NSDL: Performance and services update

IN THE last four years, India's capital markets have completed the transformation to paperless settlement to the extent of 99.5 per cent.

This level of settlement in demat form could not have been imagined in so short a period of time when the National Securities Depository Ltd (NSDL) started its operations.

IN THE coming year NSDL will consolidate its position, improve process efficiencies and add new features to the Depository operations. The endeavour will be to enable the DPs to service investors with more uptodate information even at their branch offices. NSDL also hopes to reach out to investors by making it possible for DPs to provide Internet-based services. Brokers are already availing of NSDL's Internet facility to `view' their settlement accounts.

NSDL performance summary: As on October 31, 2000 164 depository participants were offering depository services.

* More than three million investor accounts have been opened from across the country and abroad.

* More than 3,580 clearing member accounts have been opened to facilitate trading and settlement of demat shares in the stock exchanges connected to NSDL.

* As on October 31, 2000 1,932 companies signed agreements with NSDL. Out of these, demat facilities were available for 1,858 companies.

* As on October 31, 2000 DP services were available from more than 1,800 locations across the country.

* In October 2000, a total quantity of more than 630 million shares worth Rs 1,43,0000 crore were settled in the demat form in the stock exchanges connected to NSDL.

* As on October 31, 2000 more than 25,400 million shares having a value of Rs 3,38,0000 crore were dematerialised.

Direct credit of shares: NSDL offers the facility of directly crediting investor accounts with securities arising out of corporate actions such as Bonus issue, Capital restructuring, amalgamation, demerger, subdivision. This facility also includes crediting of shares on allotment in a public or rights issue.

A total of 637.19 crore equity shares have been credited to 16.29 lakh beneficiary accounts in the above-mentioned corporate actions through NSDL. This facility has helped avoid printing of 6.37 crore share certificates (assuming a market lot of 100). In addition, companies benefited by savings in cost and effort involved in handling the certificates, postage, administrative costs and other incidental expenses.

Direct credits to beneficiaries through NSDL depository system eliminates the risk of loss of securities in transit or fraudulent interception of the same. This has also resulted in reduction in the number of investor grievances pertaining to non-receipt of corporate benefits.

Dividend distribution service: NSDL recently undertook dividend distribution directly to shareholders holding shares in demat form. This activity was carried out for eight companies -- BSES Ltd., Essel Packaging Ltd., Western Hatcheries Ltd., Satyam Computer Services Ltd., Global Telesystems Ltd., Hindalco Industries Ltd., Zee Telefilms Ltd. and VSNL. A total of Rs 96.24 crore was distributed to 3,14,657 shareholders constituting more than 87 per cent of the dividend payable on the shares of these companies held in demat form.

Demat of debt instrument: The Finance Act 2000, has paved the way for transactions in debt instruments in demat form by exempting debt instruments from stamp duty on transfer in a depository. Since then, more than 26 corporates have joined NSDL to make available 235 debt instruments for dematerialisation.

Some of the major issuers of debt instruments such as ICICI Limited, IDBI, HDFC, Larsen and Toubro, Hindalco Limited, Indo Gulf Corporation, Reliance Industries Limited, Reliance Petroleum Limited, Ford India Limited, Rural Electrification Corporation Limited, etc., are now offering this option to their bond holders (debenture holders). This has given a choice to investors to hold the debt instruments in demat form.

Holding debt instruments in demat form gives following benefits to the investors:

* Savings in stamp duty payable on transfers.

* Electronic settlement of trades across the country.

* Flexibility in denomination of the securities.

* All investments get summarised in a single Statement of holding.

* All the benefits of dealing in demat form.

Keeping in view the benefits of Demat, some issuers are making allotment against fresh issues of debt instruments, which are being given directly in Demat form. Maruti Udyog Ltd., National Highway Authority of India, Grasim Industries Ltd. and Orix Auto Finance Ltd. are few examples.

Government securities: A new investment opportunity is now made available to investors through two Primary Dealers -- PNB Gilts Limited and IDBI Capital Market Services Limited. They have taken the lead in retailing government securities in demat form. Investors can buy government securities even in scores of Rs 25,000 in demat form.

(Edited extracts from NEST Update published by NSDL for October-November 2000.)