APROJECT REPORT ONDEPOSITORY OFLUDHIANA STOCK EXCHANGEA training report submitted in partial fulfillment of the requirement for the degree ofMASTERS OF BUSINESS ADMINISTRATION(2013-2015)

SUBMITTED TO : SUBMITTED BY :MISS POOJA M.KOHLI VIVEK KAURA[Executive director of LSE] MBA 3RD SEM MR. SANDEEP ARORA 132562036[Our Mentor] BABA FARID COLLEGE OF MANAGEMENT AND TECHNOLOGYDEON, BATHINDA

CERTIFICATE

This is to certify that the Summer Project work of Mr. / Ms ___________________________ batch 2013-15, entitled ________________________________________________________ is a bona-fide piece of work and that this work has not been submitted elsewhere in any form earlier. The project work was carried out from __ /__ / 2014 to __ /__ / 2014 in _________________________ at____ _____________________ .

Date: __ / __ / 2014

PREFACE

In order to make the student competent, all students are required to make a real time project work . This exposure to real life situation given an insight to the students about what problem he/she can expect to face during this career.

Studying and merely passing exams is not worth, the education, knowledge and infect experience is incomplete without being exposed to what is happening in real. With the introduction of compulsory trading by SEBI, there has been mushroom growth of depository participants with so many DPs to choose from, client still had to face so many problems while carrying on their transaction. LSE also entered the DP business with the aim of providing more efficient services.

Our study aims of finding our how far it has been successful in keeping its promise of efficient services. The main intention of this report is to compile the subject matter in such a way that anybody who has no prior knowledge of elements of LSE and DP, can understand properly without any difficulty . Actually this report is result of assignment to improve us and gain confidence . We have to done our best to make it genuine study but as well as all know maxim TO ERR IS HUMAN so there is a chance for some mistake.

DECLARATION

This project entitled empirical study on DEPOSITORY is submitted in partial fulfillment of requirement for the award of degree of MASTERS OF BUSINESS ADMINISTRATION OF PUNJABI UNIVERSITY , PATIALA . This research work is done by vivek kaura . This research work done for MBA and none of this research work has been submitted for any other degree. This assistance and helping the executive of the project has been fully acknowledged.

VIVEK KAURAMBA 3rd SEM

ACKNOWLEDGEMENT

Behind this successful undertaking is the blessing and guidance of many. This formal piece of acknowledgement may not be sufficient to express my feeIings of gratitude and deep respect that have experienced during my learning process at Ludhiana stock exchange.I am extremely thankful to Mrs .Pooja M. Kohli, executive director (officiating),Ludhiana stock exchange, for assigning me the project Depository, and also taking a keen interest and rendering valuable help that ultimately proved to be very helpful in the successful completion of my project.I am also very thankful to Mr.Sadhu Ram, coordinator of the training programme, for the knowledge and experience that I have gained from him during the course of training which I can easily look at my most rewarding phase the course of my study. He in spite of his busy schedule, provided me valuable guidance and has shown utmost interest in imparting this training.

S.NO.PARTICULARSPAGE NO.

1.Executive Summary10

2.Introduction to Ludhiana stock exchange vision and mission of stock exchange Board of Directors Governance and Management Strength of LSE Group Infrastructure & asset base at LSE Listing of Securities of Company & LSE Investor Related Services Educational Initiative of Exchange1112

13

14151617

3.Introduction to Depository History What is Depository Legal Framework of Depository Eligibilty Criteria For Depository Records Maintained by Depository Benefits Of Depository Depositories In India18

19

2021

22

4.Nation Securities Depository limited Introduction of NSDL Management of NSDL Bye-Laws of NSDL Business Rules of NSDL Fee structure of NSDL

23

24

25

5.Central Depository Services (India) limited Introduction of CDSL Fee structure of CDSL26

27

6.Facilities offered by NSDL and CDSL28

7.Depository System is a boon to Capital Market

28

8.Main depository players Depository (new NSDL and CDSL) Depository Participant Issuer companies/Registrars of Transfer agent (RTA) Clearing Corporations Stock Brokers/ stock exchange Investor

29

30

31

9. Difference Between Bank & Depository32

10.Important Function in depository system Account opening Dematerialisation Rematerialization Initial public offers Trading and Settlements Corporate Actions Nomination Account Transfer Instruction Freezing of an account Unfreezing of an account Account Closing Transmission Pledging Suspension of an account

33

35363739

40

41

42

43

11.Scope of depository43

12.Safety features in the depository system

44

13.Objectives of the Study

45

14.Research Methdology46

15.Analysis And Interpretation47 to 55

16.Findings56

17.Limitation of the Study56

18.Suggestion And Recommendations57

19.Conclusion57

20.Annexure Questionnaire Application form for opening an account(for individual only) Application form for opening an account (for corporate/clearing member only) Application form for closing an account

58

58 to 60

61 to 64

65 to 68

69

21.Bibliography70

Executive Summary Since the Beginning of liberalisation process in 1991, the size of Indian capital market expanded maniford. The Tradition system of settlement through physical transfer of securities failed to cope with the requirement of growing of the market, Physical settelment mechanisms gave rise to inefficiencies & risk of bad deliveries. Delays in transfer & registration, fake certificates & forgies. Minimisation of settement risks & shortening of settelment cycles are the basic rrquirement for greater depth & expantion of markets by upgrading the existing trading system into a modern internationally competitive one. The depository Act has paved the way for Instituting an infrastructure for eliminating various risks associated with capital market transaction & increasing the efficiency of clearance & settlement systems. The Depository is an organization which hold securities in electronic form. This Depository are made under the Depository & participant Regulation Act 1996. In India their is only two Depository NSDL & CDSL. The Ludhiana stock exchange is a regional stock exchange that deals with securities. This exchange is an intermediary that create a link between Depository & Investor's. This exchange is established in 1981 by Sh. S.P oswal of vardhman group & Sh. B.M Lal Munjal of Hero group. Before coming of Depository only Manual based trading are made means Physical transfer of shares that need for transfer deed when we can sell or buy shares. But due to Depository the screen based trading are used which means electronic transfer of share. Depository means dematerialization of securities . This all work is done by the depository players. This include Depository participant, Registratrar & Transfer Agent [RTA], Clearing Corporation & Stock exchange. The depository can perform many function like Account Opening, Initial public offer [IPO], Trading & Settlements of transaction, Corporate Actions, Nomination facilities , freezing & unfreezing of an account, Transmission, Pledging & suspension of an account etc. It also allows for dematerialisation & rematerialisation of securities in depositories through electronic Book entry thus reducing settlement risks & removing same of the infrastrual bottlenecks Introduction to Ludhiana stock exchange

