Idbi

RETAIL BANKING: DEPOSITORY,
FUNCTIONING & SERVICES
1. PROFILE IDBI BANK:

The tenth largest development bank in the world has promoted world-class institutions in
India. A few of such institutions built by IDBI are The National Stock Exchange (NSE),
The National Securities Depository Services Ltd. (NSDL), Stock Holding Corporation of
India SHCIL) etc. IDBI is a strategic investor in a plethora of institutions, which have
revolutionized the Indian Financial Markets. IDBI promoted idbi bank to mark the formal
foray of the IDBI group into commercial banking. This initiative has blossomed into a
major success story. idbi bank, which began with an equity capital base of Rs.1000
million (Rs.800 million contributed by IDBI and Rs.200 million by SIDBI), commenced
its first branch at Indore in November 1995. Thereafter in less than seven years the bank
has attained a front ranking position in the Indian Banking Industry.
The Bank:
The birth of idbi bank took place after RBI issued guidelines for entry of new private
sector banks in January 93. Subsequently, IDBI as promoters sought permission to
establish a commercial bank and retained KPMG a management consultant of
international repute to prepare the groundwork for establishing a commercial bank. The
Reserve Bank of India conveyed it's in principle approval to establish idbi bank on
February 11th, 1994. Thereafter the bank was incorporated at Gwalior under Companies
Act on 15th of September 1994 (Registration No. 10-08624 of 1994) with its registered
office at Indore.
Management Team - The Core Strength of The Bank:

Since August 2000 idbi bank has witnessed a transformation in the top management
structure with top talent from foreign banks and private banks coming together to create a
world-class management team. It is totally a customer-focused organization. Existing
talented people within the bank were re-aligned to a functionally driven product & sales
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organizational structure. Also, to align employee interests with shareholder interest’s
founder Stock Options (ESOPs) in October 2000 covering 75 % of the existing
employees of idbi bank were distributed.
TECHNOLOGY AND TECH INITIATIVES:

Keeping in line with its policy of leveraging technology to drive its business, idbi bank
deployed Finacle, the e-age banking solution from Infosys to consolidate its position,
meet challenges and quickly seize new business opportunities. Entire Finacle rollout was
remarkable considering the fact that it was implemented across all branches in a record
time frame of 5 months. Finacle will provide the critical technology platform to propel
the bank's new thrust and direction.
Achievement of these significant milestones is consistent with idbi bank's continued
focus to create customer and shareholder value through deployment of superior
technology. Investments in technology is part of the plan to put in place building blocks
for creating the right organisational infrastructure which will help idbi bank in
consistently delivering superior products, convenient access channels and efficient
service to our retail and corporate customers.
STRATEGIC RETAIL INITIATIVES:

idbi bank in the previous calendar year initiated its formal foray into retail banking. idbi
bank's depository services product E-Sec is a major success story and the bank today is in
the top three league in India in this segment. A spate of retail products were introduced
such as home finance, loans against shares, educational loans, car loans, Sweep in
account, SMS mobile banking etc. on very competitive terms.
The bank has recently announced its strategic alliance with TATA AIG General
Insurance Company for selling General Insurance Products through select branches &
ATMs of idbi bank.
The bank announced a landmark strategic alliance to make available widely, both
organisation products through each other’s distribution channels. Now you can buy
coveted savings Products like the National Savings Certificates (NSC) and Kisan Vikas
Patra (KVP) on Internet. It recently had a tie up with Birla group in the name of Birla Sun
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Life Insurance.
The new products, which are going to be announced shortly, are Credit Cards, Debit
Cards etc. idbi bank is continuously looking for ways to leverage its technical strengths
and bring to the retail customer convenience products at reasonable cost. It has started
converting its ATM card into ATM cum Debit card.
CORPORATE BANKING AND CREDIT:

The bank has also invested in Credit Rating System software from CRISIL to strengthen
its corporate risk assessment mechanism. This goes live from the first quarter of 2001-
2002.
CORPORATE GOVERNANCE:
idbi bank has adopted governance standards based on best practices prevalent
internationally. It has a structure of governance which meets with the requirements and
fully meets the recommendations by internationally acclaimed and recognised norms of
governance.
Following globalization in India, retail banking has made strong inroads into Indian
banking. Every bank, small or big, new or old, private or foreign is chanting the retail
mantra. Since retail banking is evolving at a faster pace, the players are redrawing their
strategies to optimize on the business potential.
Retail banking has been at the forefront of the growth for many a consumer economy
worldwide. Following globalization in India, the FMCG and consumer durable products
opened up to international players. Retail banking made strong inroads into Indian
banking as well.
Retail banking generally refers to offering financial services, products related to deposits
and assets to individual customers for personal consumption. Banks concentrate on
various segments like professionals, housewives, pensioners, children, salaried class etc.
Different types of products like recurring deposits, savings bank deposits, fixed deposits,
credit cards, housing and consumer loans and educational loans are offered by banks to
the above mentioned market segments.
Retail banking is a business activity, which is subject to evolutionary change and
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development, as its processes, structure and market place are all, modified. Strategy
however exists as a technique for operating the bank within the environment, which
essentially consists of the marketplace, and for analyzing the bank and marketplace in
detail. Thus it provides the framework in which suitable action can take place. This
framework enables the management to:
 do long term planning.
 allocate resources optimally.
 set objectives.
The application of strategic methodology to retail banking as a practical exercise is a vital
element in structuring and focusing bank's energies towards an increasingly complex and
volatile business environment. The value of applying generalized, conceptual thinking to
an industry as apparently dynamic as the Banking industry is often questioned. It is
thought that its long-term view is not justified given the realities of the market place, with
its framework for action not allowing effective entrepreneurial opportunities. Strategy
however attempts to take a holistic view of business activity taking into account all the
interacting elements that make up the business environment. The strategy proposed
should be a synthesis of the entire interacting element so that it is practical enough, to
respond flexibly to short term changes, which are either related to the organization or to
the environment. Clearly the more able a strategy is able to deal in a cohesive way with
the totality of factors that effect the business the more able it is to accommodate changing
patterns of business and provide successful long term lines of action.
2.RETAIL BANKING-NEED:
Poor industrial production due to lack of demand has resulted in poor credit off take.
Banks cannot rely on big corporate. As there is regular rise in deposits, banks are flushed
with funds. Banks do not want to take risk by financing second rung manufacturers in
recession. With narrowing investment opportunities and poor credit off take, banks turn
towards retail banking, which presents attractive opportunity with lesser risk and
reasonable return. Growing consumerism in India also encourages retail banking.
The domain of retail banking market has tremendous growth potential for banks and
finance companies, as at present it is largely untapped. The penetration level is 2.5 to 3%.
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And this is in a scenario when the requirements of the consumers are growing. In the
past, people never believed in buying consumer goods on credit. But today the attitude is
changing. The demand for consumer products has increased. Today, about 70% of
consumer goods purchased are through finance schemes/loans as against 40% about five
to six years ago.
In retailing of deposits also banks have better scope now. The stock markets and real
estate market are not performing to the expectations of the investors. To tap this market,
banks should come out with a variety of new deposit products.
Due to recession and industrial slowdown, many of the corporate have either shelved or
postponed their development plans. A number of corporate borrowers are sidetracking
banks and raising money through commercial paper and the debt market. These are not
only cheaper than bank credit but at times they succeed in raising money at rates below
bank rate. To overcome these problems banks have formulated strategies to go for retail
banking as a major thrust area.
INDIAN OUTLOOK & SCENARIO:
In order to reduce transaction costs, banks are trying to shift to technology supported
banking from the age-old brick. Many banks introduced Voluntary Retirement Scheme
(VRS) to cut the operational costs. Banks are aggressively trying to become a one-stop
financial shop providing all types of financial services to suit their customer needs. They
are selling products ranging from insurance policies to government securities to increase
their non-interest income. This helps them in acquainting themselves with
products/segments where they do not have any experience. Banks are concentrating on
vehicle loans, housing loans, other fee-based business like guarantees, remittances, gold
banking etc.
Public sector banks have increased their exposure to housing loans by 53% to Rs. 29,456
cr. during the year ended March 31, 2002 as compared to Rs. 19,204 cr. during the earlier
year. Borrowers are comfortable with the falling interest rate regime. The financiers for
home loans have slashed their lending rates to align with the current falling interest rates
structure. This has made the home loans very attractive. Banks are expected to reach a
higher market share in the current fiscal as they have a low risk weightage of 50% as
against 75% for housing finance companies.
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Traditional branch banking has changed. A number of banks have adopted a new model
of branch banking. The customers avoid standing in queue in branches; instead they
prefer transacting at offsite locations like supermarkets, petrol pump stations etc. This is
the reason why retail-banking products like credit cards, vehicle loans are available at
offsite locations also. In fact, this mode is becoming more popular these days. Banks are
making tie-ups with shopping malls and supermarkets which are offering such retail
Banking products to the customers. The banks for promoting credit card services have
also appointed direct selling agents. Such agents arrange for door-to-door campaigning of
these products. These steps are being taken to ensure customer's convenience, which is
the most important factor on the retail business agenda of banks.
Credit card business is growing in India at the rate of about 25% per year. There are
about 5.5 billion cardholders in India but the average amount spent is very low. Slowly
people are getting acquainted with the plastic money culture.
The urban and metropolitan centers have a large concentration of corporate and
commercial advances and wholesale deposits. In the rural and semi-urban centers,
deposits and advances are probably mostly retail in nature, considering big-ticket
advances are non-existent. These customers include all categories of depositors and
borrowers like farmers, households, service and other professionals mainly located in
rural and semi-urban areas.
At present, much of the action in the retail financial services segment is mainly restricted
to urban and metro centers as now. The entire banking operation in rural areas is
completely branch-centered and alternate delivery channels are yet to develop.
The ATMs are the main distribution channel for migration of branch transactions and the
pace also is slow. World over there are over one million machines operating in over 100
countries. India has about 5,000 machines-a small numbers given the country's size.
While the use of ATMs is on the upswing, use of ATMs for services other than cash
withdrawals is yet minimal investors, reveals an extremely low usage of ATMs in India.
As per the study almost 81% of respondents have stated that they have never used an
ATM. The study indicates a higher usage of ATMs in the south zone (28%) as compared
to other geographical regions. The percentage of customers using ATMs in North is 14,
East 11 and West 14.
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In UK, ATMs are being used to recharge `pay as you go' mobile phones. Stamps and
phone cards are also sold through ATMs. Trading in shares and applying for loans are
being pursued in a number of countries. ATMs that check cash for people without bank
accounts are developing in the US. In China, banks are testing ATM units that give
instant credit to the account for bulk cash deposits. Compared to the international trends,
ATMs usage in our country is still poor. To optimize the return on investment, banks
have to push the customers to migrate to the ATMs/Internet channels, so that marketing
of the financial services will deepen among the branches of various banks.
According to CK Prahalad (Business Standard, November 5, 2002) the delivery and
retail focus should be directed towards the 60% of the population whose income,
consumption and savings levels are really low. This is all about per capita consumption,
and retail services should increase their penetration and reach. Targeting such customers
and providing services to them will be the greatest challenge for retail banking business.
RETAIL BANKING AND TECHNOLOGY:

Banking remains an essential input of a modern economy. The three traditional Banking
functions of purveying liquidity, facilitating payments and maturity transformation (inter-
generation risk distribution) will be needed in future too. However, the crucial difference
would be, banks would not be essential for doing these.
AT BEST, A SECOND BEST:

The (commercial) Bank is a product of an inefficient market, a second-best institutional
solution to an ìncomplete-contracts environment'. The 20th century has witnessed the
lowest entropy of change in the spheres' of technology, information availability and the
property rights environment. As a result, the banking functions have become separable
from their institutional appellation (the commercial bank). So that the institutional form is
fast becoming immaterial it tallies with the declining share of traditional banking
functions in banks. The banks' share of intermediate assets between today and half-a-
century back remains stable on average only when the non-interest income is capitalized
and added to the bank assets. Banks continue to be safe delivery systems for financial
services due to institutional appellation. However, today the banking functions are fast
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becoming separable from banks. Non-Banks like financial companies, insurance
companies, specialist firms etc., offer almost all-banking products. Thus, banks' survival
is threatened by the rise of non-banks.
DAWN OF DIGITAL ECONOMY: THE NEW ECONOMY:

There are many synonyms for the `new economy': `virtual economy', `digital economy',
è-economy', Ìnternet economy', è-commerce' etc., although all these sound less
capacious than `new economy'. It heralds ènd of geography' and a truly borderless world.
The new economy not only stands for all the informational goods and services, but also
emphasizes that development, production and provision of these goods and services are
critically dependent on digital technologies. Information is both a dominant final output
and also intermediate input in such an economy. It contributes to high growth and low
inflation. Any prospect of being excluded from the ìnformation economy' amounts to
being excluded from economic progress.
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THE TECHNOLOGICAL DIVIDE: LEAVING CASH AND PAPER
BEHIND:
Few financial analysts and banks doubt the depth of internet-banking capabilities and the
huge impact it will have on the bottom lines of banks. Internet banking represents a
paradigm shift in the business-modeling mindset of banks. The opportunities are
unlimited. With customers becoming more tech-savvy and sophisticated, they to choose
products from, than to be chosen for them, view the Internet as the newfound ability.
Thus, the Internet represents a critical shift in the customer-relationship-marketing
environment for banks. Internet capabilities look pretty impressive; some of
which are presented in table below.
TABLE 1:
POSITIVE NEGATIVE
• Low Costs • High investment costs
• Better data mining • Low barriers to entry
• Better market segmentation • Reduced profitability
• Channel Integration • Customer defection
• Unbundling, financial re-packaging • Co-ordination risks
• Improved work culture • Spreading of thin spreads
• B2B • Competition from newcomers
• Brand equity creation • E-payments under pressure
• Better capital allocation • Customer empowerment
• End of geography • More ‘aggregators’
• New revenue avenues • More systemic risk
SOURCE: ICFAI journal (January issue 2003)
A cursory look at the table reveals that the Internet can provide customers an S makes
customized pitches attractive due to low transaction costs and ease of use. At the same
time, Commoditization need not make customers `sticky'. Instead, it may make them
`stingy', and fickle-minded thus, eroding customer loyalty.
TABLE 2:
SOME INTERNET CAPABILITIES
1. Channel Variety
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• PC Internet Banking
• SIM or WAP mobile Banking
• PDA Banking
2. Transaction Capability
• Credit card account activity
• Wire transfer to third parties
• Funds transfer
• Account activity, balance inquiry etc
• Bill presentment and payment
3. Customer Service
• E-mail alerts
• Internet phone
• Other customer inquiries
4. Online Lending
• Online loan applications
• Online loan approvals
5. Cross-Selling
• Online stock broking
• Online insurance
• Online mutual funds
6. Financial Portal
• Personal planning modules
• Stock quotes and news
• Loan calculators
SOURCE: ICFAI Journal (January issue 2003)
INTERNET AS A PROMINENT DELIVERY CHANNEL:
Migration to Internet channel by various users is happening much faster than expected
due to rapid technological advancements and increased usage of IT. For example, in
Europe, the percentage of Internet users is estimated to increase from 10% in 1999 (38
million) to 50% in 2007 (190 million). Broadband transmission, Web TV and wireless
Internet access via mobile phones are providing greater impetus for this transformation
and exponential growth in the number of users.
Another trend, which is having a significant impact on the banking, is the proliferation of
mobile phone users. By 2003, the number of customers using mobile phones is projected
to be 230 million in Europe alone and these phones are likely to find additional utility as
`pocket banks'.
Similar trends are discernible in the case of online broking customers. The number of
online broking customers stood at 1.2 million in 1999 in Europe and estimated to increase
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progressively to 19 million by 2007.
The Future of Financial Services' succinctly summarizes the impact of new technologies
on the financial services industry as below:
 Credit _ Credit providers will no longer be able to price mortgage rates at
premiums to the market because the public can easily get market information. Firms
that integrate financing with services will dominate. Real estate agents, for example,
will link financing with house sales in a single package. Multiple mortgage lenders
will bid online to finance a home sale.
 Insurance _ Life and health products will become far more integrated with
investment and other financial products. Technology improvements that facilitate risk
assessment _ such as the use of sensors to detect the condition of a car, for example-
will give insurers accurate data with which to price insurance specifically for each
driver.
 Investing _ Further integration of financial products with consumers' needs will
occur. With the help of Personal Financial Booths (PFBs), investing will become
automated, enabling consumers to develop portfolios that best meet their personal
needs and risk preferences, without having to become stock market experts.
 Money Management _ Where money is stored and how it is retrieved will change
greatly. PFBs will manage consumers' funds ensuring that the return is optimized.
Eventually, multiple services will be combined through a wireless Personal Digital
Assistant (PDA) or other device.
 Think customers, not products, by developing and personalizing innovative, easy-
to-use offerings that focus on customers' lifestyle goals-and by structuring their
organizations around customers.
 Partner with best-of-breed product providers to develop tailored customer
solutions in real time, weaving the needed financial services into the fabric of overall
product offerings.
 Be accessible to customers whenever and however customers want, interact with
them efficiently through multiple channels.
 Also development in Electronic Commerce is perforce forcing the banks to
review their service delivery strategies. First it was business-to-Consumer (B2C),
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then Business-to-Business (B2B) and Person-to-Person (P2P). Today it is all about
mobile commerce through Internet.
 Will the next wave be a transaction conducted through a television set-top box (t-
commerce) or transactions initiated through voice commands (v-commerce) or
beaming of value from one device to another through infrared or blue tooth
technology through proximity commerce (p-commerce)?
 These channels and devices are creating a new environment where buyers and
sellers will be able to conduct business anywhere and anyway which is termed as
universal commerce (u-commerce).
THE PERVASIVENESS OF TECHNOLOGY:

History has clearly demonstrated that technology, properly applied, drives efficiencies,
productivity, and value. As technology becomes more pervasive-think of the explosive
growth of Non-technology as well as ongoing capital investments in technology at the
enterprise level there is a larger platform on which to leverage innovations and new
applications.
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INCREASING BANDWIDTH AND CONNECTIVITY:
Bandwidth has been doubling every nine months or roughly at twice the growth rate of
computing power. It is not hard to imagine a world where every electronic device has its
own Internet connection and interactivity is possible in appliances as ubiquitous as
televisions, medicine cabinets and refrigerators. Increasing bandwidth will lead to the
creation of what is being called the èver net’; where billions of devices will be connected
to the hyper speed, broadband, multiform at Web. In the future, the Internet will always
be òn'.
As these trends are revolutionizing the banking operations world over, there are certain
challenges, which are emerging for banks particularly in the area of Internet banking.
Around 35% of the companies offering Internet banking services have recently entered
the market. These new entrants will give stiff competition to existing banks in offering
various financial services. As the barriers between various players in financial markets
collapse and technology enables to develop alternative channels of delivery, there is
every possibility that service providers grab the market through efficiency and price
competitiveness. Some of the above-enunciated trends are taking roots in India as well.
IS INTERNET ALWAYS PREFERRED?

