Demat and its nuances


Well-Known Member
I decided to start a new thread on demat because this is one of the least discussed topics when it comes to trading and no one seems to be interested. The problem is however that I am a technical person (no not the analysis type technical as in electronics and comps). I have gained a little knowledge by reading from various websites and mags and it is like a jumble. Hope we can all dicuss and put the pieces into place.


Well-Known Member
Demat matters by P Mehta

To start off for newbies who don't know much about dmat/DP there's an excellent write up from the rediff pages:

Demat matters by P Mehta

So what is a depository and what is dematerialisation all about? What is the reason for Chirag and Rakesh to be happy about?

The process of buying or selling shares through a recognised broker of a stock exchange is even now the same. What has changed is that post-transaction work has become much simpler.

The depository is a system that eliminates this voluminous and cumbersome paperwork involved while buying and selling shares. The depository enables the conversion of physical securities in electronic form through a process of dematerialisation (in short it is referred to as demat) of share certificates. Thus it facilitates share transactions and transfers electronically without involving physical share certificates or transfer deed. If after getting his shares dematerialised the investor wants his shares back in physical form, he can get it back by a process called as rematerialisation.

The depository system consists of the depository participants (DP), companies (or their registrars) and the investor. Currently in India there are two depositories namely the National Securities Depository Ltd (NSDL) and the Central Securities Depository Ltd (CSDL).

Put simply a depository is similar to a bank. In order to utilise the services of a bank an investor opens a bank account. Just like one holds funds in a bank account, he holds shares in a depository account. In a bank one can transfer funds between various accounts without actually handling money. In a depository he transfers shares without actually selling them.

A Depository Participant (DP) is the first point of contact with the investor and serves as a link between the investor and the company through the NSDL or CSDL for dematerialisation of shares. A depository participant could be a financial institution (like ICICI), bank (HDFC Bank, Global Trust Bank), custodian (Stock Holding Corporation) or a broker (Action Financial).

The first step for a investor would be to approach a DP of his choice and open an account just like one does with a bank. The account would have to be opened in the same order as the shares are held. There is no restriction on the number of depository accounts an individual can open.

After that in case he wants to get his physical shares dematerialised he can surrender these shares to the DP who then confirms the details with the concerned company. If everything is found in place the shares are dematerialised and credited to the investors account. The whole process may take somewhere close to 40 days. Just as a bank gives a statement that keeps records of all transactions made, the DP gives a statement for every buying or selling transaction done.

After the physical shares have been converted into electronic shares the modus operandi is simple. When an investor sells shares, he instructs his DP to debit his account with those shares. Similarly when he buys shares through his broker, the DP credits his account with those shares. In case a company comes out with a bonus issue or a rights issue, the investor has nothing to worry about, as these shares will directly come into his depository account. However, if he wants the shares in physical form he can request the company to do so.

Why go for a depository?

According to leading players in the stock markets, in two years time more than 90 per cent of shares will be traded in the depository mode. The benefits of a depository are obvious. As soon as you buy shares, it takes merely a day's time to become the owner. One does not have to send shares to the company for transfer. Thus there is no possibility of fake shares or loss of shares.

Another reason for investors to go in for a depository is the fact that as time passes, brokers will be reluctant to deal with physical shares. This is because brokers are exposed to the risk of bad deliveries (bad deliveries are those share certificates which the registrar cannot transfer because of some problem of the transfer deed such as mismatch of signature or outdated/invalid transfer deed). It may take upto a year for a broker to discover the risk. In case of a depository the only risk will be that the investor does not own the shares which he has sold. However, this will be known within 10-15 days. Hence the broker would prefer to deal in securities in the depository mode.

Today there are as many as 533 companies where the investor can buy and sell dematerialised shares. Similarly there are 109 DP participants who have as many as 1191 service centres across the country.An investor could look at some of these parameters before choosing his depository participant

1. Convenience as far as location is concerned so that a investor can operate his account irrespective of his location. Stock Holding Corporation has around 70 branches of its own and a equal number of franchisees.
2. Telephonic service: There should be a special cell, which answers all investor-related query immediately on the phone itself.
3. No hidden costs: Some banks insist on the individual opening a savings account with the bank wherein he would have to maintain a minimum deposit of Rs.5,000. Some other foreign banks have a minimum transaction cost of Rs.50.
4. A player for whom a depository is a core business should be preferred unlike a player for whom it is a mere add-on business.