The Ludhiana stock exchange limited was established in 1981, by Sh. S.P. Oswal of Vardhman group and Sh. B.M Lal munjal of hero group, leading industrial luminaries, to fulfill a vital need of having a stock exchange in the region of Punjab, -Himachal Pradesh, Jammu & Kashmir and union territory of Chandigarh, since its inception, the stock exchange has grown phenomenally. The stock exchange has played an important role in channelizing savings into capital for the various industrial and commercial units of the state of Punjab and other parts of the country. The exchange has facilitated the mobilization of funds by entrepreneurs from the public and thereby contributed in the overall, economic, industrial and social development of the states under its jurisdiction.Ludhiana stock exchange is one of the leading regional stock exchange and has been in the forefront of other stock exchange In every spheres, whether it is formation of subsidiary for providing the platform of trading to investors, for brokers etc, in the era of screen based trading introduced by national stock exchange and Bombay stock exchange, entering into the field of commodities trading or imparting education to the public at large by way of starting certification programmed in capital market. Further, the exchange has 295 members out of which 162 are registered with national stock exchange as sub- broker and 121 with Bombay stock exchange

The vision and mission of stock exchange is:Reaching small investors by providing services relating to capital market including trading, depository operation etc. and creating mass awareness by way of education and training in the field of capital market.To create educated investors and fulfilling the gap of skilled work force in the domain in capital marketBOARD OF DIRECTORS

S.NO.Name Of The DirectorCategory

1.Prof. Padam Parkash KansalChairman

2.Sh. Joginder KumarVice chairman

3.Sh. Vikas batraShareholder director

4.Sh. Ashok KumarShareholder director

5.Sh.Jagmohan KrishanShareholder director

6.Sh.Anup Kumar JainShareholder director

7.Dr. Raj SinghRegistrar of companies

8.Sh. Ashwani KumarPublic interest director

9.Sh. V.P. GaurPublic interest director

10.Sh. Jasminder SinghPublic interest director

11.R.L. BehlPublic interest director

12.Vijay AsdhirPublic interest director

GOVERNANCE AND MANAGEMENT LSE has a strong governance and administration, which encompasses a right balance of industry experts with highest level educational background, practicing professionals and independents experts in various fields of financial sectors. The administration is presently headed by Sr. General manager CUM company secretary and team of persons having in-depth knowledge of secretarial, legal and education & training.The governing board of exchange comprises of 11 members. Out of which 2 are public interest director. Who are eminent persons in the fields of finance and accounts, education, law, capital markets and other related fields. 6 are shareholder directors and 3 are broker member director and the exchange has 4 statutory committees namely disciplinary committee, arbitration committee, defaults committee and investor services committee. In addition, it has advisory and standing committees to assist the Administration.LSE has a code of conduct in place that governs the elected board members and the senior management team. The same is monitored through periodic disclosures procedures. The exchange has an ethics committee, which looks into any issue of conflicts interest and has in place general code of conduct for the senior officials.STRENGTH OF LSE GROUP

1. LSE brand is popular among masses. The brand image of LSE can be capitalized.2. They have requisite infrastructure for the capital market activities which includes a multi storeyed, centrally air conditioned building situated in financial hub of the city i.e., feroze Gandhi market. 3. They have well experienced staff handling operations of stock exchange.4. They have competent board and professional management. 5. They have much needed networking of sub brokers in the entire region, who are having rich experience in stock market operations for the last 25 years.6. They have more than 40,000 clients spread across Punjab, Himachal Pradesh, Jammu Kashmir and adjoining areas of Haryana and Rajasthan.7. The turnover of LSE subsidiary is the highest amongst all subsidiaries of regional stock exchange of India.Infrastructure and asset base at Ludhiana Stock Exchange

The exchange building is situated at Feroze Gandhi market, Ferozepur road, Ludhiana. It is a six storeyed building, which is centrally air conditioned. The building has 262 rooms, which are located on various floor ranging from second to fifth. The first floor of the building houses the administrative offices and rooms from second to fifth floors have been leased out to brokers. The first floor has also canteen and banking facilities. Investor service. center is also located at first floor which houses a well-equipped library and view-terminals to provide live rates of NSE and BSE to investors. Investors are also provided with cable TV and setup boxes for the purpose of viewing the latest happenings in the capital market and around. Basement of the building has air-conditioning plant and generators to provide air-conditioned environment and twenty-four hours power back up. The exchange has also an additional plot of land measuring 2333 sq. yards in the prime location of city, to enhance its infrastructure and source of income.Status of Subsidiary i.e. Ludhiana Securities Ltd.

Due to nation-wide reach of bigger stock exchanges, the trading volumes at Ludhiana stock exchange declined and ultimately, the trading stopped in February, 2002, but the stock exchange converted the threat of bigger exchanges into opportunities and acquired the corporate membership of these exchanges through its subsidiary companies i.e., LSE securities limited. We have now been providing trading platforms of bigger stock exchanges to the investors of the regions. The vast network of brokers of the exchange is servicing millions of investors. The subsidiary company is also providing depository services in the state of Punjab and Himachal Pradesh. The allied services like PAN service centre, investor service centre are also being provided at major locations of the region. The turnover of subsidiary is highest amongst all the subsidiaries of regional stock exchanges. The growth of subsidiary is swift and it has been providing a range of services to the public at large such as trading, depository, and IPO bidding collection centre.The company in its continuous Endeavour to provide qualitative services to its valued clients, has started e-broking trading services for its clients, thereby increasing the geographical reach of the company.

LISTING OF SECURITIES OF COMPANY AND LUDHIANA STOCK EXCHANGE

At present Ludhiana stock exchange has 330 listed companies out of which 214 are regional and 116 are non regional. The total listed capital of aforesaid companies is Rs. 3168.91crores approx. the market capitalization of the said companies is more than Rs. 3372.34 crores. The stock exchange is covering the vast investor base through the listing of above said companies, which are situated in the region comprising of Punjab, Himachal Pradesh, Jammu & Kashmir, and Chandigarh.Despite the fact, the implementation of SEBI(delisting of securities) guidelines, 2003 has resulted into the delisting of good companies listed at exchange, however still there are leading companies listed with our exchange, notable among them are united breweries limited, vardhman acrylics limited, SMC global securities limited, Himachal futuristic communications limited etc.Ludhiana stock exchange has facilitated the capital generation for agro based industries as Punjab is an agricultural led economy. It will continue to do so, once it gets approval for a tie up with bigger exchange for commencing trading operations.INVESTOR RELATED SERVICES The exchange has been providing a variety of services for the benefit of investing public. The services include investor service centre, investor protection fund and investor educational seminar.(I) Investor service centers : The exchange has set-up investor service centers at various DP branches of its subsidiary for providing information relating to capital market to the general public. The centers subscribe to leading economics, financial dailies and periodic. They also store the annual reports of the companies listed at the stock exchange. The investor service centers are also equipped with the terminal for providing live rates of trading at NSE & BSE a large no. of the investors visit the centers to utilize the services being provided by the exchange.(II) Investor awareness seminars : The exchange has been organizing investor awareness seminars for the benefit of investors of the region comprising states of Punjab, Himachal Pradesh, Jammu & Kashmir and Chandigarh and adjoining states of Haryana and Rajasthan. This massive exercise of organizing investors awareness seminar has been launched as a part of securities market awareness campaign launched by SEBI in January, 2003. The exchange apprises the investors about DOs & DONs to be observed while dealing in securities market. Till date, exchange has organized more than 200 workshops in the region mentioned above.