The Internet is in fashion but it is not what the customers want when markets turn volatile
and times get tough. It is quite possible that the Internet can serve some investors better
all the time, all investors only some time, but not all investors all the time. That is why a
multi-channel strategy makes better sense where the Internet can serve as a shock
absorber of aggregate profit volatility besides adding to profitability. Therefore, brick and
mortar business channel retains its basic role even if the dominant business is only click-
of-a-mouse away.
CONCERNS OF TECHNOLOGY:
 Information Security: Security problems arise in a variety of ways: what is
perceived as the key issue varies from place to place and from B2B. Worries that "the
tax authorities will know how large my turnover (or sometimes even personal
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expenditure) is" are particularly common in areas with a thriving black economy.
Most pervasive, however, are the classic business worries about assurance of payment
for the seller and assurance of delivery to specification for the buyer; as a sub-set of
this, there are worries about the security of both Banking and trading online against
the depredations and disruptions of hackers. Fortunately, these commonplace
problems are very rapidly generating commonplace answers, sometimes in the form
of commercial products or services e.g. online credit card authorization service
providers, and sometimes in the widespread use of techniques that are effectively in
the public domain. (E.g. P.G.P. encryption)
 Transaction Security: It is evident that bank, although very interested in Internet
banking is also concerned with the risks connected with procedures for transactions
over the Internet. Today, banks are already loosing enormous amounts through
cheques and credit card fraud. The security solutions of the future are therefore high
on the bank's agenda. If customers distrust the security it may create multiple
problems. Banks will find it hard to launch Internet banking services if demand is low
because of security doubts. Banks are in some senses trendsetters in determining the
technology that will be used in the future.
Concerning specific security solutions for Banks transactions over the Internet, there
is a strong support for smart cards solutions. a majority of the banks believe that
smart cards based security solutions will be the most widely used solution in Internet
Banking in the future. However, some banks are still concerned about the pricing of
existing smart card (compared to magnetic stripes ones). A significant reduction in
prices may be necessary for the technology to win widespread acceptance. Other
threats exist in the form of new conceptions of electronic money and attempts to
overturn the payment methods currently employed - Cyber Cash, Dig Cash, First
Virtual and Net Bill.
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WHY TECHNOLOGY UNDERPERFORMED:
The three main reasons for technology under performing were:
 Developers were away from actual customers: People who developed the
technology were not in direct contact with the end-user. More often than not they
had to depend on the instructions from the companies themselves.
 Customers were not comfortable: As it is the case with anything new, there is
inertia that needs to be overcome, secondly the customers were not used to
technology, at least in India, and the learning curve is that much longer.
Technology could be duplicated: Most of the companies that used
technology to differentiate themselves found that their competitors
closed this gap pretty rapidly.
3.ELECTRONIC CLEARING SERVICE (DEBIT CLEARING):

With the widespread bank/branch network and increase in volume of banking
operations, technology was brought into the clearing operations since 1986 using
High Speed-Reader Sorters driven by a powerful IBM computer system. As years of
successful clearing operations passed, the banks have speedily developed a much
wider range of financial services for the benefit of their constituents including
members of the general public. Computerisation is the next development leading not
only to greater efficiency, but also to new services for customers such as round-the-
clock banking with Automated Teller Machine (ATM), off-line inter-bank payment
system and cashless transactions.
In this scenario, the National Clearing Center has implemented an off-line electronic
fund transfer system allowing paperless direct debit and credit transactions by banks,
viz. Electronic Clearing Service. Presently, the ECS-Credit is in operation and is
providing satisfactory services to all concerned in respect of payment from companies
to their share/debenture holders. The facility of payment of pre-authorised debits
through ECS is very much needed. Hence, the ECS Debit Clearing Scheme has been
proposed and approved by Committee on Technology Issues in Banking Industry
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(Payment System and Cheques Clearing System) under the chairmanship of Shri
W.S. Saraf, the then Executive Director, Reserve Bank of India.
OBJECTIVE:
The objective is to provide an alternative method of effecting payment transactions in
respect of the Utility-bill-payments such as telephone bills, electricity bills, insurance
premium, and loan repayments which would obviate the need for issuing and
handling paper instruments and thereby facilitate improved customer service by the
banks/companies/corporations government departments collecting / receiving the
payments.
4.NSDL:
The Indian capital market has witnessed and unprecedented growth in the past few
years, facilitated by modernization of the trading systems. Automation of the trading
infrastructure in 1994 has given us a trading system comparable with the best in the
world. The establishment of a settlement guarantees scheme has removed counterpart
risk in trading.
Though the advent of automated trading brought with it several associated benefits
such as transparency in trading and equal opportunity for market players all over the
country; the problems related to settlement of trades such as high instances of bad
deliveries and delay in transfer of ownership have continued. As an answer to the
myriad settlement problems, National Securities Depository Ltd. (NSDL) was
inaugurated in November 1996 as the first depository in the country.
National Securities Depository Limited (NSDL) is an organization Promoted by

Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and National
Stock Exchange of India Limited to provide facilities for handling and holding
securities in electronic form. It commenced operations on November 08,1996.
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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
dematerialised form in Indian 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 cost. IDBI is the largest development
financial institution in India. It has been set up for providing credit facilities for the
establishment and development of industries. UTI is the largest Mutual Fund in India.
Established under UTI Act, 1963, with a view to encourage savings and participation
in investment. NSE was established with a view to provide a fair, efficient and
transparent securities market to investors all over the country has emerged as the
largest stock exchange in India.
PROMOTERS:
1) Industrial Development Bank of India
2) Unit Trust of India
3) National Stock Exchange
OTHER SHAREHOLDERS:
 State Bank of India
 Global Trust Bank Limited
 Citibank NA
 Standard Chartered Bank
 HDFC Bank Limited
 The Hongong and Shanghai Banking Corporation limited
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 Deutsche Bank
 Dena Bank
 Canara Bank
NEED:
With SEBI making trading mandatory in the demat form and the advert of rolling
settlements it is imperative that all investors have a demat account with a Depository
Participant. When you place or buy order, a seller can deliver the securities in demat
form, which can only be credited to a demat account.
DEPOSITORY:
It holds your securities portfolio in electronic form in the same way a bank holds your
money. Besides holding securities, a depository also provides services related to
transaction and securities. The only difference is that it deals with securities in
electronic form and not in money. idbi bank a leading provider of innovative,
technology-driven products is offering Demat Account a unique, capital-market-
investor-oriented, depository service.
The Depositories Act defines a depository to mean “a company formed and registered
under the companies act, 1956 and which has been granted a certificate of registration
under sub-section (IA) of section 12 of the Securities and Exchange board of India
Act, 1992.”
DEPOSITORY PARTICIPANTS:
A depository interfaces with its investors through its agents called as DP. If any
investors want to utilize the services offered by a depository, the investor has to open
an account with DP.
The following can open a demat account (as per NSDL terminology)
-Individuals - Residents-ordinary, HUF’s, NRIs
-Corporate - Body Corporate-Domestic Companies.
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-Co-operatives, OCB’s, NBFC’s, Government Companies.
 The Depository - NSDL.

 The Depository Participant (DP) – Banks and NBFC’s.
 A Depository Product - Demat account.
OBJECTIVE:
The main objective of depository is to reduce settlement risk by minimizing the
paperwork involved in trading, settling and transferring securities.
NSDL- BANK- AN ANALOGY:

TABLE 3:
BANK NSDL
• Holds funds in accounts • Holds securities in accounts

• Transfers funds between • Transfer securities between
accounts accounts
• Transfers without handling • Transfers without handling
cash physical securities
• Safekeeping of money • Safekeeping of securities
SOURCE: NSDL Depository module 2003
In a bank the medium of exchange is money, whereas a depository deals in securities
in a bank money is given for safekeeping. In a depository, securities are kept safely.
Banks hold and transfer funds; depositories perform the same function with securities.
Banks can transfer funds from one account to other without handling cash; a
depository can do the same with physical securities. Just as in a bank an account is
opened to avail the banking services, an account has to be opened with a DP for
holding scrips in the depository segment.
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NSDL- BANK- THE DIFFERENCE:
TABLE 4:
BANK NSDL
• Either of holders can • All joint holders to sign

sign instructions instructions
• Minimum balance to be • No minimum balance
maintained required
• Entitled for interest • Interest can only be earned
by participating in Stock
Lending Scheme
• Uses balance in • Does not move balance in
accounts account without account
holders authorisation
• Nomination is kept • Signature and photograph
confidential of nominee to be provided
In case of transaction in a bank account, any one of the joint holders can sign the
instructions (cheques), whereas in the depository, all the joint holders are required to
sign all the instruction. Minimum funds balance by the bank has to be maintained in
the bank account; no minimum balance of securities is required to be maintained in a
depository account bank uses the funds held in a bank account for lending
purposes.the securities maintained in a depository account by an investor can be
moved from the account on the basis of a proper authorisation from the account
holder. A depository cannot use the client’s security balances.
20
ELIGIBILITY- DP:
Persons belonging to the following categories are eligible to become a DP
 A public financial institution as defined in section 4A of the Companies Act.
 A bank included for the time being in the Second Schedule to the Reserve
Bank of India Act, 1934.
 A foreign bank operating in India with approval of the RBI.
 A State Financial Corporation established under the provisions of section
3 of the State Financial corporations Act, 1951.
 An institution engaged in providing financial services, promoted jointly or
severally by any of the institutions mentioned in the four above mentioned
clauses.
 A custodian of securities who has been granted a certificate of registration
by SEBI.
 A clearing corporation or a clearinghouse of a stock exchange.
 A stockbroker who has been granted a certificate of registration by SEBI.
 Non-banking finances company.
 An R&T agent who has been granted a certificate of registration by SEBI.
STEPS FOR JOINING AS A DP:

 Entity eligible and desirous of becoming a DP makes an application to
NSDL.
 NSDL verifies the application for completeness and conformity to the
requirements. NSDL may reject, ask for further information and clarifications or
ask to remove the defects in the application.
 Upon satisfaction of the requirements, NSDL grants approval to the
application for recommendation to SEBI.
 Applicant is required to furnish details in the prescribed forms and procure
necessary hardware as per specifications issued by NSDL. Applicant is required
to provide the hardware set up information to NSDL in the prescribed forms.
Applicant establishes electronic connectivity with NSDL.
21
 NSDL forwards the application to SEBI for registration alongwith the
recommendation.
 SEBI reviews the application and if found satisfactory, grants the principle
approval.
 The DP pays the registration to SEBI within the stipulated period of 15
days. The DP also pays security deposits, insurance charges and other collateral to
NSDL. The DP and NSDL sign an agreement in the prescribed format.
 SEBI grants Certificate of Registration to the applicant.
 The DP pays the necessary registration fees, security deposits, insurance
fee and other collateral to NSDL as stipulated under the byelaws.
 The DP and NSDL sign an agreement in the prescribed format.
 NSDL activates the DP module at the applicants (now a DP) premises
 DP begins operation.
22
4.1.HOW IT WORKS?
FIGURE: 1
Depository System-Business Partners NSDL carries out its activities through various
functionaries called business partners who include 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 (VSATs) or through Leased
landlines. 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 Settlements & Transfer) system. NSDL is electronically linked to each
issuer company or its R&T agent. This dematerialisation, rematerialisation, daily
reconciliation and corporate actions. 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.
23
OPERATION CYCLE: The Daily operation at NSDL is as follows:
TABLE 5:
Beginning of day in process: This will be the first process for the day
Regular operations: This indicates the period during which
DP can perform operations for the
current business date.
Regular operations ended: After this situation, DP cannot verify
release any instructions with the
current date as the execution date.
DP can still verify –release future
dated instructions.
End of day in process: A pop –up message indicating “EOD in
progress” is also flashed on the
server.
Business ended: After EOD is completed, the status
changes to business ended.
NSDL business end time: This indicates the time after which EOD
will start from NSDL.
4.2.BENEFITS:
In the depository system, the ownership and transfer of securities takes place by
means of electronic book entries. At the outset, this system rids the capital market of
the dangers related to handling of paper. NSDL provides numerous direct and indirect
benefits, like: -
 Elimination of bad deliveries - In the depository
environment, once holdings of an investor are dematerialised, the question of bad
delivery does not arise i.e. they cannot be held "under objection". In the physical
environment, buyer was required to take the risk of transfer and face uncertainty
24
of the quality of assets purchased. In a depository environment good money
certainly begets good quality of assets.
 Elimination of all risks associated with physical
certificates - Dealing in physical securities have associated security risks of theft
of stocks, mutilation of certificates, loss of certificates during movements through
and from the registrars, thus exposing the investor to the cost of obtaining
duplicate certificates and advertisements, etc. This problem does not arise in the
depository environment.
 No stamp duty -for transfer of any kind of securities in the
depository. This waiver extends to equity shares, debt instruments and units of
mutual funds.
 Immediate transfer and registration of securities - In the
depository environment, once the securities are credited to the investors account
on pay out, he becomes the legal owner of the securities. There is no further need
to send it to the company's registrar for registration. Having purchased securities
in the physical environment, the investor has to send it to the company's registrar
so that the change of ownership can be registered. This process usually takes
around three to four months and is rarely completed within the statutory
framework of two months thus exposing the investor to opportunity cost of delay
in transfer and to risk of loss in transit. To overcome this, the normally accepted
practice is to hold the securities in street names i.e. not to register the change of
ownership. However, if the investors miss a book closure the securities are not
good for delivery and the investor would also stand to loose his corporate
entitlements.
 Faster settlement cycle -The exclusive demat segments
follow rolling settlement cycle of T+2 i.e. the settlement of trades will be on the
2nd working day from the trade day. This will enable faster turnover of stock and
more liquidity with the investor.
 Faster disbursement of non-cash corporate benefits like
rights, bonus, etc. - NSDL provides for direct credit of non-cash corporate
25
entitlements to an investor’s account, thereby ensuring faster disbursement and
avoiding risk of loss of certificates in transit.
 Reduction in brokerage by many brokers for trading
in dematerialised securities - Brokers provide this benefit to investors as dealing
in dematerialised securities reduces their back office cost of handling paper and
also eliminates the risk of being the introducing broker.
 Reduction in handling of huge volumes of paper
 Periodic status reports to investors on their holdings and
transactions, leading to better controls.
 Elimination of problems related to change of address
of investor, transmission, etc. - In case of change of address or transmission of
demat shares, investors are saved from undergoing the entire change procedure
with each company or registrar. Investors have to only inform their DP with all
relevant documents and the required changes are effected in the database of all the
companies, where the investor is a registered holder of securities.
 Elimination of problems related to selling securities on
behalf of a minor - A natural guardian is not required to take court approval for
selling demat securities on behalf of a minor.
 Lowest interest charge for loans against demat shares as
compared to the interest for loan against physical shares.
 Buyer is secured in the physical environment, seller was
secured since the sale proceeds were always fully realisable but the buyer was not
since it was not certain whether shares transferred or not. The market principle is
that the buyer is the king.
 NSDL has introduced a common Internet based
platform, SPEED –e for clients of all DPs so that client can issue instructions to
their DPs through Internet. Using SPEED-e the client need not write delivery
instructions or visit its DP for issuing instructions. Clients can monitor the status
of instructions given by them on SPEED-e on Internet.
 Convenient consolidation of accounts, if multiple
accounts were opened by investors, all accounts can be consolidated into one
26
account by giving instructions to DP. In case of physical certificates,
consolidation of folios required correspondence with all the companies
individually.
 Newer services, opportunities like pledge/hypothecation
and stock lending are given specifically by the depository system.
4.3.CORPORATE ACTIONS:
FEATURES:
Corporate actions are benefits given by a company to its investors. These may be
either monetary benefits like dividend, interest or non-monetary benefits like bonus,
rights, etc. NSDL facilitates distribution of corporate benefits.
Monetary benefits (dividends etc):
NSDL will give the beneficiary ownership details to the Issuer/R & T Agent. The
Issuer/R & T Agent will carry out the necessary processing and the distribution of
such benefits will be outside the system.
Non-monetary benefits (rights bonus etc): NSDL will give the beneficiary
ownership details to the Issuer/ R & T Agent. The Issuer/R & T Agent will carry out
the necessary processing and upload the beneficiary ownership details to NSDL.
NSDL will then credit the beneficiary owners' accounts by downloading the data to
the DPs.
PROCEDURE IN CASE OF CASH CORPORATE ACTIONS:

NSDL will inform the DPs about the record date/book closure as announced by the
Issuer for the corporate action. NSDL will also inform the DPs about the no-delivery
period as announced by the Clearing Corporation / clearinghouse and the procedure to
be followed thereof through a circular. On receipt of information about the book
closure/record date, the DP will take care:
 To update the changes in tax status, bank details, change of
address etc. in the beneficial owners' accounts well in advance of the book
closure/record date.
27
 To clear positions in all the clearing accounts by transferring the
relevant securities to relevant beneficiary accounts well in advance of the book
closure/record date. The balances lying in the Clearing Accounts are reported to
Issuer/R&T agent as transit account position.
NSDL will provide the details of the beneficial owners and their holdings on the
business day prior to commencement of book closure to the Issuer/R&T agent. The
Issuer/R&T agent will distribute dividend, interest and other monetary benefits
directly to the beneficial owners on the basis of list provided by NSDL.
PROCEDURE IN CASE OF NON- CASH CORPORATE ACTIONS

NSDL will inform the DPs about the record date/book closure as announced by the
Issuers for the corporate actions. NSDL will also inform the no-delivery period as
announced by the Clearing Corporation / clearinghouse and the procedure to be
followed thereof by issuing a circular. On receipt of information about the book
closure/record date, the DP will take care:
 To update the changes in tax status, bank details, change of address
etc. in the beneficial owners accounts well in advance of the book closure/record
date.
 To clear positions in all the clearing accounts by transferring the
relevant securities to relevant beneficiary accounts well in advance of the book
closure/record date. The balances lying in the Clearing accounts will be reported
to Issuer/R&T agent as transit account position.
NSDL will provide the details of the beneficial owners on the business day prior to
commencement of book closure to the Issuer/R&T agent. The Issuer/R&T agent will
provide an option to the shareholders to be allotted securities either in physical or
electronic form. The investors who opt for electronic securities will indicate the DP Id
and the beneficial owner account number in the form and send it to the Issuer/R&T
agent. If investor does not make any choice of form in which these corporate benefits
are to be received, then the Issuer/R & T Agent will issue securities in the form in
which the investor holds original securities. Even the investors who hold original
shares in physical form can opt for corporate benefits in demat form. The Issuer/R&T
28
agent will provide allotment details and the date on which the necessary credit entries
are to be made in the accounts of the beneficial owners (referred to as execution date)
to NSDL. NSDL will perform the necessary bookings and the relevant credit entries
are booked in the DPM on the execution date.
The DP will give the statement of holdings and transaction statement to the beneficial
owners, giving the updated positions after the corporate action.
PRECAUTIONS:
Investor must ensure that securities purchased by him are transferred to his account
from the brokers pool account before the record date or book closure date. This
facilitates receipt of corporate actions directly without any problem.
The investor who holds securities in physical form or requires securities in a different
account or who acquires rights from original holder and opts for non-cash corporate
benefits (bonus, rights issue etc) in demat form must correctly indicate his client-Id,
DP name and DP-Id to ensure that his non-cash corporate benefits are electronically
credited into his account. The investor must also ensure that the name in which the
depository account has been opened matches with the name appearing in the records
of the issuer/ registrar.
4.4.DIVIDEND DISTRIBUTION:
At present, NSDL merely facilitates distribution of cash corporate benefits like
dividend etc., to shareholders. Details in respect of all beneficial owners of the
security as on the record date of the concerned company are provided by NSDL to the
company/ its registrar and share transfer agent (R & T agent). Thereafter, the
company/ R & T agent dispatches dividend entitlements to the eligible beneficial
owners in the same way as is done for shareholders holding physical certificates
NSDL intends to extend the service of distributing cash benefits directly to beneficial
owners.
ADVANTAGES:
 Issuer will be giving single cheques to NSDL.
29
 Savings in administrative cost for printing of paper instruments in MICR format
and dispatching by registered post.
 Loss of instrument in-transit and fraudulent encashment thereof can be totally
eliminated.
 Effortless receipt for investor - no need to visit the bank for depositing the
warrant.
 Reconciliation will be smooth.
 Investor grievances will be handled by NSDL.
 Issuer can ensure better investor service.
DIVIDEND DISTRIBUTION SCHEME OF NSDL:s

The Issuer will execute an agreement with NSDL for the purpose of dividend
distribution and furnish to NSDL details of the dividend payment. The Issuer will
write to the shareholders holding demat shares intimating them that NSDL's Dividend
Distribution Scheme for direct distribution of dividend will be used and give them an
opportunity to update their bank details with the DP. This should happen atleast one
month before the dividend distribution so that modifications/ corrections will get
updated in the beneficiary position (benpos) of the record date.
 The bank details given by the beneficial owners to their DPs at
the time of account opening or as updated later, will be used for crediting the
dividend.
 As per the bank details available, the dividend amount will be
credited directly into the account of the shareholder using ECS (of RBI) or direct
payment into the account. Direct deposit method will be used for crediting
dividends for institutional investors. Wherever ECS is being used, NSDL/Bank
will enter MICR code using bank details furnished by the beneficial owner.
 NSDL will be taking the services of a Bank for distributing
dividend to the beneficial owners.
 The Issuer will give to NSDL, the benpos download file of
shareholders who are eligible to receive the dividend.
 The Issuer shall give a single cheque to NSDL for the whole
amount of dividend payable to the shareholders holding shares in dematerialised
form to which NSDL will be distributing the dividend.
30
 On scrutinising the beneficiary positions data received from the
Issuer, NSDL will return those records to the Issuer for which NSDL cannot
distribute the dividend owing to insufficient bank details, the number of beneficial
owners in a center being very low or for any other reason. The Issuer shall issue
dividend warrants to these shareholders directly.
 The Issuer will intimate the details of credit of dividend amount
given directly in the bank account of the beneficial owners.
 NSDL will return to the Issuer those records for which the
credits failed due to wrong account nos. being given by the client, the account
being no longer operational or due to any other reason.
 On completion of the dividend distribution process, NSDL will
issue a certificate to the Issuer stating the same.
OPENING DEMAT A/C? ALSO LOOK FOR TRUSTWORTHINESS:

35The paperless mode of share transfer, via demat accounts, has become the order of
the day. With most of the shares of the top companies trading only in demat mode,
having a demat account has become a necessity for equity investors. If a person is
planning to open a demat account should look for effectiveness, trustworthiness and
convenience. The key lies in choosing a DP that is economical, gives trading pattern,
without compromising on serviceDemat costs are very important for an investor, as it
has a bearing on overall portfolio returns. Demat costs could broadly be segregated as
initial and recurring charges. Initial charges are by way of account opening charges
and demat charges. All these are one-time charges.
While the initial charges are more or less the same, the recurring charges are crucial.
They refer to transaction and custody charges. Transaction charges are levied on a per
transaction basis and as a percentage of trade value, or as a flat amount, whichever is
higher. And it is levied separately for buy and sell transaction with minimum charge
riders Assume 100 shares of A and B worth Rs.10000, are purchased and the
respective DP is charging .04% of trade value for a buy. This would apparently lead
to a minuscule transaction charge of Rs.4.but there is also a minimum charge clause
31
of Rs.25, which makes a person payRs.21 more per transaction, hence the cost works
out to be .25%, which is very high for a small investor. Though some brokers might
claim to waive these charges altogether, i.e. adjusted in the broking charges.
If an investor, invests and sells in small amounts frequently then his transaction
cost would be higher. The solution is to look for a DP, who charges only on a
percentage basis. If the investor is a big investor then he can look for a DP who
charges a flat fee regardless of transaction size. There are also the custody charges, a
flat charge levied by the DP as a cost of maintaining records. In market the charges
are referred as per ISIN (International Security Identification Number) per month. So
if a person were holding around 30 shares, at the rate of rs.1 per ISIN per month,
monthly charges would work out to rs30. Ensure that the respective DP does not
charge high custody charges.
While cost is important, ensure that don’t compromise on trustworthiness,
convenience and service factor. To tackle this issue, avoid DPs of unknown
credibility, even where the cost structure appears to be the lowest. Secondly, ensure
that the DP has robust infrastructure in place to meet the pay-in-deadlines, send
statement on time and process efficiently, client request like changes of address or
bank details. A 24-hours call center and dedicated help desk at a branch near your
residence should also help save on legwork.
5.SERVICES:
5.1.DEMATERIALISATION:
It is the process by which physical certificates of an investor are converted to an
equivalent number of securities. In order to dematerialise the certificate, an investor
will have to first open an account with a DP and then request for the dematerialisation
of his certificates by filling up a dematerialisation request form (DRF), which is
available with his DP and submit the same along with the physical certificates.
Share certificates, which are registered in your name and belong, to list of securities
admitted for dematerialisation at NSDL can only be dematerialised.
The share certificates that have been send for transfer can also be dematerialised the
scheme is applicable for those companies, which have agreed to institute some
additional procedures. The dematerialised shares do not have any distinctive or
certificate numbers any odd lot of shares can be dematerialised. Dematerialised
32
normally takes about fifteen days. However, this may extend it about 30 days if the
number of certificates submitted is very large.
Demat rejection causes great inconvenience to the client. DP should attend to this
area with care and caution. One of the important reasons for rejection is signature
mismatch.
The following precautions should be taken:
 If the client is aware that the signature with the company and signature of
the client at the time of opening the account vary significantly, the client should
be advised to register the new signature with the company before demat is
initiated.
 If the signature is slightly different, client should be advised to sign as per
the signature that was recorded by the company and as recorded with the DP.
 Ensure dispatch of DRFs and certificates to R&T agents within seven
days.
 Clients may be encouraged to use the Transfer cum demat facility if it is
offered by the company.
 In case of joint holdings, the clients should be informed about the
availability of transposition cum demat facility.
5.2.REMATERIALISATION:
It refers to converting the electronic securities back to physical form by requesting
your DP for rematerialisation. Your DP will forward your request to NSDL and will
intimate the registrar who will print the certificates and dispatch the same. U may or
may not be allotted a certificate with the same distinctive certificate numbers. U will
be allotted a new folio number and if u has an existing folio number, you may be
allotted the same.
5.3..DELIVERY/RECEIPT:
Sale and purchase through your broker is done in usual manner. A Delivery
Instruction Slip (DIS) is an instruction of delivery. Fill DIS and execution date. DP is
not responsible for any monetary transaction between the clients and the broker. For
purchase, instruct your broker to credit the shares to your demat account with your
DP. For this one has to give demat account number and the bank DP ID to the broker.
Your account will automatically be credited on the execution date
5.4.FREEZE/DEFREEZE:
33
Account freezing means suspending any further transaction from the depository
account till the account is de-frozen. A depository account maintained with a DP can
be frozen if the DP receives a written instruction in prescribed form from the client. A
frozen account can be de-frozen or re-activated if the client submits written
instruction in prescribed form to the DP. You have an option of freezing / defreezing
the operations in your account or restricts operations for debits only. In the form
correctly mention your demat account number. For revoking, freeze the same form as
it has a defreeze option too.
5.5.PLEDGE:
One also have the option of pledging your demat shares and availing of a loan
facility. The loan against share facility is available at very attractive interest rates.
Both the pledgor (you) and the pledgee (lender) must have depository account and the
details of the securities to be pledged should be submitted in a standard format. The
pledgee should confirm the request through his DP. Once this is done your securities
are pledged. Even after repay of loan, one can request for a closure of pledge by
instructing your DP through a standard format. The pledgee on receiving the
repayment as well as the request for closure of pledge will instruct DP.
FEATURES:
Securities held in a depository account can be pledged/hypothecated to avail of
loan/credit facility. Pledge of securities in NSDL depository requires that both the
borrower (pledgor) and the lender (pledgee) should have account in NSDL depository.
The pledge/hypothecation transactions go through the following procedures:

Pledge/hypothecation creation
Pledge/hypothecation closure
Pledge/hypothecation invocation
34
PLEDGE CREATION:
 Once the DP is satisfied at the application stage he will initiate a
pledge creation.
 Furnish the pledge / hypothecation form (Supplied with the
opening kit).
 A pledge will be created on dematerialised shares, units in
favour of your DP.
 Your pledged shares will be valued based on the current market
price. In case of units of Mutual Funds valuation will be lower of the NAV,
repurchase price or current market price.
 Applying the prescribed margin on the market value of
shares/units as mentioned above will arrive at drawing power.
 You will have to furnish the documents duly executed.
 You can avail of your loan through an overdraft facility granted
at interest payable every quarter.
 You will have to pay upfront the applicable processing fee.
MONITORING STAGE:
 Your portfolio will be valued periodically, and your drawing
power will vary, depending on the market rate of shares pledged.
 In case the value of the securities comes down resulting in
reduction of margin from the prescribed level, you will have to furnish additional
securities / shares or make cash payment so as to bring down the outstanding
amount to the drawing power.
 The DP reserves the right to invoke your pledge and sell of the
securities in case of failure in replenishing the security or bringing down the
outstanding.
 The status on your pledged shares will be given to you on a
fortnightly basis.
35
PROCEDURE FOR CREATION OF
PLEDGE/HYPOTHECATION BY THE PLEDGOR:
 The pledgor will submit an instruction to its DP to initiate a pledge/hypothecation
request in the DPM (software provided by NSDL to the DP) indicating the option
'create a pledge/hypothecation' in the pledge/hypothecation form. The pledgor
will indicate therein, the agreement number, closure date of the
pledge/hypothecation (this date is indicative of the duration of
pledge/hypothecation), pledgee's details, and the details of securities to be
pledged.
 The DP will check for the completeness of the form. The DP has to ensure that
symbols like '-', '{‘, '}', '[', ']', and ':' should not be the first character of the
agreement number and that the securities requested to be pledged exist in the
pledgor's account. If not so, the DP will return the same to the pledgor for
rectification.
 If the form is complete in all respects, the DP will accept the form for processing
and issue an acknowledgment for the same to the pledgor.
 The DP will enter the details of the request in the DPM, generate a
pledge/hypothecation instruction number for the request and release the request to
NSDL.
 The securities pledged are moved from 'Free balances' to 'Pledged balances'
account. Thus the securities pledged will not be available to pledgor for any other
purpose.
 The DP shall write the pledge/hypothecation instruction number on the
pledge/hypothecation form and intimate the same to the pledgor.
 The details of the pledge/hypothecation are electronically communicated to the
DPM of pledgee's DP through the DM for confirmation.
PROCEDURE FOR CONFIRMATION OF CREATION OF