Though opening a depository account involves a small cost, the benefits are but obvious.


Well-Known Member
For a safe and convinient demat experience

For a safe and convinient demat experience::
- Submit a copy of your PAM Card to your Depository Participant (DP)
- Keep your Delivery Instruction Slips in safe cutody. Fill the slips completely before signing and submitting to the DP. Do not sign blank slips
- Submit Delivery Instruction Slips to your DP before the deadline time
- In case of a change in your address or bank details, infor your DP immediately
- Make sure your DP send Transaction Statements to you regularly
- Avail the Nomination facility for your Demat Account
- Give Power of Attorney only if you desire and that too, to a trusted person
- Avail of the internet based IDeAS and SPEED-e facility to view and transfer your securites online
- Avail of SMS Alert facility to know transfer of shares from your account
- Avail of "Transposition cum Demat" facility to dematerialise secutities held in joint name in the same account even though names in the certificates are in different order

* Issued by NSDL


Well-Known Member
From what I have gathered so far Depositories (CDSL, NSDL) provide direct access and info services to BO via email, SMS etc to monitor their accounts.

CDSL provides:
easi/easiest: Electronic Access To Securities Information and Execution of Secured Transaction
Which allows you to access your account directly through the CDSL site instead through you DP. Here you can check your transactions and corporate annoucements
SMART: SMS Alerts Related to Transactions

NSDL provides:
STEADY (Securities Trading - information Easy Access and DeliverY) - that enables brokers to deliver contract notes to custodians and/or fund managers electronically
ideas: NSDL has launched a facility called IDeAS from January 1, 2004 for investors to view balances and transactions in demat accounts updated on an online but not real time basis. (30min delay)
Speed-e: SPEED-e is a common Internet Infrastructure that enables the Depository Participants (DPs) to provide depository services to their clients. Demat account holders (including Clearing Members) subscribing to this facility can submit delivery instructions to their DPs through SPEED-e website, instead of submitting delivery instruction slips (in paper form) to their DPs
SMS Alert: same as the one provided by CDSL


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I have a few question like
- what are delivery instruction slips?
- Which is better NSDL or CDSL
- What are the charges various brokers are charging for demat
- can we have one dmat and 2 brokers and have the two brokers seperate so as to split one as an investment and one business (for tax purposes) etc


Active Member
I have a few question like
- what are delivery instruction slips?
- Which is better NSDL or CDSL
- What are the charges various brokers are charging for demat
- can we have one dmat and 2 brokers and have the two brokers seperate so as to split one as an investment and one business (for tax purposes) etc
1. These are nasty things that fortunately should be absent from your life if you have signed all the papers pushed at you by your broker if you have opened an online trading account cum demat account. One of those papers would have been a power-of-attorney enabling the broker-cum-DP to execute delivery orders on your behalf when you sell a share on delivery basis.

2. I don't know but the appearance of CDSL (largely sponsored by the BSE) made NSDL (largely sponsored by the NSE) get a little more competitive in pricing! End of monopoly and all that. My broker Geojit seems to be tied up with NSDL.

3. Various brokers have various charges for the demat angle and for the BTST angle. You have to visit the different websites are get this info. Geojit charges Rs. 11 (inclusive of all taxes, etc) per delivery instruction. I think they do not charge for BTST. I understand that India Infoline charges Rs. 16+ for delivery and BTST.

4. There should be absolutely no reason why you cannot have multiple demat accounts. If you do go for a demat account that is not run by the broker, it may work out slightly more expensive.
I have a few question like
- what are delivery instruction slips?
- Which is better NSDL or CDSL
- What are the charges various brokers are charging for demat
- can we have one dmat and 2 brokers and have the two brokers seperate so as to split one as an investment and one business (for tax purposes) etc
Hi lazytrader,

Please refer to your last query 'can we have one dmat and 2 brokers and have the two brokers seperate so as to split one as an investment and one business (for tax purposes) etc'.

I was having Demat & Trading a/c with Sharekhan. Recently angel broker agent contacted me and offered me trading a/c with angel (Same Demat a/c with Sharekhan). Benefits include far less intraday/delivery brokerage, no Demat AMC, low account opening charges. Now I use Sharekhan a/c for investments (purchase of Gold ETFs) and angel a/c for trading.


Jitender Garg

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