(III) Website of the exchange: www.lse.co.in The Exchange has its own website with the domain name www.lse.co.in.This websites provides valuable information about the latest market commentary, research report about companies, daily status of international markets, a separate module for internet trading, information about listed companies and brokers and sub brokers of the exchange and its subsidiary. The website also contains any useful links on portfolio management, investor education, frequently asked questions about various topics relating to primary and secondary market, information about mutual funds, financials of the company including quarterly results, share prices, profit & loss account, balance sheet and many more. The website also contains daily technical charts of various scripts being traded in BSE & NSE.

EDUCATIONAL INITIATIVE OF EXCHANGE LSE has carved out its unique position among the stock exchanges of the country for the knowledge management. It has set up an education and training cell and the same has emerged as a leading facility in the various financial services in India, the exchange has been conducting a unique certification programmed in capital market in association with center for industry institute partnership programmed Punjab university, Chandigarh for the last three year. This programmed has widened the horizons of participants vis--vis capital market operations as practical skill based knowledge is provided by stock brokers, stock exchange officials, professor of finance and business management and above all business professions working in different areas of capital market. They have completed series of batches of this programme and They now want to scale up this programme and are planning to launch various other programme on areas Relating to securities market. They have edge over others as far as education and training in financial services is concerned due to following factors:a. Directly connected with the industry as regional stock exchange.b. Connected with large base of investors as they use the stock exchange as a trading platform for their liquidity needs.c. Presence in the region of Punjab, Himachal Pradesh, Jammu & Kashmir and Chandigarh through our branches network and the area being under the jurisdiction of our exchange.d. Already running certification programmes in capital market successfully.e. Continuously holding investor awareness programme for investors and investor groups through association with brokers, sub-brokers, colleges, universities and consumer groups.

Introduction The advent of online automated trading in India brought with it several associated benefits such as transparency in trading and equal opportunity for market players all over the country but the problems related to settlement of trades such as high instances of bad deliveries and long settlement cycles continued. The earlier settlement system on Indian stock exchanges was very inefficient as it was unable to take care of the transfer of securities in a quick/speedy manner. Since, the securities were in the form of physical certificates; their quick movement was again difficult. This led to settlement delays, theft, forgery, mutilation and bad deliveries and also to added costs. To wipeout these problems, the Depositories Act 1996 was passed. It was formed with the purpose of ensuring free transferability of securities with speed, accuracy & security. SEBI notified Regulations in order to provide the regulatory framework for the depositories. Depositories gave a new dimension and a new scope for conducting transactions in capital market- primary as well as secondary, in a more efficient and effective manner, in a paperless form on an electronic book entry basis. It provided electronic solution to the aforementioned problems of bad deliveries and long settlement cycle. A Depository is an organization where the securities of share holders are held in the electronic format the request of the share holder through the medium of a depository participant. In September, 1995 the Government have accepted in principle the proposed law for settling up of depositories and of a central depository for immobilization of physical certificates. The central depository is to be set up as trust to hold the physical custody of shared and effect transfers by book entries without the need to deal and transfer the physical certificates between parties. This is to be sponsored by public financial institutions and banks and will have a minimum net worth of Rs. 50-100 crores as proposed by the SEBI. This central depository can be connected to a number of share depositories for effecting transfer in book entries. The guidelines and regulations in aspect of the operations of depository participants will help smooth operations among participants and their operations with the central depository. A national securities depository corporation was set up in November, 1996. History The first depository was set up way back in 1947 in Germany. In India it is a relatively new concept introduced in 1996 with the enactment of Depositories Act 1996. Their operations are carried out in accordance with regulations made by SEBI, bye-laws and rules of Depositories Act and SEBI (Depositories and Participants) Regulations Act 1996 What is a Depository ? A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities.LEGAL FRAMEWORK OF The operations of the depositories are primarily governed by the Depositories Act, 1996, Securities and Exchange Board of India (Depositories & Participants) Regulations, 1996, Bye- Laws approved by SEBI, and Business Rules framed in accordance with the Regulations and Bye-Laws.The Depositories Act passed by Parliament received the President's assent on August 10, 1996. It was notified in a Gazette on August 12 of the same year. The Act enables the setting up of multiple depositories in the country. This was to see that there is competition in the service and there is more than one depository in operation. At present, two depositories are registered with SEBI - The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).Only a company registered under the Companies Act, 1956 and sponsored by the specified category of institutions can set up a depository in India. Before commencing operations, depositories should obtain a certificate of registration and a certificate of commencement of business from SEBI.The rights and obligations of depositories, depository participants, issuers and beneficial owners are spelt out clearly in the Depositories Act 1996. So the depository business in India is regulated by- The depositories Act, 1996 The SEBI (Depositories and Participants) Regulations, 1996 Bye-laws of Depository Business rules of DepositoryApart from the above, Depositories are also governed by certain provisions of:- The Companies Act, 1956 The Indian Stamp Act, 1899 Securities and Exchange Board of India Act, 1992 Securities Contracts (Regulation) Act, 1956 Income Tax Act, 1961 Bankers Books Evidence Act, 1891ELIGIBILTY CRITERIA FOR DEPOSITORY The following entities are eligible for becoming depository in accordance with Regulation 19 of the SEBI (Depositories and Participants) Regulations, 1996 :

A public financial institution as defined in section 4A of the company act, 1956. A bank included in the second schedule to the RBI act, 1934. A foreign bank operating in India with the approval of the RBI. A Recognized Stock Exchange. An institution engaged in providing financial services where not less than 75% of the equity is held jointly or severally by the institution. A custodian of the securities by government of India. A foreign financial services institution approved by Government of India.Records to be maintained by Depository

Every depository is required to maintain the following records and documents. These have to be preserved for a minimum period of five years.1. Records of securities dematerialised and rematerialised.2. The names of the transferor, transferee, and the dates of transfer of securities.3. A register and an index of beneficial owners.4. Details of the holdings of the securities of beneficial owners as at the end of each day.5. Records of instructions received from, and sent to, participants, issuers, issuers' agents and beneficial owners.6. Records of approval, notice, entry and cancellation of pledge or hypothecation.7. Details of participants.8. Details of securities declared to be eligible for dematerialisation in the depository.9. Such other records as may be specified by SEBI for carrying on the activities as a depository.