PLEDGE/HYPOTHECATION BY THE PLEDGEE:
 The pledge/hypothecation request will be displayed on the DPM of pledgee's DP.
36
 The pledgee's DP will furnish the details of the pledge/hypothecation requests
received for confirmation to the pledgee through the report generated by the
DPM.
 The pledgee will submit an instruction to its DP to accept/reject the
pledge/hypothecation request by indicating the option 'confirm the creation of
pledge/hypothecation' in the pledge/hypothecation form.
and issue an acknowledgment for the same to the pledgee.
 The DP will compare the details on the form with that of the details as shown by
the DPM against the pledge/hypothecation instruction number.
 The DP will execute the order for accepting/rejecting the pledge/hypothecation
request in the DPM as per the instructions given in the form.
 In case of rejection by the pledgee, the DP will enter the rejection reason in the
DPM as specified in the form.
 The acceptance/rejection of pledge/hypothecation confirmation is electronically
communicated to the DPM of the pledgor's DP through DM.
 Acceptance of the creation of pledge/hypothecation will appear in the DPM of the
pledgor's DP and pledgee's DP as a status change. Status of the
pledge/hypothecation instruction will change to "Pledged".
 In case of rejection by the pledgee, the bookings performed at the time of
initiation of creation of the pledge/hypothecation instruction will be reversed and
the securities will be debited from the pledged balances of the pledgor and
credited to its free/locked-in balances. The reasons for rejection are displayed in
the DPM of the pledgor's DP.
 The pledgor's DP cannot cancel the pledge/hypothecation order after confirmation
of creation of the pledge/hypothecation by the pledgee.
 The pledgee's DP cannot confirm the creation of pledge/hypothecation after the
closure date.
37
PLEDGE OF DEMAT SHARE:
FIGURE: 2
NSDL
333
3 4 5 2 DP
PLEDGOR’S
PLEDGEE’S DP
D’S DP
PLEDGEE’S DP
PLEDGEE’S DP
4
3 CONFIRMATION REQUEST
2
PLEDGEE AGREEMENT PLEDGOR
1
LOAN
6
STEPS:
1. Agreement is signed between the pledgor and pledgee outside the NSDL system.
2. Pledgor gives a pledge creation request to DP who enters it in the system.
3. The request reaches the pledgee’s DP through the NSDL system. Its DP intimates
pledge.
4. Pledgee gives the pledge creation confirmation to his DP who enters it in the
system.
5. Securities are transferred from ‘free balances’ head to ‘pledged balances’ head.
6. Pledgee gives loan to pledgor outside the NSDL system.
PLEDGE CLOSURE:
 You can liquidate your overdraft facility any time by paying your
outstanding in full
 You will have to fill up the Pledge / Hypothecation form and mark closure.
38
PROCEDURE FOR CLOSURE OF A PLEDGE/HYPOTHECATION BY
THE PLEDGOR:
 After the pledgor repays the loan to the pledgee, the pledgor will submit an
instruction to its DP to initiate the closure of pledge/hypothecation by indicating
the option 'close the pledge/hypothecation' in the pledge/hypothecation form.
and issue an acknowledgment for the same to the pledgor.
 The DP will enter the closure request details in the DPM against the
pledge/hypothecation instruction number as per the instructions given in the form
and verify/release the instruction to NSDL.
 The details of the pledge/hypothecation closure request are electronically
communicated to the DPM of pledgee's DP through the DM for confirmation.
 Reasons for rejection can be as:
 Closure date not accepted.
 Pledged quantity not accepted.
 ISIN not accepted.
 Market value of pledged ISIN’s insufficient.
 ISIN delisted from trading.
 Holders not acceptable to the pledgee.
 Agreement number differs from that on the agreement.
PROCEDURE FOR CONFIRMATION OF

PLEDGE/HYPOTHECATION CLOSURE REQUEST BY THE
PLEDGEE:
 The pledge/hypothecation closure request will be displayed on the DPM of the
pledgee's DP.
39
 The pledgee's DP will furnish the details of the pledge/hypothecation closure
requests received for confirmation to the pledgee through a report generated by
the DPM.
 The pledgee will submit an instruction to its DP to accept/reject the
pledge/hypothecation closure request by indicating the option 'confirm the closure
of pledge/hypothecation' in the pledge/hypothecation form.
 The DP will execute the order for accepting/rejecting the pledge/hypothecation
closure request in the DPM as per the instructions given in the form.
 In case of rejection by the pledgee, the DP will enter the rejection reason in the
 The acceptance/rejection of pledge/hypothecation closure confirmation is
electronically communicated to the DPM of the pledgor's DP through DM.
 Acceptance of the closure of pledge/hypothecation will appear in the DPM of the
pledgor's DP and the pledgee's DP as a status change. Status of the
pledge/hypothecation instruction will change to "Partially Closed" or "Closed,
Settled" and the securities accepted for closure will be debited from the pledged
balances of the pledgor and credited to its free/locked-in balances.
 In case of rejection by the pledgee, the securities will continue to remain as
pledged balances in the pledgor's account. The reasons for rejection are displayed
in the DPM of the pledgor's DP.
PLEDGE CLOSURE:
FIGURE: 3
NSDL
333
40
2 3 4 2
PLEDGEE’S DP PLEDGOR’S DP
2 CONFIRMATION CLOSURE REQUEST

3 2
PLEDGEE PLEDGOR
REPAYMENT
STEPS:
1. Pledgor repays the loan to pledgee.
2. Pledgor gives a pledge closure request to his DP. DP forwards the request
to pledgee’s DP through NSDL.
3. Pledgee gives a pledge closure confirmation form to DP.DP confirms the
closure on the system.
4. The pledge is closed and the securities are moved from ‘pledged’ balances
to free balances in the pledgor’s account.
PROCEDURE FOR INVOCATION OF PLEDGE/

HYPOTHECATION BY THE PLEDGEE:
 In case of default by the pledgor in repaying the loan to the pledgee, after taking
such steps as may be necessary as per the terms of the underlying agreement with
the pledgor and the Bye Laws & Business Rules of NSDL and SEBI Regulations,
the pledgee will submit an instruction to its DP to initiate a pledge/hypothecation
invocation by indicating the option 'invoke the pledge/hypothecation' in the
pledge/hypothecation form.
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 The DP will enter the invocation request details in the DPM against the
pledge/hypothecation instruction number as per the instructions given in the form
and verify/release the instruction to NSDL.
 The details of the hypothecation invocation request are electronically
communicated to the DPM of pledgor's DP through the DM for confirmation.
 In the case of invocation of a pledge, the securities are transferred from the
pledged balances of the pledgor to the pledgee's beneficial owner account. The
intimation of the same travels to the pledgor's DP through DM and the status of
the pledge are changed to "closed, invoked".
 Locked-in securities cannot be invoked before the lock-in release date.
PROCEDURE FOR CONFIRMATION OF HYPOTHECATION

INVOCATION REQUEST BY THE PLEDGOR:
 The hypothecation invocation request will be displayed on the DPM of the
pledgor's DP.
 The pledgor's DP will furnish the details of the hypothecation invocation requests
received for confirmation to the pledgor through a report generated by the DPM.
 The pledgor will instruct its DP to accept/reject the hypothecation invocation
request by indicating the option 'confirm the invocation of hypothecation' in the
pledge/hypothecation form.
 The DP will check for the completeness of the form. If the form is incomplete, the
DP will return the same to the pledgor for rectification.
 In case the form is complete in all respects, the DP will accept the form for
processing and issue an acknowledgment for the same to the pledgor.
the DPM against the hypothecation instruction number.
 The DP will execute the order for accepting/rejecting the hypothecation
invocation request in the DPM as per the instructions given in the form.
 In case of rejection by the pledgor, the DP will enter the rejection reason in the
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 The acceptance/rejection of hypothecation invocation confirmation is
electronically communicated to the DPM of the pledgee's DP through DM.
 Acceptance of invocation of hypothecation will appear in the DPM of the
pledgee's DP and the pledgor's DP as a status change. Status of the hypothecation
instruction will change to "Closed, Invoked" and the securities are transferred
from the pledged balances of the pledgor to the pledgee's beneficial owner
account.
 In case of rejection by the pledgor, the securities will continue to remain as
pledged balances in the pledgor's account. The reasons for rejection will be
displayed in the DPM of the pledgee's DP.
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PLEDGE INVOCATION:
FIGURE: 4
NSDL
333
3 2 2 3
PLEDGEE’S DP PLEDGOR’S DP
3 INVOCATION ORDER 4
PLEDGEE PLEDGOR
NOTICE
1
STEPS:
1. On repayment default, pledgee sends an invocation notice to pledgor.
2. Pledgee submits a pledge invocation request to DP. DP forwards the
request to the pledgor’s DP through the NSDL system.
3. Securities move automatically from pledgor’s account to pledgee’s
account through the NSDL system.
4. His DP informs pledgor of the movement of securities.
CORPORATE BENEFITS FOR PLEDSED / HYPOTHECATED

SECURITIES:
Ownership of the pledged/hypothecated securities remains with the pledgor until the
pledge is invoked. Hence, all corporate benefits-cash and noncash-like dividends,
bonus, rights etc., will accrue to the borrower. Dividends will be given to the
44
borrower in the usual manner and bonus shares will be credited to his account as
pledged balances.
CHECKLIST FOR PLEDGE/HYPOTHECATION:

DP should take care the following points:
 Ensure that the instruction form is submitted in duplicate.
 Enough balance should be there in pledgors account to effect the creation
of pledge.
 All compulsory fields in the instruction form are entered.
 The request for confirmation of pledge is given before the closure
date mentioned in the instruction form.
STATEMENT OF ACCOUNTS:
It will be made available to you on a fortnightly basis, if there is any transaction.
Also, it can be requested at any time other than regular frequency, at a marginal cost.
In case there is no transaction in the demat account, the Statement of Holdings will be
received on quarterly basis
VALUATION:
Your entire portfolio of securities held in the demat account is valued at the latest
available prices in the Stock Exchange.
TRANSFER -CUM-DEMAT:
Fill in the transfer-cum-demat form and submit it along with option letter.
5.6.TRANSPOSITION:
In case of transposition-cum-dematerialisation, the client can get the securities
dematerialised in the same account if the names appearing on the certificates match
with the names in which the account has been opened but are in different order, by
submitting the security certificates along with the Transposition form and the
45
Dematerialisation Request Form (DRF) to the DP.
5.7.TRANSMISSION:
The Companies Act distinguishes transmission of shares from transfer of shares.
While transfer of shares relates to a voluntary act of the shareholder, transmission is
brought about by operation of law. The word 'transmission' means devolution of title
to shares otherwise than by transfer, for example, devolution by death, succession,
inheritance, bankruptcy, marriage, etc. While transfer of shares is brought about by
delivery of a proper instrument of transfer (viz., transfer deed) duly stamped and
executed, transmission of shares is done by forwarding the necessary documents
(such as a notarised copy of death certificate) to the company. On registration of the
transmission of shares, the person entitled to transmission of shares becomes the
shareholder of the company and is entitled to all rights and subject to all liabilities as
such shareholder. In case the deceased shareholder had holdings in different
companies, then in order to effect transmission of shares for these shares, the relevant
documents must be sent to each of the companies, along with the share certificates.
This results in a heavy reliance on the postal system. Follow-up may have to be made
with each of the companies in order get the transmission effected before the book
closure, if the survivor(s) wishes to avail of the benefits accrued through these shares.
TRANSMISSION OF SECURITIES IN THE DEPOSITORY

SYSTEM:
In the depository system, all these problems are mitigated, as the shares are account
balances in the electronic form. The process of transmission through the depository is
not only simple but it is also quicker. This is because the successor to the title
interacts only with one entity - his DP.
Transmission of Securities held jointly:

In case the deceased was one of the joint holders, then the surviving holders have to
request the DP vide a form called the transmission form along with a copy of
notarised death certificate to transmit the securities lying in the account of the
deceased to the account of the surviving holders. For this purpose, the surviving
clients must have a depository account, which can be with the same DP or with a
46
different DP.
Transmission of Securities held singly:

In case of death of the sole holder, the legal heir(s) or legal representative(s) of the
deceased must request the DP to transmit the balances lying in the Client account of
the deceased to the account of the legal heir(s) or legal representative(s). For this, the
legal heir (s) or the legal representative(s) of such securities must submit an
instruction called the transmission form to the DP along with the following
documents:
 A copy of the death certificate duly notarised
 A copy of the Succession certificate duly notarised or an order of a court of
competent jurisdiction where the deceased has not left a Will; or
 A copy of the Probate or Letter of Administration duly notarised.
However, if the legal heir(s) or the legal representative(s) express inability to produce
either of the documents mentioned under (b) and (c) above, and the market value of
the securities held in each account of the deceased as on the date of application for
transmission does not exceed Rs. one lakh, then the DP will process the transmission
request on the basis of the following documents:
 Transmission form;
 Copy of the death certificate duly notarised;
 Letter of Indemnity duly supported by a guarantee of an independent surety
acceptable to the DP, made on appropriate non-judicial stamp paper;
 An Affidavit made on appropriate non judicial stamp paper
 No Objection Certificate(s) from all the legal heir(s) who do not object to such
transmission.
The DP will ensure that the documents submitted by the legal heir(s) or the legal
representative(s) are in order and will then affect a transfer of the balances to the
Client account of the legal heir(s) or the legal representative(s). After effecting the
transmission, the DP will close the account of the deceased.
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Transmission of Securities in case of Nomination:
The nomination facility for shares is provided by amendment in Companies Act 1956.
The clients can avail of this facility by furnishing duly filled Form for Nomination
available with their DPs. This form contains photograph of the nominee and the other
details of the nominee, which help DPs to identify and give effect to the nomination
given by the clients.
INTER-DEPOSITORY TRANSFERS:
Transfer of securities from an account in one depository to an account in another
depository is termed as an inter-depository transfer. This facility is quite similar to the
account transfers within NSDL. It can be done only for securities that are available
for dematerialisation on both the depositories. The account in NSDL can be either a
clearing account or a beneficiary account. For debiting the clearing account or the
beneficial account with NSDL, the form for "Inter-depository delivery instruction" is
required to be submitted by the clearing member/beneficial owner to its DP. For
crediting the clearing account or the beneficial account, the standing instruction given
for automatically crediting the account is applicable. In case the standing instructions
are not given, then the form for "Inter-Depository Receipt Instruction" is required to
be submitted by the clearing member/beneficial owner to its DP. As both the
depositories are connected to each another, the batches to effect inter - depository
transfers are presently exchanged on each working day.
Online transfer of inter depository instructions has commenced w.e.f December 14,
2002. In the online inter depository transfer (OLIDT) module, Inter Depository
Transfer instructions for the day will be exchanged online between the two
depositories. Thus, the instructions executed by DPs may get settled at shorter
intervals. Both the depositories inform the Issuer/Registrar & Transfer Agent about
the transfer and it amends its records accordingly. Government securities cannot be
transferred from one depository to another using this facility.
48
5.8.OFF - MARKET TRANSFERS:
Trading in dematerialised securities is quite similar to trading in physical securities.
The major difference is that at the time of settlement, instead of delivery/receipt of
securities in the physical form, the same is affected through account transfers.
FEATURES:
Trades, which are not settled through the Clearing Corporation/ Clearing House of an
exchange, are classified as "Off Market Trades". Negotiated trades and trade-for-
trades which are not cleared and settled through the Clearing Corporation/ Clearing
House, by this definition, are off-market trades.
49
Procedure in case of an Off-Market Transfer Involving Two Clients:
FIGURE: 5
The selling client will have to give a delivery instruction to his DP to transfer
securities from his depository account to the buying client's depository account. To
receive securities from the selling client’s depository account, the buying client must
give a receipt instruction if he has not already given a standing receipt instruction to
his DP.
PRECAUTIONS:
For a transfer of securities to be effected from one account to another, details
mentioned in the "delivery" and "receipt" instructions need to match. Investors need
to be especially careful with respect to the "execution date" mentioned in the two
forms. The transfer would be rejected if there is a mismatch in this regard even if all
50
other details in the two forms match. In case the buyer has already given a standing
receipt instruction to his DP, this may be ignored.
5.9..MARKET TRANSFERS:
Trading in dematerialised securities is quite similar to trading in physical securities.
The major difference is that at the time of settlement, instead of delivery/receipt of
securities in the physical form, the same is affected through account transfers.
FEATURES:
Trades that are settled through the Clearing Corporation/ Clearing House of an
exchange are classified as "Market Trades".
51
Procedure in Case of Market Transfer for Retail Investors:
FIGURE: 6
In the diagram, the selling client and clearing member1 have their respective accounts
with DP1 and the buying client and clearing member2 have their respective accounts
with DP2. DP1, DP2 and the Clearing Corporation/ Clearing House have on line
electronic connectivity with NSDL. The following paragraphs, explain the flow of
securities to effect settlement of a market trade:
Step-1: Seller gives delivery instruction to DP1 to debit his account and transfer
securities to "Clearing Member1 Pool A/c" with DP1. [Clearing Member1 gives
corresponding receipt instruction to DP1 to accept in his clearing account securities
52
transferred by seller through DP1 if he has not already given standing receipt
instruction for all credits into his clearing account.]
Step-2: Securities are transferred from "Selling Client A/c" to "Clearing Member1
Pool A/c" with DP1.
Step-3: Clearing Member1 gives delivery to CC instruction to DP1 to debit his
"Clearing Member1 Pool A/c" and credit his "Clearing Member1 Delivery A/c". The
transfer will take place on the "execution date" mentioned in the instruction. Delivery
to CC instruction to be given as per final/ net delivery obligation.
Step-4: Securities lie in the "Clearing Member1 Delivery A/c" till settlement day. At
the time of pay-in, securities lying in "Clearing Member1 Delivery A/c" are
automatically flushed to the Clearing Corporation/ ClearingHouse. No debit
instruction is needed for this transfer. The deadline time for pay-in of securities to the
Clearing Corporation/ Clearing House may vary from one exchange to another.
Step-5: At the time of payout securities are transferred from the Clearing
Corporation/ Clearing House to "Clearing Member2 Receipt A/c" with DP2. No
credit instruction is needed because this transfer is automatic.
Step-6: Securities are transferred from "Clearing Member2 Receipt A/c" to "Clearing
Member 2 Pool A/c". Receipt account of clearing members is purely a transit account
for maintaining audit trail.
Step-7: - Clearing Member2 gives a delivery instruction to DP2 to debit his "Clearing
Member 2 Pool A/c" and credit "Buying Client A/c" with DP2. [Buyer gives
corresponding receipt instruction to DP2 to accept in his account securities
transferred from "Clearing Member2 Pool A/c" through DP2 unless he has not given
a standing instruction to receive credits to his account.] Note: - Funds are not handled
by NSDL. Clearing Member2 obtains cheques from buyer and gives it to the Clearing
Corporation/ Clearing House. Only after clearing bank clears the cheques, the
Clearing Corporation/ ClearingHouse allows credit of securities to clearing member2
and thereafter, communicates the match to NSDL.
Step-8: - Securities are transferred to "Buying Client A/c" from "Clearing Member2
Pool A/c" with DP2. Note: Until the clearing member gives delivery instruction, the
securities will remain in his "Pool A/c". However, if they are not transferred to a
53
"Beneficial Owner A/c", the securities will not be eligible to any corporate benefits
like bonus, dividends, etc.
Precautions:
 For a transfer of securities to be effected from one account to another, details
mentioned in the "delivery" and "receipt" instructions need to match. Investors
need to be especially careful with respect to the "execution date" mentioned in the
two forms. The transfer would be rejected if there is a mismatch in this regard
even if all other details in the two forms match. However, if standing instruction
facility for receipt has been activated, this may be ignored.
 Investors need to be careful with respect to the pay-in deadline. While the selling
client fills the delivery form, he must take care to Strike off the portion for 'For
Off-Market Trades (Receiver Details)' and fill up all other details completely.
Ensure that only delivery instruction form given by the DP having the pre-printed
serial no. is used. Do not use the form belonging to another client. If the client
uses loose delivery instruction slips, he should obtain it directly from his DP after
proper identification. Ensure that his Client ID and DP's 'DP ID' is available on
the form. This would be printed/stamped by his DP. Writes the CM-BP-ID, name
of the clearing member, market type and settlement number as given by the
clearing member in the portion 'For Market Trades (Receiver Details)'.
 Write the ISIN of the security, which is to be transferred. This ISIN will be
available in the statement of account received from the DP giving details of the
security holding.
 Write the security name as it appears in the statement of account.
 Write the quantity both in figures and words.
 Execution date is the date on which the transfer should take place. The clearing
member should on or before the delivery date prescribe this.
54
PROCEDURE FOR INTER SETTLEMENT TRANSFERS:
In a clearing account, the securities are always kept in a bucket of specific market
type and settlement number. Hence, the clearing member may have to move securities
from one bucket with a different market type-settlement number combination to
another bucket from where pay-in is to be affected. To effect this movement a
clearing member can give an instruction to move securities from one settlement to
another settlement. For e.g., 100 shares of INE002A01018 (Reliance Limited) can be
transferred from Market Type Physical Settlement Number 1999048 to market type
Rolling Settlement Number 1999251.
PROCEDURE:
Step-1: Clearing Member gives "inter settlement instruction" to his DP. The
instruction should clearly indicate the market type & settlement no. from which the
securities are to be moved and the market type & settlement no. to which the
securities are to be moved. Please note that, securities can be transferred only to a
settlement whose deadline for pay-in is not complete. In other words, it means that
securities can be transferred only to a current or future settlement and not to an old
settlement.
Step-2: The DP will ensure that the instruction slip is complete & the signature of the
CM is valid.
Step-3: The DP will execute the instruction & securities will be moved within the
pool a/c of the CM as per the instruction.
PROCEDURE FOR CM POOL TO CM POOL TRANSFERS:

A Clearing Member can transfer securities from its account to any other Clearing
Member’s account of any stock exchange connected to NSDL.
Step-1: - Clearing Member gives "CM Pool to CM Pool Delivery Instruction" to his
DP to debit its Pool account and credit the Pool account of another Clearing Member.
The instruction should clearly indicate the market type & settlement no. from which
55
the securities are to be moved and the CM-BP-Id, market type & settlement no. to
which the securities are to be moved. Please note that, securities can be transferred
only to a settlement whose deadline for pay-in is not complete. In other words, it
means that securities can be transferred only to a current or future settlement and not
to an old settlement. Receiving Clearing Member gives corresponding receipt
instruction to its DP to accept in his clearing account securities transferred by
delivering Clearing Member if he has not already given standing receipt instruction
for all credits into his clearing account.
Step-2: - The DP will ensure that the instruction slip is complete & the signature of
the CM is valid.
Step-3: - The DP will execute the instructions of the Clearing Member to debit/credit
the Pool account of the Clearing Member.
6.ACCOUNT OPENING:
NSDL interfaces with investors through its agent called depository participants (DPs).
According to SEBI guidelines, financial institution, banks, custodians, stockbrokers,
etc. can become DPs. One can approach any DP of choice and fill up an account
opening form. At the time of opening an account, the DP will sign a standard
agreement, which details the rights and duties of you and DP. The depository has not
prescribed any minimum balance. One can even have zero balance in account.
In order to avail of depository facilities, an investor has to open a beneficiary account
with a depository participant of his choice. This is similar to opening a bank account
to use the banking services.
The account holder is called 'beneficial owner' in a depository system and the account
is known as 'beneficiary account'.
ACCOUNT MAINTENANCE:
To avail of the various services offered by NSDL an investor/ a broker/ an approved
intermediary (for lending & borrowing) has to open a NSDL depository account.
Depository accounts are of three types-
1) Beneficiary account:
56
An investor or a broker who wants to hold shares in dematerialised Demat) form
and undertake scripless trading must have a depository account called beneficiary
account with a DP of his choice.
2) Clearing member account:
Member brokers of those stock exchanges which have establish electronic
connectivity with NSDL need to open a clearing member account, with a DP of
his choice, to clear and settle trades in the demat form. This account is meant only
to transfer shares to and receive shares from the clearing corporation/ house and
hence, the member broker does not have any ownership (beneficiary) rights over
the shares held in such an account.
3) Intermediary account:
Any person desiring to act as an approved 'intermediary' for stock lending and
borrowing needs to open an intermediary account with any DP of his choice. An
intermediary account may be opened with the DP only after the intermediary has
obtained registration from the Securities & Exchange Board of India and with the
prior approval of NSDL.This account is meant only to deposit the securities
received from the lender and lend them to the borrower under stock lending and
borrowing scheme. The intermediary does not have any ownership (beneficiary)
rights over the shares held in such an account.
FEATURES OF BENEFICIARY ACCOUNT:

 No limit on the number of beneficiary accounts that an investor
can open with a DP.
 No limit on the number of DPs with whom an investor can open
a beneficiary account.
 No minimum balance is required to be retained in a beneficiary
account.
 An investor can close a beneficiary account with one DP and
open an account with another DP.
57
 To dematerialise existing physical holdings, the beneficiary
account must be opened in the same combination and sequence of names of
holders as printed on thephysicalcertificate.
If three investors X, Y and Z have holdings in the following combinations:
1. X only
2. Y only
3. Z only
4. X first and Y second
5. Y first and X second
6. X first, Y second and Z third
7. Y first, X second and Z third
8. Z first, X second and Y third
9. X first, Z second and Y third
10. Y first, Z second and X third
11. Z first, Y second and X third
X, Y and Z will have to open as many accounts as the number of
combinations used for investments and dematerialise securities held in such
combinations. However, if holdings in X first and Y second combination have been
allotted multiple folios by registrars then only one account in the name of X first and
Y second would be needed.
PROCEDURE:
 Investor will choose a DP for the purposes of opening
beneficiary account. The choice of the investor may be based on convenience,
comfort, services offered or any other reason.
 The investor will obtain the relevant account opening form from
the chosen DP.
 For the purpose of verification, investor has to submit the
following documents along with the prescribed account opening form.
 Proof of Identity in the form of applicant's signature &
photograph authenticated by an existing account holder or by applicant's bank or
58
due verification made with the original of passport, voter ID, driving license or
PAN card with photograph.
 Proof of residence in the form of a ration card, passport,
election voting card, income tax PAN card, driving license, bill for electricity or
gas, etc. This is required to confirm and ascertain the correct identity and establish
correct address of the account holder.
 Passport-size photograph.
 The DP will also provide a copy of the DP-Client agreement.
 Account opening form require the applicants to give the
following details:
 Name(s) of account holder(s) - The investor should ensure that
the name is identical to that which appears on the certificate(s) to be
dematerialised. In the case of a joint account, the names of the holders should be
in the same order as appearing in the share certificate to be dematerialised, if any.
Investors are advised to open their account in their fully expanded name, i.e., to
spell to the first name as well as the middle name. This would obviate any doubts
about the veracity of the information.
 Mailing and communication address (es) - The veracity of the
applicant's address is determined through the documents submitted for
verification like ration card, passport, voter ID, PAN card, driving license, bank
passbook, etc. For NRI accounts, proof is required for both address - that of the
account holder as well as the constituted attorney. For corporate accounts, a copy
of Memorandum of Association, Articles of Association, Board resolution
permitting opening of account, the registered address of the company as well as
addresses of the person(s) authorized to operate the account on behalf of the
company have to be furnished.
 Details of guardian in case account holder is a minor - Only a
guardian can open a depository account for a minor. The guardian is required to
sign the application form, and details of his name and address need to be given in
addition to the details of the minor.
59
 Foreign Address and RBI approval details for NRI, FII or OCB
accounts - For foreign-based applicants like NRIs, Flls, OCBs, etc., the applicant
must furnish original or attested copies of the power of attorney and the approval
letter from RBI permitting them to invest. If the account holder is an FII or an
OCB, SEBI registration details along with attested copy of registration certificate
issued by SEBI and authorization letter is required.
 Details of bank account -Details of bank account of the account
holder, including the nine digit code number of the bank and branch appearing on
the MICR cheques issued by the bank have to be filled in the application form.
Companies use this information for printing them on dividend/interest warrants
etc.
 Details of Income-tax Permanent Account Number (PAN) or
GIR No. - In case the account holder is not an income tax assesses, or he has not
yet been allotted a PAN or GIR No., the applicant must give a declaration to this
effect. In other cases, a photocopy of PAN card or the acknowledgement of latest
income-tax returns is required.
 Nomination declaration - A beneficial owner can make a
nomination of his account in favour of any person by filing the nomination form
with his DP. Such nomination is considered to be conclusive evidence of the
account holder'(s) disposition in respect of all the securities in the account for
which the nomination is made.
 Standing Instruction - a facility of standing instruction is
provided to the investors for receiving securities to the credit of their accounts
without giving a separate receipt instruction.
 The demat account cannot be operated on "either or survivor"
basis like the bank account. In case of the joint account for the beneficial owners,
all the joint holders have to sign the account opening form.
 The investor will submit to his DP the duly filled in account
opening form & DP-client agreement along with the documents.
 The DP will verify whether the account opening form has been
duly filled in or not. He will also verify the submitted documents. For corporate
60
investors, the DP will also verify whether the board resolution for the authorized
signatories has been enclosed. The DP will ensure that client's signature is
recorded on the form, which will serve as specimen for authorizations in future.
 If the application form and documents are in order, then the DP
will accept them and give an acknowledgement slip duly signed and stamped to
the client. The DP will execute the agreement and give a copy of it to the client.
 After completion of all documentation, the DP will enter the
client details as mentioned in the account opening form in the DPM (software
provided by NSDL to the DP) screen provided for the purpose. After entering
client details in the system, a client account number will be generated by the
DPM. The DP will enter this in the account opening form.
 On successful opening of the account, the DP will give:
 Client Id - an eight-digit number to be used along with DP Id
for any future transactions.
 Delivery Instruction Slip Book
 A copy of the report listing the client details captured in the
DPM database to the client. The report will be generated by the DPM.
PRECAUTIONS:
 To dematerialise existing physical holdings, the beneficiary account must be
opened in the same combination and sequence of names of holders as printed on
the physical certificate.
 Corporate investors to enclose Memorandum of Association/Trust deed/Board
resolution for the authorized signatories along with the account opening form.
 Details with respect to the bank account details of an investor must be indicated in
the space provided for the same in the account opening form.
 If an investor is interested in availing the facility of standing instructions for
credits to his account, then such instructions may be given to the DP. Otherwise,
he will need to give a receipt instruction to his DP
61
62
NOMINATION:
A client can make a nomination of his account in favour of any person by
filing the nomination form with his DP. Such nomination is considered to be
conclusive evidence of the account holder'(s) disposition in respect of all the
securities in the account for which the nomination is made.
CHANGE IN ADDRESS:
The client can change his address by submitting the changes in writing to the DP. The
changes conveyed to the DP will be automatically communicated to the companies in
which he is holding shares in dematerialised form.
BANK ACCOUNT DETAILS:

Details of bank account of the client, including the 9-digit code number of the bank
and branch appearing on the MICR cheques issued by the bank have to given to the
DP at the time of account opening. Companies use this information for printing them
on dividend/interest warrants etc. to prevent its misuse. In case the client wishes to
change these bank account details, he can do so by submitting the changes in writing
to the DP.
STANDING INSTRUCTION FACILITY:

DP registers the transfer of securities to or from a beneficial owner's account only on
receipt of instructions from the client. The clients need to give delivery instruction to
transfer securities from their account & receipt instruction to get credit into their
account. However, for ease of operation, a facility of standing instruction is provided
to the client's for receiving securities to the credit of their accounts without any
further instruction from them.
CONSOLIDATION OF ACCOUNTS:
Some clients could have opened multiple accounts to dematerialise their shares held
in multiple combinations & sequence of names. However, they may not need so many
63
accounts after they have dematerialised their shares and may want to bring all their
shareholdings into one or fewer accounts. Using off-market account transfer
instruction such consolidation can be done.
CLOSURE OF ACCOUNT:
A client can close a depository account by giving an application in the prescribed
form. In case there is any balance in the account sought to be closed, the following
steps are necessary.
(a) Re-materialisation of all securities standing to the credit of the account at the time
of making the application for closure; or
(b) Transferring the balance to the credit of another account opened by the same
account holder(s) either with the same participant or with a different participant.
64
DOCUMENTATION FOR DIFFERENT TYPES OF
INSTRUCTIONS:
Following are the types of instructions forms required:
TABLE 6
INSTRUCTION PURPOSE
Delivery Instruction for Client will give this when the securities are sold in the
Market Trades. market and delivered to the broker on pay-in day.
Delivery Instruction for Client will give this when securities are transferred in off-
Off-Market Trades market deal i.e. not sold through the Stock exchange.
Pledge / Hypothecation Client will give this form when the shares held in
Form. Demat Account by the client are pledged to obtain
loans/advances.
Application for Client will give this when he/she wants to freeze/defreeze
Freezing / Defreezing his/her Demat Account temporarily.
of operations Of an
account.
Dematerialisation Client will give this when physical securities are to be
Request Form converted to Electronic Holdings.
Rematerialisation Client will give this when electronic balance of
Request Form. securities in the Demat Account is to be converted back
to physical form.
Application for closing Client will give this when the Demat Account is to be
an account. closed.
Repurchase / Client will give this form for repurchase/redemption of
Redemption Form. UTI's US-64 units and other demated mutual fund units
like Master Share, Master Gain, Master Plus, Master
Growth etc. lying as credit in the Demat account.
ISIN Conversion Form. Client will give this for conversion of units of UTI's US-
64, lying as credit in the Demat Account, between cash
and reinvestment options.
SOURCE: Intranet of idbi bank.
65
7.TRADING/SETTLEMENT
 The Stock Exchange, Mumbai (BSE), the National Stock Exchange (NSE), the
Calcutta Stock Exchange (CSE), the Delhi Stock Exchange (DSE), the Ludhiana
Stock Exchange (LSE), the Bangalore Stock Exchange (BgSE) and the Over
Counter Exchange of India (OCTEI) have established electronic connectivity with
NSDL.
 Dematerialised segments follow T+5 rolling settlements, which means that trades
are settled on the fifth working day from the date of the trade. In NSE trades are
settled on T+2 basis irrespective of whether the delivery will be made in physical
or dematerialised form.
 One should prefer to buy Dematerialised shares the possibility of loss or theft of
share certificate is completely eliminated. Further courier cost and stamp duty is
also saved.
 Investor is allowed to deliver Dematerialised shares in the physical segment of
stock exchanges connected to NSDL.
 SEBI has made compulsory for all categories of investors to settle trades in demat
form with respect to a select list of scrip’s since Jan 4, 1999.Hence investors
trading in these scrip’s will necessarily need a depository account to settle their
trades.
 An investor purchasing shares for long-term investments under demat would
save .5% as against settlement cost of .1% in depository. The savings in custody
cost will be .02% as against .1%. Further courier and postal charges would also be
saved.
 The trader who buys and sell can use the transaction statement given by NSDL as
an effective record-keeping too.
PRECAUTION:
 Ensure that the delivery instruction book given to each client has pre
printed serial numbers and client –ID.
 Inform clients about the pay-in deadline of the stock exchange and the
66
deadline of the DP.
 Inform clients about the future dated instruction facility and encourage
them to use this facility.
 Each DIS received should be inward correctly with the date and time
stamp.
 Late stamp must be affixed on the instructions received after the expiry of
the deadline set by the DP.
 Ensure that correctness of execution date on the DP.
 Ensure that the signatures of all folders are obtained in case of joint
accounts.
 If the client has not issued “standing instructions”, fee should be made
aware that a receipt in instruction will be required to receive the credits the
account on purchase of shares.
 Clients should be made aware of the account freezing facility.
T+2 SETTLEMENT CYCLE:

T+5 rolling settlement cycle introduced by SEBI in the Equity Market from July 2001
and subsequently shortened the same to T+3 from April 2002. Now, the settlement
cycle has further been reduced to T+2 with effect from 1st April 2003. This is done in
order to reduce the risk in the market, to protect the interest of the investors.
In line with most of the developed markets around the world, all the major stock
exchanges in India will move into the ‘T+2’ trading cycle from 1st of April 2003.
What is T+2 settlement cycle?
 T+0 = Trading Day.
 T+1 = Submission of Physical Delivery Instructions to DP.
 T+2 = Settlement (Pay-in and Pay-out of funds and securities)
Stock Exchanges across country have already geared up for the same according to
which all transactions will be settled within two days after the deal is struck as against
the current norm of 3 days (T+3).
67
Under this new settlement cycle of T+2, Pay-in of securities as well as funds will take
place at 10.30 am on second working day after the day of trading while pay-out will
take place at 1.30 pm on the same day (i.e., pay-in day).
8.SPECIAL ELECTRONIC FUND TRANSFER

(SEFT):
In order to facilitate the economical transfer of funds especially for this T+2 regime,
the RBI has proposed to implement a new Electronic Fund Transfer (EFT) system
called Special Electronic Fund Transfer (SEFT) from 1st April 2003 onwards.
SEFT will facilitate same day inter-bank transfer of funds between accounts
maintained in any of the participating branches under the scheme. SEFT will cover
2500 branches in 24 banks in 500 cities across India. The settlement would be in
Mumbai for Inter-Bank transfers. The scheme covers branches of banks that are
networked for transmitting SEFT messages electronically and quickly. SEFT would
enable transfer of funds inter-bank from one branch of a bank in one location to
another branch of the same / another banks in the same/ another location.
There will be 3 settlement batches of SEFT on weekdays at 12 noon, 2 pm and 4 pm.

On Saturdays, there will be 2 settlement batches at 12 noon and at 2pm.
Consequently, the response time for customers to receive credit in their accounts will
be faster. Moreover, it will facilitate timely settlement of Pay-in and Payout of funds
for stock exchanges.
ROLE OF DEPOSITORY PARTICIPANT (DP):

In view of the recent developments, time lag between trading and settlement is
practically just one day. In other words, after the trading day (Day 0), client has to
submit his Delivery Instruction Slip (DIs) to his Depository Participant (DP) latest by
4 pm on Day 1. The 2nd day (Day 2) being the settlement day i.e., Pay-in and Payout
of funds and securities takes place, thereby completing the T+2 settlement cycle.
68
As per the SEBI guidelines, a DP, have to accept the DIs (in physical form) from our
client up to 4 pm on Day 1 and execute the same well before the pay-in deadline. Any
DIs accepted after the stipulated deadline time will be purely at the risk of the clients
and should be accepted ‘at client’s risk’.
ROLE AS A SETTLEMENT BANKER (FUNDS PART OF
SETTLEMENT):
With the commencement of T+2 settlement cycle, the most significant activity is the
transfer of funds into the settlement account of a Clearing Member well before the
Pay-In deadline time. Intimation to the clearing members regarding any shortages of
funds, transfer of funds from client’s account to clearing member account etc.
assumes utmost importance. SEFT is expected to make this task much easier.
9.EXECUTION OF DELIVERY INSTRUCTIONS:

It is a time sensitive, high-risk area and with the implementation of execution of
delivery instructions it is imperative that adequate systems, procedures are followed
and records maintained as per NSDL guidelines.
In the event of non-execution / incorrect / late execution, financial claims can arise.
This is also an area, which is prone to frauds. To safeguard against such instances,
every DP should strictly adhere to the guidelines, areas such as safekeeping of DIs,
acceptance of DIs, maintenance of records and checking of reports are covered.
Issuing DI slips to clients

 New DI slips should be issued to the client only on the basis of the requisition
slip (which forms a part of the DI slip book). The signatures should be verified
before issuing the DI slip book.
 2) Issuing loose DI slips to clients should be avoided. In case of emergency,
the loose DI slip should be issued only if the client personally comes along with
the latest transaction / holding statement.
69
 Requests for issuing DI slip books on the basis of fax / telephone calls should
not be entertained.
 The client Id should be pre stamped on each DI slip without fail before issuing
the DI slip book to the client. This is mandatory as per NSDL guidelines.
Accepting of delivery instructions:

 The DP should maintain an inward register mentioning details of the Delivery
Instructions received from clients.
 On receipt of the delivery instruction from the client, the following should be
checked:
 All the relevant details are mentioned viz. Settlement No., Market type (in
case of market transaction) and target client details (in case of off market
transaction), ISIN No., scrip name, number of shares in figures and words,
signatures of all the joint holders and the execution date.
 The DI slip is submitted at least 2 working days prior to the execution
date.
 The signatures on the DI slips should be verified and in case of mismatch,
the client should be informed immediately for corrective action.
 The stamp must be affixed on the DI slip. The date and time of receipt and
the initial of the person receiving the DI slip should be mentioned on the DI slip.
 In case of Delivery instructions received beyond the deadline time or
which need to be executed urgently, the same should be accepted at client’s risk.
The stamp of “Accepted at Client’s Risk” should be affixed on the DI slip as well
as on the acknowledgement of the same. (NSDL has prescribed that all clients
should submit delivery instructions pertaining to Rolling Settlements at least 2
days prior to the pay in day and should be executed by us, at least one day in
advance of paying.)
 The branches should not accept faxed delivery instructions from clients,
unless the duly signed fax indemnity has been obtained from them.
70
 In case of receipt of delivery instructions received from clients, other than
those issued to the client, the same should be accepted only after ensuring that the
client himself has issued the instruction.
RECTIFICATION/ REPLACEMENT OF REJECTED DELIVERY

INSTRUCTIONS
 The Depository Cell, sends an email of ‘problem cases in delivery
instructions’, giving the reference no. And the reason for rejection of the DI slips
by NSDL after execution. This email is sent to the Ids of the respective persons
handling demat operations at the branch.
 Branches should maintain a copy of the emails received and takes immediate
corrective action, by informing the clients, keeping in mind the deadline time for
such rectification’s. The replacement DI slip, should be obtained from the client,
in all cases where the Delivery instruction has to be executed.
RECORD MAINTENANCE OF DI SLIPS AS PRESCRIBED BY

NSDL
 As per NSDL guidelines, DP has to maintain records of all documents
pertaining to demat, for a period of 5 years.
 The Instruction nos. of executed DI slips should be obtained from the status
reports and written on the relevant DI slips. The DI slips should be filed
instruction number wise.
 The Delivery Instruction files should be maintained at the branch and made
available for subsequent reference or for NSDL inspection as and when required
 Concurrent auditors, wherever appointed, will have access to these records
and reports to query, download and print to conduct the audit operations.
SAFEGUARDS AND PRECAUTIONS

 Advise the client to strike off blank spaces before submitting the DI slip.
71
 Advise the client to keep the DI slip books in safe custody just like checkbooks.
Advise the clients not to submit blank signed DI slips to their brokers.
 Exercise caution in case of DI slips for a large number of shares with high value,
especially in case of off market delivery Instructions. In case of any doubt, please
contact them over phone or any other mode for quick confirmation.
 Clients having dormant accounts should be advised to freeze their demat accounts
before proceeding on tour or leaving the country.
72
SAFETY FEATURES:
There are various checks and measures in the depository system to ensure safety of
the investor holdings. These include:
 A DP can be operational only after registration by SEBI, which
is based on the recommendation from NSDL and their own independent
evaluation. SEBI has prescribed criteria for becoming a DP in the regulations.
 Depository Participants are allowed to affect any debit and
credit to an account only on the basis of valid instruction from the client.
 Every day, there is a system driven mandatory reconciliation
between participant and NSDL.
 There are periodic inspections into the activities of both DP and
R&T agent by NSDL. This also includes records based on which the debit/credit
are affected.
 The data interchange between NSDL and its business partners
is protected by protection measures of international standards such as encryption
hardware lock. The protection measures adopted by NSDL are more than what is
prescribed in the SEBI Regulations.
 All transactions are recorded at NSDL Central System and in
the databases maintained by business partners.
 All investors have a right to receive their statement of accounts
periodically from the DP.Every month NSDL forwards statement of account to a
random sample of investors as a counter check.
 In the depository, 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. These investors can
transfer their holdings to an account held with another DP.
FREEZE FACILITY:
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, account
73
holder can prevent unexpected debits or credits or both, creeping into its account. The
following types of freeze facility available in the NSDL system may be availed of by
submitting freeze instruction to the Depository Participant (DP) in the prescribed
form.
Freeze for debits only
Freeze for debits as well as credits
 Freeze a particular ISIN in the account
 Freeze a specific number of securities held under an ISIN in an account
10.CONCEPT OFLOANAGAINST SHARES.
LAS
Loans against shares product are an overdraft facility against Demat Shares. While
the Bank's Demat Account offers the convenience of converting the physical shares
into Demat form, LAS helps to unlock holdings through an overdraft facility. Thus it
gives easy and flexible access liquidity without the need for selling off holdings.
Loan Against Shares (LAS): Operation:

It is an overdraft facility against the dematerialised shares, units of mutual Funds of
the investor. An investor can offer to pledge his eligible securities as per the banks
approved list in order to avail this facility. A pledge is created in favour of the bank
and the drawing power (DP) is calculated based on the applicable margins set by the
Bank. Based on his DP, an overdraft account is opened and a line of credit is
sanctioned to him.
PREREQUISITES FOR LAS:

One should have a DP Account with any Depository Participant. Due to inherent
benefits of having a beneficial account, it is preferable that you have a Demat account
74
ELIGIBILITY
 Individuals - Salaried, professional self-employed and Individuals having
independent source of income.
 Individual brokers who have their own beneficial account either with us or
another DP.
OTHER ELIGIBILITY CRITERIA:

 One should have a Demat account with any Depository Participant.
 The shares, Units of Mutual Funds should be on the approved list of the
Bank, which will be revised periodically.
 The shares should be fully paid-up.
 Even Single Scrip can be pledged, in case of Index scrip’s (Nifty &
Sensex).
 Scrips in the name of Corporate, Firms, HUF, Minors and NRIs will not
be eligible for finance under this scheme.
 Minimum of 2 eligible scrip’s to be pledged, with the value of any scrip
not exceeding 60% of total portfolio value.
 Individuals cannot pledge scrip’s of companies of which they themselves
are Directors/ Promoters.
PURPOSE OF THE LOAN

One can avail of the facility to meet contingencies and personal needs.
MODE OF LOANS:
 The loan is in the form of an overdraft repayable on demand, renewable
every year
 A suitable drawing limit will be fixed within which you can draw from
your overdraft facility.
LOAN LIMITS:
75
One can take a loan anywhere between a minimum of Rs.0.50 Lac to a maximum of
Rs.20.00 Lac. The limit depends on the valuation of the security, applicable margin,
and you ability to service and repay the loan, and other conditions as applicable from
time to time.
Margin
 On Index (Nifty & Sensex) scrips, Margin @ 40% will be retained while arriving
at the loan amount.
 On other approved scrips of the bank the margin retained will be higher at 50%.
 Single scrip lending (only Nifty & Sensex scrips) also attracts a margin of 50%.
 Units of Mutual Fund will attract margin of 50 %.
CONTENTS OF THE APPLICATION FORM BOOKLET

(DOCUMENTS):
 LAS Application Form
 Process Note
 Pledge / Hypothecation Form
 Agreement for Pledge -cum - Guarantee (on a stamp paper)
 Irrevocable Power of Attorney (stamped & notarised).
CHECKLIST FOR LAS:

 The Branch executive will confirm whether you are a Demat Account Holder or
you have a demat account with another Depository Participant.
 If you are a Demat Account Holder you need not furnish any other documents
apart from the LAS Application Booklet as may be prescribed.
 If you are not a Demat Account Holder you may be called upon to furnish such
other documents to establish your bonafides like a ration card, driver's license,
Bank attestation, a Depository Account Statement from your Depository
76
Participant as in the case of opening a Demat account.
NOTES:
The list of eligible securities is not meant to reflect on and is not based on any
company's performance, prospects, profitability, etc. It also does not indicate idbi
bank's assessment of the company's performance.
 idbi bank reserves the right, at its sole discretion, to decline or to accept
any of the listed securities at any point of time.
 idbi bank reserves the right to accept or decline the application for loan
under the scheme or any of the other schemes at its sole discretion.
77
NIFTY & SENSEX SCRIP’S
TABLE: 7
Srl. No. Company Name
1 ABB
2 ACC
3 BPCL
4 Bajaj Auto
5 BHEL
6 Britannia
7 BSES
8 Cipla
9 Colgate
10 Dabur
11 Digital Equipment
12 Dr Reddy Labs
13 GAIL
14 Glaxo Smithkline Pharma
15 Glaxo smithline
16 Grasim
17 Guj Ambuja Cement
18 HCL Technologies
19 HDFC
20 HDFC Bank
21 Hero Honda
22 Hindalco
23 Hindustan Lever
24 HPCL
25 ICICI Bank
26 Indian Hotels
27 Infosys
28 IPCL
29 ITC
30 L&T
31 Mahindra & Mahindra
32 MTNL
33 National Aluminium
34 NIIT
35 Oriental Bank of Commerce
36 Ranbaxy labs
37 Reliance Industries
38 Shipping Corporation
39 Satyam Computers
40 SBI
41 SAIL
78
42 Sun Pharma
43 TATA Chem.
44 TATA Power
45 TATA Tea
46 TELCO
47 TISCO
48 VSNL
49 Wipro
50 Zee Telefilms
SOURCE: Economic Times.
TABLE: 8
ISIN Code of nifty fifty companies

INE118A01012 BAJAJ AUTO EQ BAJAJ AUTO LIMITEDEQUITY SHARE
BHARAT HEAVY
ELECTRICALS
INE257A01018 BHEL EQ LIMITED EQUITY SHARE
BRITANNIA
INE216A01014 BRITANNIA EQ INDUSTRIES LIMITEDEQUITY SHARE
INE036A01016 BSES EQ BSES LIMITED EQUITY SHARE
INE059A01018 CIPLA EQ CIPLA LIMITED EQUITY SHARE
COLGATE-
PALMOLIVE (INDIA)
INE259A01014 COLGATE EQ LIMITED EQUITY SHARE
DABUR INDIA
INE016A01018 DABUR EQ LIMITED EQUITY SHARE
DIGITAL
GLOBALSOFT
INE124A01010 DIGITAL GLOBAL EQ LIMITED EQUITY SHARE
79
DR. REDDY'S
LABORATORIES
INE089A01015 DR. REDDY EQ LIMITED EQUITY SHARE
GLAXOSMITHKLINE
GLAXOSMITHKLINE PHARMACEUTICALS
INE159A01016 EQ LTD EQUITY SHARE
80
GRASIM INDUSTRIES
INE047A01013 GRASIM EQ LIMITED EQUITY SHARE
GUJ AMBUJA CEMGUJARAT AMBUJA
INE079A01016 EQ CEMENT LTD. EQUITY SHARE
HCL TECHNOLOGYHCL TECHNOLOGIES
INE860A01019 EQ LIMITED EQUITY SHARE
INE040A01018 HDFC BANK EQ HDFC BANK LIMITED EQUITY SHARE
HERO HONDA
INE158A01026 HERO HONDA EQ MOTORS LIMITED EQUITY SHARE
HINDALCO
INE038A01012 HINDALCO EQ INDUSTRIES LIMITEDEQUITY SHARE
HINDUSTAN LEVERHINDUSTAN LEVER
INE030A01019 EQ LIMITED EQUITY SHARE
HINDUSTAN
PETROLEUM
INE094A01015 HPCL EQ CORPORATION EQUITY SHARE
INE090A01013 ICICI BANK EQ ICICI BANK LIMITED EQUITY SHARE
INFOSYS
TECHNOLOGIES
INE009A01013 INFOSYS EQ LIMITED EQUITY SHARE
INDIAN
PETROCHEMICALS
INE006A01019 IPCL EQ CORPN EQUITY SHARE
INE154A01017 ITC EQ ITC LIMITED EQUITY SHARE
LARSEN AND
INE018A01014 L AND T EQ TOUBRO LIMITED EQUITY SHARE
MAHINDRA AND
INE101A01018 M AND M EQ MAHINDRA LIMITED EQUITY SHARE
MAHANAGAR
TELEPHONE NIGAM
INE153A01019 MTNL EQ LIMITED. EQUITY SHARE
INE045B01015 NELCO LTD EQ NELCO LIMITED EQUITY SHARE
INE161A01012 NIIT EQ NIIT LIMITED EQUITY SHARE
ORIENTAL BANK OF
INE141A01014 ORIENTAL BANK EQ COMMERCE EQUITY SHARE
81
RANBAXY
LABORATORIES
INE015A01010 RANBAXY EQ LIMITED EQUITY SHARE
SATYAM COMPUTERSATYAM COMPUTER
INE275A01010 EQ SERVICES LIMITED EQUITY SHARE
STATE BANK OF
INE062A01012 SBI EQ INDIA EQUITY SHARE
SMITHKLINE
SMITHKL PHARMABEECHAM
INE266A01019 EQ PHARMACEUTICALS EQUITY SHARE
TATA CHEMICALS
INE092A01019 TATA CHEM EQ LIMITED EQUITY SHARE
INE192A01017 TATA TEA EQ TATA TEA LIMITED EQUITY SHARE
VIDESH SANCHAR
INE151A01013 VSNL EQ NIGAM LIMITED EQUITY SHARE
INE075A01014 WIPRO EQ WIPRO LIMITED EQUITY SHARE
SOURCE: Economic Times.
How to study ISIN codes?

