It is known that investors in India hold over Rs 88.8 lakh crore worth of securities in over 2.1 crore demat accounts. However, what goes unnoticed is that these securities are with two depositories — Central Depository Services Ltd (CDSL) and National Securities Depository Ltd (NSDL).
CDSL and NSDL operate through their depository participants (DPs) such as banks, financial institutions and brokers. In a chat with Business Line , P.S. Reddy, Managing Director and CEO of CDSL, provides insights into the working of the depository business in the country.
What is the impact of no-frills demat accounts on CDSL and its DPs?
The cost of maintaining a demat account comes to about Rs 200 which is lost by DPs if investors opts for no-frill demat account. No annual maintenance charges are levied on investors by CDSL. The no-frills demat account will not have any impact on our revenues.
We charge only for transactions and that too on the debits to a demat account. Our income varies according to the number of transactions in the stock market. The higher the number of transactions, the higher will be our income.
Why has the number of demat accounts remained within a range in the last three years?
Markets have been bad for the retail investor in the last 3-4 years. Equally, a good number of demat accounts are also being closed.
How does the DP charge the investor for an RGESS account?
Investors can opt for a no-frills demat account for RGESS scheme. But demat account charges were never an issue.
Why has RGESS not taken off?
Every scheme has to be popularised and taken to the masses. When markets are booming every scheme will run. Otherwise people tend to pick holes even in the best of schemes.
What about the qualified depository participant (QFI) business?
I believe some tax issues have to be sorted out. Meanwhile, SEBI has already constituted a committee (Chandrashekhar Committee on QFIs) to look into rationalisation of QFI/FII investments into India.
How has SMS alerts helped?
Investors receive an alert as soon as a transaction is done through their trading account. If a transaction has been done without their knowledge they can immediately take up with the issue with their stock broker or stock exchanges. Even depositories send SMS alerts whenever there is debit in the demat account. SMS help in mitigating risk and minimise misuse.
Are companies using e-Voting facility offered by you?
We are one of the few countries which offer this facility of e-voting by shareholders on company resolutions. CDSL introduced it in November, 2009. About 160 companies have signed up and more than 48 have used it. However, the participation is low but we keep sending SMS and e-mail alerts to investors regarding this facility.
What did you learn from the Roopalben Panchal (IPO scam) case?
KYC due diligence has become robust. Today one can have even multiple demat accounts with different brokers provided the KYC is in place. Use of PAN (permanent account number) has made opening a fictitious demat account next to impossible.