BENEFITS OF DEPOSITORY Elimination of all risks associated with physical certificates such as loss of share certificate, Fake securities, Etc. Elimination of bad delivery. Faster settlement cycles i.e. immediate transfer and registration of securities. Low transaction cost for purchase and sale of securities compared to physical mode. Increase liquidity of securities Reduction of paper work Allotment of IPO, Bonus, Rights shares etc. in electronic form Wavier of stamp duty on transfer of securities Intimation like change of address, bank mandate, nomination, request of transmission, required to be given only to Depository Participant (DP) Irrespective of the number of companies in which shares held. Enables the surrender and withdrawal of securities to and from the depository (dematerialisation and rematerialisation). Carries out settlement of trades not done on the stock exchange (off-market trades).Depositories in India

There are two depositories in India :

A. The National Securities Depository Limited [NSDL]

B. Central Depository for Securities Limited [CDSL]

National Securities Depository Limited is the first depository to be set-up 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 operations on November 8, 1996. The aim is to provide facilities for holding and handling securities in electronic form. OwnershipNSDL is a public limited company incorporated under the Companies Act, 1956. NSDL had a paidup equity capital of Rs. 105 crore. The paid up capital has been reduced to Rs. 80 crore since NSDL has bought back its shares of the face value of Rs. 25 crore in the year 2000. However, its net worth is above the Rs. 100 crore, as required by SEBI regulations.The following organisations are shareholders of NSDL as on March 31, 2005.1. Industrial Development Bank of India2. Administrator of the Specified Undertaking of the Unit Trust of India - DRF3. National Stock Exchange4. State Bank of India5. Oriental Bank of Commerce6. Citibank N.A.7. Standard Chartered Bank8. HDFC Bank Limited9. The Hongkong and Shanghai Banking Corporation Limited10. Deutsche Bank A.G.11. Dena Bank12. Canara BankManagement of NSDL

NSDL is a public limited company managed by a professional Board of Directors. The day-today operations are conducted by the Chairman & Managing Director (CMD). To assist the CMD in his functions, the Board appoints an Executive Committee (EC) of not more than 15 members. The eligibility criteria and period of nomination, etc. are governed by the Bye-Laws of NSDL in this regard.Bye-Laws of NSDL

Bye-Laws of National Securities Depository Limited have been framed under powers conferred under section 26 of the Depositories Act, 1996 and approved by Securities and Exchange Board of India. The Bye-Laws contain fourteen chapters and pertain to the areas listed below :1. Short title and commencement2. Definitions3. Board of Directors4. Executive Committee5. Business Rules6. Participants7. Safeguards to protect interest of clients and participants.8. Securities9. Accounts/transactions by book entry10. Reconciliation, accounts and audit11. Disciplinary action12. Appeals13. Conciliation14. ArbitrationBusiness Rules of NSDL

Amendments to NSDL Business Rules require the approval of NSDL Executive Committee and filing of the same with SEBI at least a day before the effective date for the amendments.NSDL Charges

DP Transaction

Credit chargesNil

Debit charges0.05% (minimum Rs.15 & maximum Rs.100) per debit transaction

Other charges

Pledge creationRs. 50

Pledge closureNil

Dematerialization

Per certificateRs. 15

Postal charges per requestRs. 40

Rematerialization

Per certificateRs. 15

Postal charges per requestRs. 40

Rejection/failure per entryRs. 50

Central Depository Services (India)LimitedA Depository facilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry by a Depository Participant (DP), who as an agent of the depository, offers depository services to investors. According to SEBI guidelines, financial institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. The investor who is known as beneficial owner (BO) has to open a demat account through any DP for dematerialisation of his holdings and transferring securities. The balances in the investors account recorded and maintained with CDSL can be obtained through the DP. The DP is required to provide the investor, at regular intervals, a statement of account which gives the details of the securities holdings and transactions. The depository system has effectively eliminated paper-based certificates which were prone to be fake, forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous transfer of securities.CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of India and Centurion Bank.CDSL was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. Some of the important milestones of CDSL system are :1. CDSL received the certificate of commencement of business from SEBI in February 1999.2. Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the operations of CDSL on july 15, 1999.3. Settlement of trades in the Demat mode through BOI Shareholding Limited, the clearing house of BSE, started in july 1999.4. All leading stock exchanges like the National Stock Exchange, Calcutta Stock Exchange, Delhi stock Exchange, The Stock Exchange Ahmedabad, etc have established connectivity with CDSL.5. As at the end of Dec 2007, over 5000 issuers have admitted their securities (equities, bonds, debentures, commercial paper), units of mutual funds, certificates of deposits etc. into the CDSL system.CDSL Charges

DP Transaction

Credit chargesNil

0.05% (Minimum Rs. & Maximum Rs. 100) per debit transaction

OR

Rs. 600 per annum to be charged upfront(no charges for debit transaction)

Other charges

Pledge creationRS. 25

Pledge closureRS. 25

Dematerialization

Per certificateRS. 15

Postal charges per requestRS. 40

Rematerialization

Per certificateRS. 15

Postal charges per requestRS. 40

Rejection/failure per entryRS. 50

Facilities offered by NSDL and CDSL Dematerialisation i.e. converting physical certificates into their electronic form. Rematerialisation i.e. converting securities in Demat form into Physical certificates Electronic settlement of trades in stock exchanges connected to depositories. Pledging/hypothecation of the dematerialized securities against loan Electronic credit of securities allotted in public, rights, bonus issue. Nomination facility for Demat account. Freezing of De-mat accounts to avoid debits from the account Services related to change of address, nomination, mandate, transmission, etc. Other facilities such as holding debt instruments in the same demat account. Availing stock lending/borrowing facility, etc.

Depository System is a boon to Capital MarketDepositories gave a new dimension for conducting transactions in the capital market- primary as well as secondary in a more efficient and effective manner and in a paperless form. There are several major players in the primary market. These include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors. In the secondary market, there are the stock exchanges, stock brokers (who are members of the stock exchanges), the mutual funds, financial institutions, foreign institutional investors (FIIs), and individual investors. Registrars and Transfer Agents, Custodians and Depositories are capital market intermediaries that provide important infrastructure services for both primary and secondary markets. In the depository system the ownership and transfer of securities takes place by mean of electronic book entries.The Main Depository Players a) Depository (new NSDL and CDSL)b) Depository participantc) Issuer companies/Registrars of transfer agent (RTA)d) Clearing corporationse) Stock bokers/ stock exchangef) InvestorDEPOSITORY PARTICIPANTS

Depository Participant just as a brokers act an agent of the investor at the stock exchange; a Depository Participant (DP) is the representative (agent) of the investor in the depository system providing the link between the company and investor through the Depository. The depository participant maintains securities account balances and intimate the status of holding to the account holder from time to time. According to the SEBI guidelines, financial institutions like banks, custodians, stockbrokers etc. can become participants in the Depository. A DP is one with whom an investor needs to open an account to deal in shares in electronic form. While the depository can compare to bank with which an account can be opened. The main characteristics and role of depository participant are as under: Acts as an Agent of Depository Customer interface of Depository Functions like Securities Bank Account opening Facilities dematerialization Instant transfer on pay-out Credits to investor in IPO, rights, bonus Settles trades in electronic segment Facilitates pledge or hypothecation of securities held in demat account

Criteria of eligibility of depository participantsSEBI regulations have selected various categories of market participants who are eligible to become depository participants. These categories already have a well-established customer interface network and are, therefore, the ideal choice to become the agents of depository. These categories are: Public Financial Institutions Scheduled Banks RBI approved foreign banks operating in India State Financial Corporations Certified custodian of securities Clearing corporations of stock exchanges Registered stock brokers Non-Banking Financial Companies Registrars and transfer agentsThe regulations specify certain net worth requirements for certain categories. Also NBFC allowed to hold securities on their own behalf only and not clients.

