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What is NSDL service?

National Securities Depository Limited (NSDL) can be explained as a financial body set up to hold securities like bonds and shares in the form of physical or non-physical certificates. We can say they are maintained in a dematerialized format. All the securities held in NSDL are safeguarded in depository accounts in the same way funds are managed in the bank accounts. The main objective of NSDL is to It facilitate the quick and prompt transfer of securities in the same way like how ownership is transferred by making entries in physical books. All the processes happen on NSDL are carried out electronically which will eliminate the long route and lengthy time associated with the traditional practice where physical certificates need to be exchanged after completing every trade.

The background of NSDL

The capital market of India is older than a century. However, it has been very active since its beginning. Some of the shortcomings associated with NSDL include delayed execution of transfers and bad delivery due to the fact that settlements were solely based on paperwork. In order to mitigate these downsides, the government passed the Depositories Act, 1996. The said act provided room for the creation of Security Depositories in India for the purpose of managing securities.

Securities can be explained as financial assets that can be traded. This means that securities can both be bought and sold on the financial market. These are actually financial instruments that will include equity, fixed income instruments, common stocks, equity warrants and others. The two kinds of security documents include debts and equities. Debt instruments like bank notes, debentures and bonds are similar to money that has been borrowed and therefore have to be repaid. On the other hand, stocks and shares provide the buyers with partial ownership in a given company.

About National Security Depository Limited (NSDL)

NSDL is in fact the largest and the first ever depository in India that was created on November 8, 1996. The sole purpose of establishing this organization is to manage the securities held in the Indian Capital Market in a dematerialized form. On an average, NSDL opens about 3602 accounts in a day. NSDL has been promoted by the Industrial Development Bank of India (IDBI), National Stock Exchange (NSE) and Unit Trust of India (UTI). The important shareholders of the NSDL include the following entities.

  • Axis Bank Limited
  • Citibank
  • Deutsche Bank
  • HSBC
  • State Bank of India (SBI)
  • HDFC Bank
  • Standard Chartered Bank
  • Dena Bank
  • Canara Bank
  • Oriental Bank of Commerce
Benefits of NSDL

NSDL was founded in order to address the issues that arise due to the physical holding of the ownership of securities and the conventional method of transferring them physically through paper work. Some of the overwhelming benefits of NSDL include mitigation of bad deliveries, ruling out of the risks connected to physical certificates, elimination of stamp duty, instant transfer and registration of securities, quick settlement and enhanced liquidity, quick disbursal of the non-cash corporate benefits, reduction of a significant amount of paperwork, elimination of brokerage, possibility to get periodical status reports, easy changing of the investor details, easy transmission and easy sale of securities held on behalf of minors.