Example- ISIN INE 475 C 01 012 has the following break up:
IN- India.
E- Company.
Last digit- Check digit.
First four-digit 475C- Company serial number.
1- Equity (can be Mutual Funds units, Debt or Government Securities)
1- Issue Number.
2- Check digit.
The third digit (E in above E.g.) may be E, F, A, B.
E- Company
F- Mutual Funds
A- Central Government Securities.
82
B- State Government Securities.
DATA COLLECTION METHOD:

The data relating to the project objectives was collected from the following:
 Primary Sources:
Interview of Executives, DSA’s and Phone Banking Executives of All Banks
Covered
 Secondary Sources:
An investor’s guide to depositories. (NSDL).
ICFAI Journal for April 2003
Newspapers
Brochures of all Banks covered
Website of all Banks covered
INSTRUMENTS USED:
The instruments used to analyses the cost structure of all Banks covered were MS
EXCEL.
PROCEDURE:
The procedure followed was collecting information on demat and the charges for
Services of all Banks covered by brochures, meeting their respective executives,
phone banking and visiting their respective website.
83
RESEARCH METHODOLOGY
Comparison of depository charges

Standard
Srl. i
Services Chartere HDFC ICICI ABN-AMRO
no. dbi
d
1 A/C opening
NIL (Stamp
-A/C holders charges Rs200 NIL Rs374 p.a. Stamp charges Rs 20
apply)
-Non A/C Rs200+stamp
Rs200 Rs100 Rs2500 Not Available
holders charges
Rs1per
Custody Rs1.25 per Rs0.50 per Rs .50 per
2 mth. Per Rs2.5 ISIN per mth.
charges ISIN per mth. ISIN per mth. ISIN per mth.
ISIN
0.2% of
Rs3per
FV+postage, Rs3per crtf Rs35 per
Dematerialis crtf.
3 Min, Min (min Rs35 per DRF+Rs2 per Rs2.50 per sh.crtf.
ation +Rs35per
Rs35 per request) crtf.
request
request
.10%of
0.04% of security value
Rematerialis Rs.10 per
4 MV.Min.Rs Rs.35 per crtf. s.t.min.of As per NSDL
ation crtf.
20. per crtf. Rs20 per
request
0.02%of
.04%0f
0.02% of M.V, .05%of MV, trnst.value
Market value of .05%of MV.Min.20 per
5 MinRs.20 per Min.Rs25 s.t.min.of
Buying trnst.min. trnst.
scrip (highest) Rs.20/- per
Rs25
trnst.
.04%of
.05%of .04%0f
0.02% of M.V, trnst.value s.t.
Market MV, value of .06%of MV.Min.20 per
6 Min.Rs.20 per min.of
Selling Min.Rs.25 trnst.min. trnst.
scrip Rs20per ISIN
(highest) Rs25
per request
7 Pledge 0.05% of M.V, 0.04%of MV .04%of .02%of 0.025%, Min.Rs50 per
creation Min.Rs25per s.t Min MV, trnst.value s.t. trnst.
confirmation trnst. Rs.100, Min.Rs.2 min.of
Rs25per inst. 5 Rs20per ISIN
84
(highest) per request
.02%of
Pledge .04%of
0.05% of M.V, trnst.value s.t.
closure 0.01%of MV, MV, 0.025%, Min.Rs50
8 Min.Rs25per min.of
&confirmatio Min Rs.100 Min.Rs25 per trnst.
trnst. Rs20per ISIN
n (highest)
per request
.04%of
0.15% of M.V,
Pledge 0.01%of MV, MV, 0.05%of MV, Min
9 Min.Rs25 per FREE
invocation Min Rs100 Min.Rs25 Rs100
trnst.
(highest)
Statement of
holding/tran
10 FREE FREE FREE FREE FREE
saction
fortnightly
AVAILAB
11 E-mail alert AVAILABLE AVAILABLE AVAILABLE AVAILABLE
LE
24 hrs
AVAILAB
12 customer AVAILABLE AVAILABLE AVAILABLE AVAILABLE
LE
care center
Quick Loan
AVAILAB
13 Against AVAILABLE 60%of value AVAILABLE 60%of value.
LE
Demat Share
Demat A/C AVAILAB
14 AVAILABLE AVAILABLE AVAILABLE AVAILABLE
status on net LE
Personalised
AVAILAB
15 Instruction AVAILABLE AVAILABLE AVAILABLE AVAILABLE
LE
Book
AVAILAB
16 Odd lots AVAILABLE AVAILABLE AVAILABLE AVAILABLE
LE
A/C
17 maintenance
charges
Rs360:-A/C
-A/C Rs250 p.a, with
Rs299 Rs300 p.a Rs.250 p.a.
holder advance trnst.,Rs600:-
without trnst.
-Non A/C Rs400 p.a
Rs299 Rs.2000 p.a Not Available
holder advance
85
0.02%of
Inter .04%0f
0.02% of M.V, trnst.value
Depository .05%of MV, value of Same as market
18 Min Rs20 per s.t.min.of
Transfer Min.Rs25 trnst.min. buying & selling
trnst. Rs.20/- per
(Buy/Sell) Rs25
trnst.
Additional
19 Adhoc
Statement
-Inland Rs25
Rs25 each Rs50 each Rs20 each Rs 50 each.
address each
NOT NOT
-Foreign Rs500 each Rs500 Rs 50 each.
AVAILABLE AVAILABLE
address
0.02%of
.04%0f
0.02%o M.V trnst.value
Off Market .05%of MV, value of 0.05%of MV, Min
20 Min.Rs20 per s.t.min.of
Buy Min.Rs20 trnst.min. Rs.20
scrip Rs.20 per
Rs25
trnst.
0.04%of
.04%0f
0.02% of trnst.value
Off Market .05%of MV, value of 0.06%of MV,
21 Min.Rs20 per s.t.min.of
Sell Min.Rs20 trnst.min. MinRs20
scrip Rs20 per
Rs25
trnst.
Freeze/Defre Rs100 per
22 NIL NIL NIL NIL
eze instruction
23 Service tax 0.05 0.08 0.08 0.08 0.08
24 A/C closing:
-Bal. Zero Rs50 NIL Dues NIL 0.025%Min. Rs50bal.
A/C shifted to
Rs250 NIL Dues NIL NIL
other DP
23 Service tax 0.05 0.08 0.08 0.08 0.08
24 A/C closing:-
-Bal. Zero Rs50/- NIL Dues NIL NIL
-A/C shifted
Rs250/- NIL Dues NIL NIL
to other DP
86
IDBIpaisabuilder.in strives to empower you with information that helps you make
informed decisions and bank upon the right opportunity. We bring you lots of useful
information by way of our varied market research reports. Whether you are a beginner, an
investor or a trader, you would find our reports useful.
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Why you should invest
Where can you invest
How to manage risks
How will IDBI Paisabuilder benefit you
How to start
Why Invest
Why we need an investment plan
87
Reality Check
Undertaking planned investments
Advantages of financial planning
Creating a financial plan
Keep in mind…
Reality Check
Few of us ever adopt a planned and systematic approach to investing. The approach has
always been largely ad hoc in nature.
For instance, most of us put an alarm to wake us up in the month of March every year in
order to primarily save taxes and consequently make investments that give us a tax
break and help us to reduce our tax liability.
If we are lucky to come a cross a lump sum amount (maybe a bonus, a gain made on
some past investment, etc.), and if the money is not already spent, we make a one-time
investment without giving much thought if the investment undertaken is in sync with
our overall investment plan.
Ask yourself the question: “Are my investments aimed at realising my long-term

financial goals”? (Most probably we have not even crystallised and estimated our
financial goals!) If the answer is ‘No’, then it implies that there is no reasoning and
purpose backing up your investments. This will, in turn, leave you totally directionless
as far as creating financial security for you is concerned!
Therefore, in order to attain this, the key is to undertake a logical and a planned
approach to investments.
Where can one Invest
What are the investment options available?
There are several investment instruments available, some of which are - Fixed Income,
Mutual Funds, Direct Equity, Equity through IPOs, Equity through Derivatives, Gold,
88
etc. Depending up on your financial goal, age, awareness about each instrument and
risk appetite, you could choose the right mix. We have especially designed this section
for you to know more about each of these sections in order to arrive at the right
investment mix.
Fixed Income Instruments

Mutual Fund
Direct Equity
Equity through IPOs
Equity through Derivatives
Gold
Fixed Income Instruments
Introduction
Fixed Income Instruments – Risk free – A Myth
Characteristics of fixed income instruments
Compounding
Characteristics of Fixed Income Investing
Popular Fixed Income Instruments
Bank deposits
Company deposits
RBI Bonds
Small saving schemes
INTRODUCTION
If you will ask a cross-section of the investor community, one characteristic which an
investment should offer, “safety” will top the list. By and large, investors are willing to
settle for “fixed” and resultantly lower returns as long as their invested capital is safe.
Fixed income investments attempt to address this need of the investors.
Before the year 2000, fixed income instruments used to carry high interest rates (in
excess of 10 per cent) mainly due to scarcity of capital and high inflation rates
prevailing in India. With the opening up of the Indian economy, flow of foreign funds
89
in India, consistently high savings of Indian investors, declining inflation and several
other economic factors, interest rates started declining from the year 2000 onwards from
a high of approximately 12 per cent in late 1990’s they came down to approximately 6
per cent in 2005!
Further, several fixed income instruments earlier came with tax benefits. For instance,
interest earned on bank fixed deposits attracted the erstwhile section 80L benefit,
whereby if the interest income from such investments did not exceed a certain amount,
no tax was payable on it. However, coupled with declining interest rates in this
millennium, most such tax benefits have been withdrawn, squeezing the returns for
fixed income investors.
FIXED INCOME INSTRUMENTS – RISK FREE – A MYTH
Though, fixed income instrument do offer an element of safety and stability of returns,
they are not risk free. The two primary risks associated with fixed income investing are:
Interest Rate Risk: When interest rates rise, fixed income investments lose value. This
is because the investor will continue to earn the same (lower) interest rate until the
investment matures while market interest rates have already gone up. In order to
compensate for a lower interest rate compared to the market rate, the fixed income
investment will thus have to be priced at a lower rate. For example, if a Rs 100 bond is
fetching 7 per cent interest and market rates have moved to 9 per cent, the bond will
now be worth 77.8 per cent of its face value (coupon rate of 7 per cent divided by
market rate of 9 per cent multiplied by 100), i.e. Rs 77.8 (77.8 per cent of the face value
of Rs 100). Thus, if the bond is sold at this price, the new investor will earn 9 per cent
from this bond.
Credit Risk:This risk herein is that the borrower may default on interest and/or
principal repayment. For example, a company borrowing fixed deposits from investors
may default on servicing its obligations (interest and/or principal repayment) in case it
is going through a bad patch.
Characteristics of fixed income instruments
Some of the characteristics which fixed income instruments offerare:
90
Fixed interest rate:Fixed income instruments offer a pre-determined rate of return
which is applicable for the term of the investment.
Fixed term:Fixed income instruments come with a fixed investment term. Depending
on the instrument you may have the facility of undertaking a pre-mature withdrawal.
Normally there is a directly proportional relationship between interest rate and tenure,
longer the tenure higher the interest rate.
COMPOUNDING
Compounding is an important feature associated with fixed income investing. It offers

astounding returns on your investments over a period of time. Simply put, in
compounding, the interest that you earn on the fixed income gets re-invested and earns
interest. In other words ‘interest earns interest’. A cumulative fixed deposit is a perfect
example of compounding at work. As and when the interest accrues on the deposit, it
gets re-invested to earn further interest.
91
Risk Management
Investor Risk Personality
Investment Risk Management

Types of Risks
Your Risk Appetite
Assessing Risk Capacity
Assessing Risk Tolerance
Risk Personalities
Decrypting Asset Allocation
Importance of Asset Allocation
Model Asset Allocation Portfolios
Myth-buster – Risk Personality and Asset allocation remains identical across the life
span of an investor
Investment Risk Management
Every investment (equity, debt, property, etc.) carries an element of risk that is unique to
it. Though risk cannot be totally eliminated, it can be managed by undertaking effective
risk management. To manage risk, you first need to identify different kinds of risks
involved in investing and then take appropriate steps to reduce it. As each investment
comes with its own unique set of risks, this needs to be matched with your risk
personality.
As a general rule, returns generated by an investment move in-sync with the level of risk
it carries. In other words, risk and return share a direct relationship with one another.
Therefore, an investment which carries negligible risk, will offer a low return (viz. bonds
issued by the Reserve Bank of India) while an investment which carries a higher risk,
also offers the potential of higher returns (stocks).
While understanding this relationship, you must also bear in mind that though higher risk
is normally compensated by higher returns, there is not only no guarantee of such returns
92
but there is the risk of capital erosion as well.
How To Start
We understand your needs as a beginner. What you need is a basic account that allows
you to invest in mutual funds, IPOs and in equity shares. As you are now to investing in
equity shares, you’d like a platform which is simple to look at and to operate, so that
you can invest with ease.
We have a specially designed investing platform PaisaPower Classic – a browser based

trading platform for beginners who are relatively new to online investing. It has the
following features to give you a hassle-free investing experience:
DATA ANALYSIS & INTERPETION

GRAPH: 1
 INFERENCE: It can be seen from the above graph that the main reason for
non-execution of DI is lack of balance in the account.
93
GRAPH: 2
 INFERENCE: It can be seen from the above graph that maximum times it is
the signature of the holder, which does not match with that in share certificate.
ISIN International Security Identification number.
FV Face Value.
Crtf. Certificate.
DRF Dematerialisation Request Form.
NSDL National Securities Depositories limited.
Trnst. Transaction.
ANALYSIS:
ADVANTAGES:
 No charge for a/c holders, only stamp charges applicable.
 Facility for opening a demat a/c for non-a/c holders.
 Market buying & selling charges are comparatively lower than other
banks.
 A/c maintenance charges for a/c holders are less in comparison to
others.
 IDT charges are also less in comparison to other banks.
94
DISADVANTAGES:
 Custody charges are higher than other banks.
 Charges for pledge creation and closure are higher than other banks.
 Idbi charges for freeze/defreeze in comparison to others.
 Pledge invocation charges are higher than others.
95
ANALYSIS:
GRAPH: 3
CUSTOMER AWARENESS ON
DEMATERIALI
SATION
SERVICES PROVIDED BY IDBI
BANK REMATERIALI
SATION
120 DELIVERY/RE
CEIPT
100
FREEZE/DEF
PERCENTAGE
80 REEZE
60 PLEDGE
40
TRANSPOSITI
20 ON
0 OFF MARKET
TRANSFER
1
SERVICES PROVIDED MARKET
TRANSFER
96
GRAPH: 4
 INFERENCE: Quality of service to customer is the most important factor considered

for opening a demat account.
FACTORS CONSIDERED IMPORTANT

FOR OPENING AN ACCOUNT
35
30 ACCESSIBILITY
25
PERCENTAGE
NUMBER OF
20 SERVICES
15 CHARGES OF
SERVICES
10 QUALITY OF
SERVICE TO
5 CUSTOMERS
NAME OF THE
0 BANK
1
FACTORS
97
98
GRAPH: 5
TYPE OF RESEARCH CONDUCTED