Issuing company and Registrar & Transfer agent

The issuing company is that organization which issues the securities. The issuing company sends a list of the shareholders to the depositories. An Issuer of share is the company which had launched its shares in the market via IPO.Registrar and Transfer Agents(RTA) are appointed by Issuer companies to act on their behalf.R&T Agents form an important link between the investors and issuers in the securities market. A company, whose securities are issued and traded in the market, is known as the Issuer. The R&T Agent is appointed by the Issuer to act on its behalf to service the investors in respect of all corporate actions like sending out notices and other communications to the investors as well as dispatch of dividends and other non-cash benefits. R&T Agents perform an equally important role in the depository system as well... RTA is a trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems.Clearing corporations

Clearing corporation is an entity who takes the responsibility of every trade, which is being dealt on the floor of stock exchange. It acts as a central mechanism for consolidating and settling transactions instead of the member firms settling each trade individually amongst themselves. The members of Clearing Corporation are called as clearing members.

Stock brokers/ stock exchange

Stockbrokers are the intermediaries who are allowed to trade in securities on the exchange of which they are members. They buy and sell on their own behalf as well as on behalf of their clients. Traditionally in India, partnership firms with unlimited liabilities and individually owned firms provided brokerage services. There were, therefore, restrictions on the amount of funds they could raise by way of debt. With increasing volumes in trading as well as in the number of small investors, lack of adequate capitalisation of these firms exposed investors to the risks of these firms going bust and the investors would have no recourse to recovering their dues.Stock Exchange (SE) is an organised market for dealings in securities commonly referred as secondary market. One of its main functions is price discovery i.e to cause prices to reflect currently available information about a security.

Investor

He is a person who wants to deal in shares and whose name is recorded with a depository. The investor is the real owner of the shares who has lodged them with the depository through book entry till the day he sells them.

DIFFERENCE BETWEEN BANK AND DEPOSITORY

BANKDEPOSITORY

Allocates account number. Holds funds in accounts Minimum balance required.

Functions through branches.

Issues account statement & pass book.

Charges commission/ service charges.

Provides interest to the account holders.

Assist in transfers without having to handle money Allocates client ID number. Holds securities in accounts. Normally no minimum balance required. Functions through depository participants. Issues account statement i.e. statement of holding and statement of transactions. Depository Participant charges: Account opening and closing fee Demat and Remat fee Transaction fee (buy, sell, off market) Custody charges In future, through stock lending, it will be possible to earn income on Depository Account. Assist in transfer of ownership without having to handle securities

Important Function in depository systemACCOUNT OPENING Opening a depository account is as simple as opening a bank account. You can open a depository account with any DP convenient to you. There is no restriction on the number of depository accounts a person can open. However, if your existing physical shares are in joint names, you have to open the account in the same order of names before you submit your share certificates for demat.DEMATERIALIZATION Dematerialisation and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository.

Steps involved in dematerialization:

1. Investor must submit request form and share certificate to DP.2. DP will check whether security is available for Demat. Investor must deface the share certificate by stamping surrendered for dematerialization and DP will punch two holes on the name of the company and will draw two parallel lines across the face of the certificate.3. DP enters the Demat request in their system to be sent to the depository. DP dispatches the physical certificates along with the DRF to the RTA/ Company.4. Depository records the details of the system and forwards the request to Registrar and transfer agent or issuer i.e. the company whose shares are sought to be dematerialized.5. RTA Company on receiving the physical documents verifies request and check them. Once the RTA/Company finds that shares are in order, dematerialization of the concerned securities is electronically confirmed to the depository6. Depository credits the dematerialized securities to the beneficiary account of the investor and intimates the DP electronically. The DP issues a statement of transaction to the client.

Physical Securities Electronic Form.

Pre-requisites: Demat Account with any DP of the Depository. ISIN for the securities available with the Depository. Investor should be registered holder for the securities in the books of the company.REMATERIALIZATION Remat means converting electronic form into physical form. During a rematerialization process, the request goes from the DP to the R&T agent via NSDL OR CDSL. The R&T agent, after processing the request, will print and dispatch the share certificate directly to you. No transfer duty will be charged to you when you rematerialize your shares. You have the option of rematerializing your total holdings or part of it. In addition to this, you have the option to get the certificates in market lot.Rematerialisation process1. Investor makes a request for rematerialisation to the DP.2. DP inform the Depository about the request.3. Depository confirms the request to the registrar of the issuer company4. Registrar updates accounts and prints certificates for the investor.5. Accounts are updated by the depository and details are provided to the DP.6. Investor receives the certificates from the registrar

Electronic Form Physical Securities

Initial public offers An initial public stock offering (IPO) referred to simply as an "offering" or "flotation," is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded.In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preffed), best offering price and time to bring it to market.An IPO can be a risky investment. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.The first sale of stock by a private company to the public. IPOs are oftenissued by smaller, younger companies seeking thecapital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and thetime to bring it to market.Also referred to as a "public offering". IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near futurebecause there is often little historical data with whichto analyze the company. Also, most IPOs are of companiesgoing through a transitory growth period, which are subject to additional uncertainty regarding their future values.

Initial public offers process:

TRADING & SETTLEMENTS At present, the facility of trading and settlement in dematerialised shares is available in The Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Bangalore Stock Exchange (BSE), The Calcutta Stock Exchange Ltd (CSE), The Delhi Stock Exchange Association Ltd (DSE), Ludhiana Stock Exchange (LSE) and the Over The Counter Exchange of India (OTCEI). These Stock Exchanges have distinct trading segments viz. the unified (physical) and depository (dematerialised). In the unified segment, investor has the option of delivering physical or dematerialised shares. However, with effect from 4th January, 1999 shares included in the list of select list of companies (including of RELIANCE ENERGY) can be delivered only in the dematerialised form in all stock exchanges linked to NSDL. The other stock exchanges, at present, have only the physical segment. However, in times to come, other stock exchanges too may be providing depository segments. The settlement of trades done in the exclusive dematerialised segments at BSE, DSE, NSE, BSE, CSE, DSE and OTCEI follow the rolling settlement concept, where trade done on each day is settled after a fixed number of days. Right now, the dematerialized segments follow T+5 rolling settlement, which means that trades are settled on the fifth working day from the date of the trade.Transfer of securities in/ out of the Demat A/c can arise in the following instances: For execution of Off Market Transactions. For settling On Market Transactions. For Inter depository transactions.

