NSDL : Transforming the Indian Capital Market with an Inclusive Financial Services Framework

CIO Vendor The introduction of dematerialization i.e., the conversion of physical shares into electronic form in the mid-90s was a radical move that changed the identity of the Indian capital market. Along with electronic trading, this reform helped the Indian capital market gain a foothold in its quest to rub shoulders with its global counterparts, eliminate frauds, improve the efficiency of exchange trade settlement, and reduce costs. Prior to this advancement, paper-based trading and security settlements had been in practice in India. The increased growth in paper movements consequently attracted a number of problems including delays in transfers and settlements, bad deliveries, forgeries and an overall lack of safety in sales, purchase and transfer of securities. The notification of the Depositories Act of 1996 served to eliminate these problems through encouraging elimination of paper form of securities and paved way for the establishment of National Securities Depository Limited (NSDL), the country’s largest depository.

Since its inception, Mumbai headquartered NSDL has been working to support investors, brokers and other participants in the capital market of the country such as clearing members, stock exchanges, banks and issuers of security with its innovative and flexible technology systems. With the backing of other institutions of national stature, the company which had played a vital role in dematerializing massive volumes of physical shares since 1996 has established a national infrastructure that handles securities in dematerialized form. NSDL, thus, aims at ensuring the safety and soundness of Indian marketplace by developing settlement solutions that can minimize risks, reduce costs and increase the overall efficiency of the industry. “NSDL has been a pioneer in setting up the whole framework of migrating from the physical, paper-based model to a completely dematerialized model. Today, NSDL plays a central role in developing products and services that will continue to nurture the growing needs of the financial services industry,” affirms Krishna Srinivas, Executive Vice-President, NSDL.

Some of these services include essential facilities such as account maintenance, dematerialization, and rematerialization, settlement of trades through market transfers, and nomination/transmission. In addition to the core services of electronic custody and trade settlement, NSDL also provides special services that include pledge of securities, automatic delivery of securities to clearing corporations, distribution non-cash corporate benefits, consolidated account statement and Internet-based services such as SPEED-e, IDeAS, STeADY, e-Voting and Depository Account Validation (DAN).

Rendering Securities Depository Services
In order to render its various services to investors and other intermediaries of the capital market under the provisions of the Depositories Act, NSDL leverages its association with Issuer companies, and intermediaries including Depository Participants, Registrars and Share Transfer Agents, Clearing Corporations of Stock Exchanges, who are all integrated into the NSDL depository system.
NSDL’s Depository system facilitates holding of securities in dematerialized form and effects transfers by means of account transfers, while also offering various direct and indirect services to the market participants. NSDL also facilitates its clients with account maintenance, settlement of trades, and inter-depository transfers. NSDL provides services to over 1.6 crore demat account holders through its depository participants from more than 27,900 locations.

NSDL has been a pioneer in setting up the whole framework of migrating from the physical, paper-based model to a completely dematerialized model

In addition, NSDL provides a number of internet and mobile-based services such as SPEED-e, IDeAS, STeADY, e-Voting, and DAN. Among these services, SPEED-e stands as an Internet-based infrastructure that enables depository participants to provide services that allow end investors to submit delivery instructions electronically. Furthermore, NSDL facilitates the investors thru IDeAS (Internet-Based Demat Account Statement)to view the latest balances and transactions in their demat account.

Furthermore, with the an aim of facilitating straight thru processing with the introduction of T+2settlement cycles in the capital market, NSDL had developed STeADY with a vision to automate the processing of contract notes and the communication between brokers, fund managers and custodians as a first step in the market's move to shorter settlement cycles. Being the first of its kind, STeADY enables brokers to deliver/submit contract notes to custodians/ fund managers electronically by transmitting digitally signed trade information. NSDL e-Voting service platform allows every shareholder to exercise voting rights electronically, without the need to be physically present at the meeting location.

The FPI portal developed by NSDL enables registration of foreign portfolio investors (FPI) to enable them to access Indian capital market.

NSDL has been continuously conducting education and awareness programs for various segments of investor community to spread and enhance overall financial literacy.

The Road Ahead
NSDL has revolutionized the Indian Capital market in the last 2 decades with a solution suite that encompasses the entire spectrum of financial services products. Envisioning immense potential for growth in the country’s capital market, NSDL hopes to leverage the technical expertise and creative potential of its team to move towards a fairly digitalized world sans manual intervention in the overall trading and settlement processes, in the upcoming future.