PRIOR TO OPENING OF ACCOUNT
45
40
35
PERSONALLY
PERCENTAGE
30 VISIT BANKS
25
ASK
20 REPRESENTATIV
E TO VISIT YOU
15
ADVICE FROM
10 FAMILY AND
FRIENDS
5
ADVERTISEMENT
0 OF THE BANK
1
TYPE OF RESEARCH
99
GRAPH: 6
CUSTOMER PERCEPTION ON
SERVICE CHARGES OF IDBI BANK
45
40 VERY LOW
35
LOW
PERCENTAGE
30
25 NEITHER LOW
20 NOR HIGH
HIGH
15
10 VERY HIGH
5
0
1
CUSTOMER PERCEPTION
 INFERENCE: Customer perception about the service charges of idbi bank is that the
charges are high.
GRAPH: 7
100
CUSTOMER SATISFACTION LEVEL
ON SERVICES OF IDBI BANK
VERY
45 DISSATISFIED
40 SOMEWHAT
35 DISSATISFIED
PERCENTAGE
30 DISSATISFIED
25
20 NEITHER
DISSATISFIED
15
NOR SATISFIED
10 SATISFIED
5
0 SOMEWHAT
SATISFIED
1
SATISFACTION LEVEL VERY
SATISFIED
 INFERENCE: The customer satisfaction level on services of idbi bank is somewhat

satisfied.
101
GRAPH: 8
SUGESTIONS FROM CUSTOMERS
45
40 IMPROVE
35 QUALITY
PERCENTAGE
30
INCREASE
25 NUMBER OF
20 PRODUCTS
15 REDUCE
CHARGES OF
10
SERVICES
5 OPEN MORE
0 BRANCHES
1 AND ATM'S
SUGGESTIONS
 INFERENCE: Most of the customer suggested that idbi bank should open more
branches and ATM centers.
102
11.SWOT ANALYSIS OF IDBI BANK:
STRENGTHS:
 Effective personal service
It was observed that the entire staff at IDBI Bank renders a very personalize and a
cordial service to all its customers. The relationship is on a one to one basis and is
not mechanical like some other Banks. Needless to say IDBI Bank has got a team
of very skilled professionals who are always delivering the best of their
capabilities.
 Variety of Product Range
The range of retail products offered by IDBI Bank competes with the best in the
industry. The product range really gives the customer a feeling, of one stop
financial center, where they can fulfill all types of financial requirements. The
product range of the other new generation private banks is almost parallel.
 Efficient Lead Tracking System
IDBI Bank has a very effective tool to keep a track of each and every lead that is
received. The Bank has an appreciable amount of database, which can prove to be
useful for the Bank even in the future.
WEAKNESSES:
 Less branches viz a viz other banks
IDBI Bank being on the growth stages of Retail Banking has not really developed a
strong network of branches and ATMs. It has presently 92 branches across the
country, 279 ATMs, 6 extension counters spanning 68 cities across the country.
When compared to other Private Banks of the new generation these numbers are
low.
 Image of IDBI Bank
Often people on hearing about IDBI Bank relate it to its parent IDBI. Also the
image of IDBI Bank is of being a major thrust in Corporate Banking sector and in
the area of Investment Banking for large commercial projects.
103
 Low Awareness Due To Low Key Promotions
IDBI Bank needs to move on with more aggressive promotions.
OPPORTUNITIES:
 Increasing Interest Of People In Private Sector Banks
Due to the undesirable experiences with the Public Sector Banks,
more and more people towards Private Sector Banks. People now
want total hassles free Banking, which can be easily provided by the
new generation Private Sector Banks.
 Huge Demand and Supply Gap
Indian economy is expected to grow at 5-6% in the coming years.
This growth will continue to generate demands in the retail market
and the banks are appropriately suited to meet this need.
THREATS:
 Entry of New Players
The Government regulations being flexible than before, and seeing the
encouraging demand in the Retail Banking Sector, entry of new players might just
prove to be threat, keeping in mind the fact that IDBI Bank itself is at a growth
stage of Retail Banking.
 Saturate in the Segment
The Retail banking segment was identified by other Private Sector Banks like
ICICI and HDFC, pretty early, therefore all the major cities and urban areas are
about to get saturated with the retail products of these Private Sector Banks.
 Staff Turnover
Due to close involvement in the products offered in the Retail Banking Segment,
staff turnover can be very detrimental to the interests of the Bank.
104
SWOT ANALYSIS OF DEMAT:
STRENGTH:
 Faith in bank as an institution.
 Better technology.
 Strong networking.
 Customer base.
WEAKNESSES:
 Late entrant.
 Lack of awareness among the customers.
 Low knowledge level among the staff.
OPPORTUNITIES:
 Tapping of NSE members.
 Tapping of sub brokers.
 Clients of NSE members.
 Tapping of customers in tier II & tier III cities.
THREATS:
 Foreign banks.
 New generation banks.
 NSE members DP’s.
 Public sector banks.
 Costing.
DEMAT ACCOUNT POSITIVES:

 Confidentiality of transaction is maintained.
 Instructions on various transactions need not be passed on to another DP.
105
 Follow up for carrying instructions is not required.
 Market of pledged shares can be done in-house.
 On-line availability of information
 Wide reach as all of the branches offer Demat Account and LAS.
 Professional and warm service by NSE certified executives to cater to Demat
account and LAS.
 Competitive rates of interest.
LIMITATIONS:
The project and is analysis is based on information and data collected from various
sources so it has its own limitations.
 The first limitation was of time constraint because the customers were not ready
to devote their time.
 People are not aware about the demat and its benefits.
 Views of individuals may not be consistent in the future.
 Every bank provide with some distinct services, so there was problem in
collecting the rate structure.
SUGGESTIONS
 Competitive Pricing:
IDBI Bank should make its pricing of services competitive to sustain the pressure
from its competitors and become the leader.
 Bring Out More Customerised Products:
The Bank should focus on catering to different segments like senior citizens,
working women, college students and even small kids by bringing out specialized
products so as to attract all segments of the society.
 Adopting Differentiation Strategy
As is true for any service industry, there is difficulty in differentiating one's own
strategy from those of the competitors. The major problem is that, in most
services innovations are easily copied. Few of them are preemptive in the long
run. Also today a wide range of products are available to suit the needs of the
106
clients, in future the Banks and NBFCs will have to grow their product range even
further. Constant innovation will be required, as along with the change in
customers their requirements will also undergo change. Along with the change in
product profile and competitive prices it is very essential for Banks to provide
quality service and enhanced speed of delivery. Still if IDBI Bank can introduce
regular innovations it can gain an advantage over its competitors and may retain
its customers.
 Achieve Consistency in the Service Quality
This can be achieved by improving on the training being imparted to its front line
staff and officers and preparing a service blue print which would depict the
service events and process flow chart, which will help it to recognize potential
failure points.
 Diversified Portfolio of Products
The products of IDBI Bank should be such so that they are compatible with
different levels of income. AT present IDBI Bank is comfortable in this regard but
any change in the portfolio in future should consider the following factors:
_ the preferred growth of the balance sheet.
_ the preference of lending to various segments
_ the degree of risk aversion.
_ the relative profitability and risk of alternate business options.
_ position itself as a fast bank by being competitive on prices, providing rapid
credit decisions and offering choice of products.
 Aggressive Promotion
Although the visibility of the products has increased, but vis-à-vis competition
with other new generation Private Sector banks there is a considerable scope for
improvement. IDBI Bank needs to move on with more aggressive promotions.
More thrust is given on marketing of products. Mere designing of new products
will not help. Sales promotion activities should be geared up. A detailed market
research is undertaken before identifying a particular market segment as a target
group.
 Expand Network
107
IDBI Bank being on the growth stages of Retail Banking has not really developed
a strong network of branches and ATMs. It has presently 92 branches across the
country, 279 ATMs, 6 extension counters spanning 68 cities across the country.
When compared to other Private Banks of the new generation these numbers are
low. New delivery channels, which are at present introduced in major cities of the
country, will have to be extended to other cities too as potential available in these
cities is still unexploited.
 Improve Infrastructure
Infrastructure outsourcing should be done to lower the cost of service channels.
This will give Banks more time to concentrate on core business area instead of
getting involved in the intricacies of technology. There is a need for new
technologies with their reinvented business models. Banks, who will adopt these
changes at the earliest, will reap the fruits of increased efficiencies.
 Customer Base Strengthened
Customer base should be strengthened. More and more customers are encouraged
to shift to `plastic' from `paper' so that usage of new delivery channels increases.
CONSTRAINTS THAT CAN BE FACED BY THE BANK

 Designing their own financial product is very costly and time consuming for
Banks.
 Customers nowadays prefer Net Banking to branch Banking. The Banks, which
are slow in introducing technology-based products, are finding it difficult to retain
the customers who wish to opt for Net Banking.
 Customers are getting attracted towards other financial products like mutual funds
etc.
 Though Banks are investing heavily in technology, they are not yet able to exploit
the same to the full extent.
STRATEGIES FOR DEMAT

 Tapping of main broker’s account.
108
 Tapping of sub brokers account.
 Tapping of brokers client account
 Forming of direct selling teams (DST).
CONCLUSION
IDBI Bank is aware of the importance of retail Banking business and its strength in
improving their bottom line. It is the quality of products, level of technology and
speed of services rendered which is going to be the deciding factor. It will have to
differentiate from other Banks offering similar products to the customers. With
blossoming consumerism in India, retail banking has come to stay and in the scene of
close competition, the common consumer is the ultimate beneficiary in terms of
quality and cost. As more and more players chant the mantra of retail Banking, IDBI
needs to provide customer a choice of options at the lowest cost to choose from. With
the barriers for Internet Banking diminishing new players will gain the market access
and provide similar services to customers making the existing players to be ever
vigilant and look out for choices.
In this fierce war for higher market shares in retail segment the only beneficiary is the
customer. We can say that customer is the king for banks nowadays.
109
110
QUESTIONNAIRE
1. What is the procedure for dematerialising the physical share certificates?

Ans: You need to open a demat account in the name(s) in which the share
certificates are and submit the share certificates along with the duly completed
Demat Request Form (DRF) either by courier or by hand delivery at the nearest
DP branch. You can also transpose-cum-Demat the shares.
2. What is transposition cum demat and what is the procedure?

Ans: Transposition cum demat enables the customer to transpose
(swap/interchange) names of the joint holders in desired order along with the
process of dematerialization of certificates. For e.g. If A & B hold a Demat
account and if the certificates are in the names of B & A the shares can be
dematerialised in the demat account of A & B. The customer should submit duly
completed transposition form along with the Demat Request Form (DRF) and the
share certificates. No new name can be added through transposition process.
3. How long will the dematerialization process take?
Ans:The dematerialization process takes about 30 days.
4. What is the process for dematerialising physical shares of a joint account in case
of death of one account holder?
Ans: In this case, such shares could be dematerialised in the demat account of the
surviving member(s) provided that the surviving member(s) submits a
Transmission cum Dematerialization form duly signed by all the surviving
holders and a notarized/certified true copy (by nationalized bank) of the Death
certificate.
5. How can I demat shares with Pre Marital/Maiden names?

Ans: To demat such shares you need to submit a certified true copy of the
marriage certificate along with the DRF.
111
6. Can I as a sole holder of the share certificates add one more name as a joint holder
at the time of dematerialising share certificates?
Ans: No. However, this can be done by opening an account as the sole holder
(account A) and dematerialize the share certificate. Then you need to open another
depository account (account B) in which you are the first holder and the other person
is the second holder. and make an off market transfer of the shares from the account
A to account B. You will have to incur a charge on this transaction.
7. Which statements would I be receiving?
Ans: Usually, the Transaction statement and the Holding statement are sent by
courier on a quarterly basis. If there is a transaction in the demat account you will
receive a statement on a monthly basis. And if there is no transaction or there are no
holdings in the demat account you will not receive any statement. Other than this, the
requested statements will be charged Rs. 20/- per demat account.
8. How can I check for my demat holdings online on IDBIpaisabuilder.in?

Ans: After you log-in to your Trading account, select the ‘Demat Allocation’
option under the ‘Trading Site’ option and click on the Go button to view your
demat holdings.
9. What is the procedure to transfer the shares from one demat account to other?
Ans: To transfer the shares from one demat account to another, you have to use
the Delivery Instruction Slip (DIS)/Transfer Instruction For Delivery (TIFD) Slip
as provided by the DP with whom the source demat account is, mention the
details of the demat account where you wish to move the shares and specify the
shares you wish to transfer. This DIS/TIFD Slip is required to be submitted to the
nearest branch of the DP with whom you are holding your demat account.
112
BIBLIOGRAPHY:
 An investors guide to depositories (NSDL).

 NSDL Depository module 2003.
 ICFAI Journal for January and April 2003.
 Economic Times.
 Brochures of all banks covered.
 Intranet of idbi bank.
 website
 www.hdfcbank.com
 www.standardchartered.co.in
 www.icicibank.com
 www.abnamro.co.in
 www.nsdl.co.in
 www.idbibank.com
113

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RETAIL BANKING: DEPOSITORY,

FUNCTIONING & SERVICES

1. PROFILE IDBI BANK:

Management Team - The Core Strength of The Bank:

TECHNOLOGY AND TECH INITIATIVES:

STRATEGIC RETAIL INITIATIVES:

CORPORATE BANKING AND CREDIT:

RETAIL BANKING AND TECHNOLOGY:

AT BEST, A SECOND BEST:

DAWN OF DIGITAL ECONOMY: THE NEW ECONOMY:

THE PERVASIVENESS OF TECHNOLOGY:

IS INTERNET ALWAYS PREFERRED?

3.ELECTRONIC CLEARING SERVICE (DEBIT CLEARING):

National Securities Depository Limited (NSDL) is an organization Promoted by

 The Depository - NSDL.

NSDL- BANK- AN ANALOGY:

• Holds funds in accounts • Holds securities in accounts

• Either of holders can • All joint holders to sign

STEPS FOR JOINING AS A DP:

PROCEDURE IN CASE OF CASH CORPORATE ACTIONS:

PROCEDURE IN CASE OF NON- CASH CORPORATE ACTIONS

DIVIDEND DISTRIBUTION SCHEME OF NSDL:s

OPENING DEMAT A/C? ALSO LOOK FOR TRUSTWORTHINESS:

The pledge/hypothecation transactions go through the following procedures:

PROCEDURE FOR CONFIRMATION OF CREATION OF

PROCEDURE FOR CONFIRMATION OF

2 CONFIRMATION CLOSURE REQUEST

PROCEDURE FOR INVOCATION OF PLEDGE/

PROCEDURE FOR CONFIRMATION OF HYPOTHECATION

CORPORATE BENEFITS FOR PLEDSED / HYPOTHECATED

CHECKLIST FOR PLEDGE/HYPOTHECATION:

 The request for confirmation of pledge is given before the closure

date mentioned in the instruction form.

TRANSMISSION OF SECURITIES IN THE DEPOSITORY

Transmission of Securities held jointly:

Transmission of Securities held singly:

PROCEDURE FOR CM POOL TO CM POOL TRANSFERS:

FEATURES OF BENEFICIARY ACCOUNT:

BANK ACCOUNT DETAILS:

STANDING INSTRUCTION FACILITY:

T+2 SETTLEMENT CYCLE:

8.SPECIAL ELECTRONIC FUND TRANSFER

There will be 3 settlement batches of SEFT on weekdays at 12 noon, 2 pm and 4 pm.

ROLE OF DEPOSITORY PARTICIPANT (DP):

9.EXECUTION OF DELIVERY INSTRUCTIONS:

Issuing DI slips to clients

Accepting of delivery instructions:

RECTIFICATION/ REPLACEMENT OF REJECTED DELIVERY

RECORD MAINTENANCE OF DI SLIPS AS PRESCRIBED BY

SAFEGUARDS AND PRECAUTIONS

10.CONCEPT OFLOANAGAINST SHARES.

Loan Against Shares (LAS): Operation:

PREREQUISITES FOR LAS:

OTHER ELIGIBILITY CRITERIA:

PURPOSE OF THE LOAN

CONTENTS OF THE APPLICATION FORM BOOKLET

CHECKLIST FOR LAS:

ISIN Code of nifty fifty companies

How to study ISIN codes?

DATA COLLECTION METHOD:

Comparison of depository charges

Why we need an investment plan