A) Off Market TransactionsTransaction done on person to person basis without going through stock exchange mechanism.Pre-requisites: Transfer of securities from one BO A/c to another BO A/c. Both A/cs are with same Depository though with differentDPs. Neither buyers A/c nor sellers A/c is with clearing house/clearing corporation.

Off market transaction process

B) On Market Transaction Trades done by investors through stock exchange mechanism and settled using same stock exchange mechanism. seller as well as buyer account is with CH/CC

C) Inter Depository Transactions.

SEBI (Depository and participants) Regulations, 1996 requires depositories to be inter connected. Securities available for dematerialization on both depositories. Debit/ credit instructions have to given on inter-depository delivery or receipts forms to the DPs of seller and the buyer. These instructions are exchanged online for each day between the depositories.

Current Scenario SEBI has since introduced T+2 rolling settlements from April 1, 2003. T+2 settlement cycle means that the final settlement of transactions done on T, i.e., trade day by exchange of monies and securities between the buyers and sellers respectively occurs on second business day after the trade day excluding Saturdays, Sundays, bank holidays and exchange holidays.

DAY ACTIVITY

T Trading and daily downloading of statements showing details of transactions and margins at the end of each trading day.T+1 Confirmation of 6A/7A data by the custodians up to a specified deadline time. Downloading of securities and funds obligation statements by members.T+2 Pay-in of funds and securities and pay-out of funds and securities by pre specified deadline times. The members are required to submit the pay-in instructions for funds and securities to banks and depositories respectively.T+3 Auction for shortages in delivery of securities.T+4 Auction pay-in and pay-out of funds and securities.

CORPORATE ACTIONS When any corporate event such as rights or bonus or dividend is announced for a particular security, NSDL will give the details of all the clients having electronic holdings in that security as of the record date to the registrar or share transfer agent. The registrar will then calculate the corporate benefits due to all the shareholders. The disbursement of cash benefits such as dividend/interest will be done by the registrar whereas NSDL will do the distribution of securities entitlements (Rights or Bonus) based on the information provided by the registrar to all those clients who have opted for electronic allotment.

NOMINATION The investors have an option of nominating persons who would be entitled to receive shares outstanding in their names in the event of their death. While opening the account with the DP, the investor is required to fill up an application form for operating the Account , wherein the investor has an option to fill in the names of their nominees. Shareholders have an option to hold securities in joint names with or without nomination or in single name with nomination which is optional. Such a facility has been recently introduced under the Companies (Amendment) Ordinance, 1998 for shares held in physical form. As far as concerned the nominee entered by the investor while opening the demat account will be the beneficiary and shall be deemed to be the member of the Company.ACCOUNT TRANSFER INSTRUCTIONS An account holder can transfer his account from one DP to another DP account in the prescribed format given by the SEBI.

INTERDEPOSITORY INSTRUCTIONS There are two depository i.e., NSDL and CSDL. For e.g. if my depository account is with NSDL, can I receive my securities from an account holder having account with some other depository in India.

FREEZING OF AN ACCOUNT A client may wish to freeze its account by deactivating it. The participant has a facility in the DPM to freeze an account. The account is frozen for any transaction thereafter until it is reactivated on a request from the client. An account may be frozen for debits or for both debits and credits depending on the choice of the account holder, but any benefit arising, due to corporate actions is credited to the account just like any other account.Procedure for freezing an account:The client submits a request form to the participant in the prescribed form for freezing its account. On receipt of the request form, the participant verifies whether the form is duly filled or not & then issue signed & stamped acknowledgement slip to the client. The participant compares the signature of the client on the form with that of available in its records. If the request form is in order the participant changes the status of the clients account from ACTIVE to SUSPENDED FOR DEBIT or SUSPENDED FOR ALL depending on the choice of the client from the date mentioned by the client on the form. The participant enters the reasons for change in status. The participant then intimates to the client about the change in status.

UNFREEZING OF AN ACCOUNT A client whose account is frozen may request to unfreeze it. The Participant has the facility in the DPM to unfreeze an account. The account is reactivated and transactions are allowed on the account thereafter.Procedure for unfreezing an account: The client submits a request to the participant in the prescribed form for unfreezing his account. On receipt of the request form, the participant verifies whether the form is duly filled or not. Then it issues a signed and stamped acknowledged slip to the client. The participant compares the signature of the client on the form with that of available in its records. If the request form is in order, the Participant changes the status of the clients account to ACTIVE on the date mentioned by the client on the form. The participant enters the reason for change in the status. The participant intimates the client about the change in status.

A depository account holder (beneficiary account) may freeze securities lying in the account for as long as the account holder wants it. By freezing the account holder can prevent unexpected debits or credits or both, creeping into its account.The following types of freeze facility available in the NSDL the system may BE availed of by submitting freeze instructions to the DP in a prescribed form. Defreezing is vice versa to freeze.

ACCOUNT CLOSING An account holder can close his account by just filling the closing form, which is available with the entire depository participant

TRANSMISSION Transmission of securities due to death, lunacy, bankruptcy, and insolvency or by any other lawful means other than transfer is also possible in the depository system. In the case of transmission, the claimant will have to fill in a transmission request form, (which is available with the DP) supported by valid documents. The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. For this, the claimant must have a depository account. The major advantage in transmission of dematerialized holdings is that the transmission formalities for all securities held with a DP can be completed in one go, unlike inthe case of share certificates, where the claimant will have to interact with each issuing company or its R&T Agent. In case where the deceased was one of the joint holders in the Client account, the surviving client(s) shall be the person(s) recognized by depository as having title to the securities held in that joint Client account.

PLEDGING The Depositories Act permits the creation of pledge against securities. Securities held in depository mode can be pledged against a loan or credit or such other facility availed by beneficial owner of such securities.

Procedure:

1. Pledgor gives a pledge creation request to DP who enters it in the system.2. The request reaches the pledgees DP through the NSDL system. Pledgee is intimated by his DP.3. Pledgee gibes a pledge creation confirmation to his DP who enters it in the system.4..Securities are transferred from free balances head to pledged balances head.5. Loan is given by pledgee to pledgor outside the NSDL system

SUSPENSION OF AN ACCOUNT A Participant has the facility in the DPM to suspend a clients account in case it receives a directive order to the effect from NSDL, Income tax or Judicial authorities. No transactions are allowed on the account, but benefits arising due to corporate action are credited to the suspended account just as in any other account. The client cannot move the frozen holdings out of the account. The Participant intimates the client about the suspension of his accounts.Procedure for Suspending an Account: On receipt of directive/order for suspending of a client account, the Participant has to change the clients account status in the DPM from ACTIVE to SUSPEND FOR DEMAT or SUSPEND FOR ALL. It records the reason for the status change as directive/order of the concerned authority. The Participant intimates the client about the suspension of his account. In case of clearing members client, the participant intimates the clearing corporation also about the suspension.Procedure for Revoking Suspension of an Account: The status would be changed to ACTIVE on receipt of a directive to revoke such suspension from NSDL or authorities mentioned above. The participant records the reason for the status change as a directive from the concerned authority. The Participant intimates the client about the revoking of the suspension.

