcry

system.

(b) Is used by speculators to artificially increase share prices.

(c) Is used in the public issue process for efficient price and demand estimation for the Issuer.

(d) Is used by bookies in horse racing.

52. If a DP goes bankrupt, what happens to the dematerialised holdings

of investors with the DP?

(a) The assets of the investor may be used for paying off the creditors of the DP.

(b) The appointed "court receiver" has the discretion to dispose off the assets of the investor in

the manner he deems fit.

(c) NSDL has the discretion to dispose off the assets of the investor in the manner it deems fit.

(d) The investor can opt for rematerialisation or open his account with another DP and transfer

his holdings.

53. A broker (clearing member) gives delivery to clearing corporation/

house instruction to its DP.

What will be the movement of the shares?

(a) Broker's (clearing members) pool account will be debited and buying client's account will be

credited.

(b) Broker's (clearing members) pool account will be debited and his delivery account will be

credited.

(c) Broker's (clearing members) beneficial owner account will be debited and his pool account will

be credited.

(d) Broker's (clearing members) pool account will be debited and DP's house account will be

credited.









54. An investor submits 10 share certificates of RPL, all in market lot of 50

shares for dematerialisation to his DP. The face value of the share is Rs. 10/-.

Assuming that DP charges 0.2 % of the face value of securities for

dematerialisation, calculate dematerialisation charges by NSDL to the DP:

(a) Rs. 1.

(b) No charges.

(c) Rs. 10.

(d) Rs. 100.

55. If an investor requests for demat securities in case of public issue

without having a depository account, then

(a) Issuer/ R and T Agent will open the account on behalf of the investor and credit it with allotted

shares.

(b) NSDL will open the account on behalf of the investor and credit it with allotted shares.

(c) Allotted shares will be issued in physical form.

(d) DP will open the account on behalf of the investor and credit it with allotted shares.

56. Physical securities registered in the name of more than three joint

holders, can be dematerialised by:

(a) Sending the same for registration in the name of three or less jointholders and then

dematerislising them. They cannot be directly dematerialised in the name of more than three

jointholders.

(b) Writing to NSDL and NSDL will decide on a case to case basis.

(c) Opening an account in the name of first three joint holders for the purpose of dematerialising

these securities.

(d) Opening an account in the name of all the jointholders which account can be used only for

the purpose of dematerialising these securities and delivering the same on sale.











57. For a stock exchange/clearing house to settle demat securities, the

stock exchange/ house must have a mechanism to ensure payment against

delivery or guarantee settlement. This requirement is drawn from:

(a) The Byelaws of the respective stock exchanges.

(b) The NSDL Byelaws.

(c) The SEBI (Depository and Participants) Regulations, 1996.

(d) The Depositories Act, 1996.

58. Is it true that according to SEBI's April 6, 1998 directive demat shares

will be treated as good delivery in the physical segments of stock exchanges

connected to NSDL?

(a) Yes, for all category of investors.

(b) No.

(c) Yes, for all category of investors but only at NSE and BSE.

(d) Yes, but only for institutional investors.

59. UTI:

(a) Is the largest mutual fund in the world.

(b) Was set by an act of Parliament in India.

(c) Has floated only one mutual fund scheme till date viz., UNIT-64, but the same happens to be

the most popular.

(d) Is the self-regulatory body for mutual funds.

60. All dematerialised securities are:

(a) Mandatorily registered in the name of the individual investor.

(b) Registered both in the name of the individual investor and the depository.

(c) Mandatorily registered in the name of the depository.

(d) Registered in the name of either the depository or the individual investor.











Answers

1. a 13. b 25. c 37. c 49. d

2. c 14. c 26. a 38. b 50. a

3. b 15. d 27. b 39. a 51. c

4. d 16. a 28. c 40. d 52. d

5. b 17. b 29. a 41. a 53. b

6. d 18. c 30. a 42. a 54. b

7. a 19. c 31. b 43. c 55. c

8. b 20. c 32. a 44. c 56. d

9. b 21. b 33. d 45. c 57. c

10. c 22. a 34. b 46. b 58. a

11. b 23. d 35. a 47. b 59. b

12. c 24. a 36. d 48. a 60. c



INTERPRETATION

Analysis and interpretation are central step in research process. The goal of analysis

is to summarize o collected data in such a way that they provide answer to the and

triggered the researcher. Interpretation is the research for the broader meaning of

research finding. The questionnaire is preceded a few uncoded response are

classified the code were verified before transferred to the master chart.



CHAPTER v





RECOMMENDATION

The Government of India has to add the overview of NSDL in the syllabus

of Bachelor Degree of Commerce. So people know about short knowledge

of that.

Create the awareness about Capital Market.





CONCLUSION

1) The NSDL helps to regulate the financial Institutions.

2) The working terms and conditions are regulated by the NSDL and the

Financial Institutions have to run on that.

3) The daily and routine activity is run the guidelines of NSDL.

4) The NSDL have their own Bye-Laws and all those regulations which

bounded for the Dematerialization, Rematerialisation & for account

open or close.

5) I have also concluded that It is very vast concept, the study of NSDL is

short period is not possible but I tried to cover the important things and

their clarification on that topic.





BIBLIOGRAPHY

Second book for NSDL Depository Operation Module.

The website of BSE. Com. National Security Depository Limited.

Indian Journal of Commerce.

Charted Accountant of Agrawal & Associates.

Newspapers & Magazines.

WEBSITE

www.nsdl.co.in

www.wikipidia.in

http://www.nsdl.co.in/

Documents

New NSDL Project Report