SCOPE OF DEPOSITORY

1. Depositories gave a new dimension for conducting transactions in the capital market.2. It is used for dematerialization & rematerialization.3. Pledging or hypothecation of the dematerialized securities against loan.4. Receipt of non- cash corporate benefits such as bonus, in electronic form.5. Assisting in repurchase / redemption of mutual fund units.6. Effective transmission of securities.7. It scope also in freezing of Demat account to avoid debits from the account.

Safety features in the depository system

To ensure safety to the investors the following measures exist- Strict norms for becoming depository participant- Net worth criteria, SEBI approval etc. is mandatory. DP cannot effect ant debit or credit in the demat account of the investor without the valid authorization of the investor. Regulation reconciliation between DP and the depositories. Periodic inspection by Depositories of the office of the DP and Registrar. All investors have a right to receive their statements of accounts periodically from the DP. In the depository system, the depository holds the investor accounts on trust. Therefore if the DP goes bankrupt the creditors of the DP will have no access to the holdings in the name of the clients of the DP. Compulsory internal audit of operations of DP by practicing company secretary of the chartered accountant every quarter. Various procedures for backup and safe keeping of data at all the levels.SEBI has made compulsory trading of shares of all the companies listed in Stock Exchange in demat form w.e.f 2 January 2002. Hence, if the investor wants to trade in respect of the companies, which have established connectivity with NSDL & CDSL, he may have to open a beneficiary account.

OBJECTIVES OF THE STUDY

At Present the Indian stock exchanges are following screen based trading and electronic settlement system. But investors scattered at various distant places from trading and settlement place. So there are some problems arising in the settlement and transfer system. Thus, there is a need to evaluate the effectiveness of Indian Depository system.

The Main objectives of the study are :

To evaluate the performance of the Depository system in India with reference to NSDL & CDSL. To study the Organizational frame work, Operational policies, Problems and Prospects and financial performance of NSDL & CDSL. To present legislative measures of dematerialization and to understand the present status of dematerialization in India. To analyze services rendered and quality among the DPs and opinions of investors with regard to the functioning of NSDL. To identify the Investors expectations from the DP companies and to exhibit the Investors perceptions on the services offered by the DP companies . To make appropriate and relevant recommendations to the management of the organization under study. To study the securities in market & overall functioning of depository To know the difference between NSDL and CDSL To examine the satisfaction level of investors by the services provided by NSDL & CDSL To know about the benefits yielded to brokers To study about the types of accounts that can be opened in depositoryRESEARCH METHDOLOGY Although India adopted multi-depository system model to provide competitive and healthy depository system for surpass services to Investors. There is a chance to various entities to enter into Depository system but only two organizations National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) are providing depository services presently.

1) Research plan : To meet the objectives of the studies undertaken, the descriptive respondents were adopted2) Data sources : The data has been collected from the following sources:-a)Primary data b)Secondary data

A) Primary data : In this study questionnaire &personal interview methods have been used for receiving primary data.B) Secondary data :

Secondary data is collected from the website of NSDL (www.nsdl.co.in) and CDSL (www.cdsl.ac.in), website of Indian central depository system (CDS), published reports of NSDL and Govt. of India, Depository Act-1996, SEBI Act-1992, and Capital Market Services, published books and printed material on financial services or Intermediaries.

3) Sampling Plan Sampling units it consist of investors, brokers etc Sampling size: 50 respondents were selected ANALYSIS AND INTERPRETATIONQ.1 Are you aware of the services of Depository? A) yes B) No

Interpretation:-The above table shows the opinion of the investors about the Depository services. 90% of the respondents are aware of the Depository services but only 10% are not aware about the Depository services. So the majority of the investors are aware of the Depository Services.

Q.2 How do you come to know about Demat? A) Brokers B) Friends C) Newspaper D) Others

Interpretation:-The above data represents that 56% of the respondents came to know about the demat from their friends, 24% from the brokers and 12% from newspaper. So, most of the investors are aware of it from their friends.Q.3 In which Depository do you hold an account? A) LSE B) India Bulls C) Karvy D) Master Trust E) Others

Interpretation:-From the above table it has been observed that about 30% of the respondents hold their Depository account in LSE, 20% in Indian Bulls, 24% in karvyi, 16% in Master Trust and 10% of the respondents hold their Depository account in others.

Q.4 What is your opinion about the Depository System?A) Excellent B) Very GoodC) Good D) Average

Interpretation:-The above table enlists the investors opinion about the Depository. 40% of the respondents commented that the Depository organization is excellent and another 30% gave their opinion as very good. 18% of the respondents claimed the Depository system as good and another 12% respondents gave their opinion as average.

Q.5 Since how long have you been operating Demat? A) Less than 1 years B) 1-2 yearsC) 2-3 years D) More than 3years

Interpretation:-It is clear from the above data that 30% of the investors are operating their demat for more than 3 years, 28% b/w 2-3 years, 20% less than 1 year and 16% are operating b/w 1-2 years. The majority investors are operating their demat for more than 3 years.

Q.6 Are the Depository participants service center are assessable to the common investors?A) yes B) No

Interpretation:-The above table shows the accessibility of the depository services center to the common investor. 84% of the total respondents disclosed the essay accessibility of depository participants service center to the common investor and only 16% has negative opinion. So it can be concluded that majority of the participants are positive with accept of accessibility of the depository service centers.

Q.7 Do you receive regular statements about your Demat account?A) yes B) No

Interpretation:-The above table shows that 80% out of the total respondents receive regular statement about their demat account and only 20% of the respondents did not receive regular statement about their demat account. So, majority of the investors are aware of it.

Q.8 Are you satisfied with the existing fee structure of Depository system?A) yes B) No

Interpretation:- The above data shows the opinion of the investors on the existing fee structure of Depository. 60% of the respondents declared their favourism towards the present fee structure and 40% of the respondents turned negatively. So, the majority investors have positive opinion.

Q.9 Did you know that how to open a Demat account?A) yes B) No

Interpretation:-The table represents that 84% of the investors are aware of the procedure of the demat account and only 16% of the total investors dont know about the demat procedure. Therefore, majority investors are aware of the procedure of demat.

Q.10 What is your opinion on the security of the new transferring and settlement system?A) Positive B) Negative

Interpretation:-The above table shows the opinion on the security of new transfer and settlement system. It can be clearly inference that 84% respondents unanimously voted positively in favour of the new transfer and settlement system, which can be termed as the total positive approach.

Q.11 Are you aware about capital markets?A) yes B) No

Interpretation:-The above data depicts that about 76% of the total respondents are aware of capital market and only 24% of the investors are not aware of capital market.

Q.12 What is your usual mode of trading?A) Online Trading B) Trading through BrokersC) Both

Interpretation:-The above data represents that 60% of the total respondents usually prefers trading through brokers, 16% prefers online trading and 24% respondents prefers both. So, the majority investors prefers trading through brokers and the brokers charge commission from such investors.

Q.13 What are the most frequent defaults in the service of the DP?A) Insufficient information B) Enquiry problemsC) Delay in statement delivery D) Delay in transactions

Interpretation:-The above diagram shows that 46% of the total investors think that there is enquiry problem in the services of DP, 32% think it provide insufficient information, 12% investors say that there is delay in statement delivery & 10% says there is delay in transactions.Q.14 Are you aware of the working of CDSL and NSDL?A) yes B) No

Interpretation:-The above figure depicts that 60% of the total investors are aware of the working of NSDL and CDSL but 40% of the investors dont know that how NSDL & CDSL perform its work.

Q.15 According to you which one is the most important factor for a trading company to enhance the loyalty and customers?A) Provide maximum profit B) Provide tips from time to timeC) No hidden charges D) Other factors

Interpretation:-The above data represents that 40% of the total investors think that Profit maximization is the most important factor for the company to enhance loyality & customers, 30% thinks that company should provide time to time tips to the customers, 20% says there should not be any hidden charges charged by the company and 10% goes for other than the above factors.FINDINGS

Majority of the investors are aware of the services provided by the Depository system. Most of the respondents are aware of the basic functions of DEMAT A/C (like procedure of account opening, transaction statement of DEMAT Account, nomination facility, Re-materialization of DEMAT Securities etc.) but most of them do not have any knowledge about NSDL, CDSL and Depositaries Act 1996. There are more number of male respondents as compare to female respondents. The investors are satisfied with the fee structure of Depository System. Investors believes that Demat form is better than the physical form of shares. Mostly investors wants to get regular statements of their Demat account. Investors are aware of the Capital market. They required full information about the plans before investment. Investors invest large amount of their income in order to earn maximum profits but mostly investors believes that it is very risky to invest in the stock market

LIMITATIONS OF THE STUDY

The study suffered from certain limitations which are as under:- Whole area is not covered in this project so only 50 respondents are representative for complete area.

The overall sample was restricted to respondents of Ludhiana. It was difficult to convince the investors that information provided by them was to be used for study purpose only.

SUGGESTIONS AND RECOMMENDATIONS Since dematerialization has a great bearing on the creation and protection of wealth and investment earnings of an investor, DPs must increase their efforts in promoting enhanced services in general, and in those involving security and safety in particular. To encourage the existing and prospective shareholders, all efforts should be made to ensure good returns, in addition to providing greater security and safety. Since the investors expect better service form depository participants, it should provide them value-added services. The processing of the DEMAT account opening should be made fast and non-tedious. The DEMAT a/c holder should be given basic information about NSDL, CDSL and Depositaries Act 1996. Clear picture of the deductions made by depository participant or the charges levied on the customers should be provided in black and white. Bank should expand its network by opening its more branches and franchise and there should be easy accessibility of services rendered by this system. The processing of the demat account opening should be made fast.

CONCLUSION To conclude, it can be said that the demat account opening is same as bank account, i.e, single or joint accounts or with nominee. The growth rates of demat account holder in increasing over years. The Indian system of capital market is a two tire system. Indian government allows holding securities in any form i.e either in physical securities or in demat form. The transaction of securities is completely done through electronic form. Investors are not aware of the services offered by depositories. Most of the speculators do no utilize demat account in day-to-day online trading. They trade through broker pool account. Dematerialization process can be done through online trading by utilizing computers.AnnexureQUESTIONNAIRE

SEEK YOUR VALUABLE TIME FOR OUR RESEARCH WORK

Respected Sir / Madam,We are student of MBA of BABA FARID GROUP OF INSTITUTIONS, DEON (BTI). We are conducting a survey on the Depository System. Your free and frank opinion would be very valuable in conducting the survey. Please answer the following questions with a () in the appropriate boxes:

Name.. Gender- Male____ / Female______E Mail ID: ______________________Age group: Below 18 years ____, 18-25 ____, 25-35 _____, 35-45 _____, Above 45 years ____Educational qualification: Undergraduate ___, Graduate ___, Post Graduate ____, Any other, please specify ______________Occupational status: Student __, Businessman ___, Employee ___, Housewife ____

Q.1 Are you aware of the services of Depository? A) yes B) NoQ.2 How do you come to know about Demat? A) Brokers B) Friends C) Newspaper D) OthersQ.3 In which Depository do you hold an account? A) LSE B) India Bulls C) Karvy D) Master Trust E) OthersQ.4 What is your opinion about the Depository System?A) Excellent B) Very GoodC) Good D) AverageQ.5 Since how long have you been operating Demat? A) Less than 1 years B) 1-2 yearsC) 2-3 years D) More than 3yearsQ.6 Are the Depository participants service center are assessable to the common investors?A) yes B) NoQ.7 Do you receive regular statements about your Demat account?A) yes B) NoQ.8 Are you satisfied with the existing fee structure of Depository system?A) yes B) NoQ.9 Did you know that how to open a Demat account?A) yes B) NoQ.10 What is your opinion on the security of the new transferring and settlement system?A) Positive B) NegativeQ.11 Are you aware about capital markets?A) yes B) NoQ.12 What is your usual mode of trading?A)Online Trading B) Trading through BrokersC) BothQ.13 What are the most frequent defaults in the service of the DP?A) Insufficient information B) Enquiry problemsC) Delay in statement delivery D) Delay in transactionsQ.14 Are you aware of the working of CDSL and NSDL?A) yes B) NoQ.15 According to you which one is the most important factor for a trading company to enhance the loyalty and customers?A) Provide maximum profit B) Provide tips from time to timeC) No hidden charges D) Other factors

THANKS A LOT FOR YOUR PRECIOUS INPUTS AND VALUABLE TIME

Application form for opening an account(for individual only)

Application form for opening an account (for corporate/clearing member only)

Application form for closing an account

BIBLIOGRAPHYReferences:1. Prof. sultan Singh & Sakshi Goyal, (2011), Analysis of factors affecting the decision making of the investors in depository system available at http:/www.skirec.com/42/1.abstract2. Narendra Jadhav, (2007), Development of securities market - the Indian experience , available at http://dnarendrajadhav.info/drnjadhav_web_files/published%20papers/development%20of%20securities%20market%20by%20narendra%20jadhav.pdf

Websites: www.nsdl.co.in www.cdsl.co.in www.investorwords.com/1431/depository.html www.lse.co.in www.lse.co.in/LSESL_New/depository.aspx www.bseindia.com www.nse.india.com

Books: Malhotra, N.K Marketing Research Person Publication 6th edition (2010), New Delhi, Topic- factor analysis Page no.(587-601), Exploratory research design page no: (97-121) Dematerialisation in the Indian Capital Market By P.V Nishanth Security analysis and portfolio management By Prasanna Chandra Securities Laws and Compliances By Institute of Company Secretaries of India Financial institutions and markets-L.M.Bhale Investment management-V.K.Bhalla Research methodology-Mohit gupta,Navdeep Aggarwal Financial services- Shashi k. gupta, Nisha aggarwal

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