Study of ICICI Direc - Com - Demeterilisaton in ICICI Capital

A Study On ICICI Direct.Com, Demeterialisation of ICICI Capital Ltd.
EXECUTIVE SUMMARY
India has two hundreds years old tradition in securities. Infact that first Indian
stock Exchange established in Bombay is the oldest in Asia. The earliest
security dealings were transactions in loan securities of the East India
Company, the dominant institution of those days. Corporate shares came into
the picture by 1830’s and assumed significance with the Companies Act of
1956. In 1887 the broker community gave birth to the “Native Share and Stock
Broker Association” which is known as Bombay Stock Exchange.
The Indian Capital grew at a very moderate rate from 1951 to 1980. However
it registered an impressive growth in 1980’s. The process of liberalization and
the transparency in operations has raised the interest of the foreign investors
in India. Till 1978 there were only eight recognized exchanges in India.
At present there are twenty-two stock exchanges including OTCEI (Over the
Counter Exchange of India) and NSE (National Stock Exchange). Initially the
exchange operated on an outcry system i.e. manual system of trading. Due to
increase in trading volumes, the number of issuers increased substantially,
and the birth of NSE’s highly transparent automated system came into
existence. Even then there was an increase in paper work causing a gridlock
at every stage in the stock market. This delays the clearance and settlement
of traders, registration of securities in the share holders name and due to this
it increased the back office paper work of intermediaries. These outdated
systems have increased settlement risks and have rendered the
implementation of a delivery versus payment system impossible.
Introduction of de-mat and net trading has revolutionized the capital market.
Internet trading has made the process of buying and selling of shares much
faster and easier than physical broker. It provides integration of bank, broker,
stock exchange and depository participants. This eliminates the rigorous
process of investing in stock exchange.
East West College Of Management, Bangalore 1

Today when one wants to invest in stock market, he has to contact broker on
phone or meet him personally to place order. Broker gives much importance
and additional service only to high net worth customers but the internet
trading has given a opportunity to small investors to get best service at much
lower price than physical broker. Online trading has basically replaced a
phone call with the Internet. Instead of interacting with the broker over the
phone, the customer is clicking the mouse. Online trading has given customer
a real time access to account information, stock quotes, elaborated market
research and interactive trading. The prerequisites of Internet trading are a
computer, modem, telephone connection, and registration with broker, a bank
account and depository account.
Introduction of depository services is considered as the ‘Beginning of the Era

of Stocks@Click’. This means that you can arrange delivery of securities
(shares) sold any time, anywhere to any one by click of mouse.
Dematerialization facilitates to keep the securities in electronic form instead of
paper form. It offers more advantageous than the physical certificate form.
The scope of this study is limited to the performance of the industry.
1.1 GENERAL INTRODUCTION

PHYSICAL CERTIFICATES - THE TRADITIONAL WAY
The Indian capital market has seen an unprecedented boom in its activity in
the last decade. We can now boast of a very large investor population and
substantial volumes of trade. However, this surge in activity has brought with
it, numerous problems that threaten the very survival of the Capital market in
the long run. A closer inspection of the problems would reveal that most of
them arise due to the intrinsic nature of paper based trading and settlement.
This century-old system of trading and settlement requires handling of huge

volumes of paper leading to increased costs and inefficiencies.
Simultaneously, they expose the investors to greater risks putting them at a
disadvantage. Some of these areas are:
 Unwarranted delay in transfer of shares. It takes 30 to 60 days for the

investors to get the shares lodged in their name;
 Possibility of forgery on various documents leading to bad deliveries, legal

disputes etc;
 Theft of shares leading to defective title in shares purchased and

subsequent litigation;
 Prevalence of fake certificates in the market;
 Mutilation or loss of share certificates in transit;
 Increased transaction costs due to stamp duty, fake shares, rejection by

registrars, etc.
This has made the investors, both retail and institutional, wary of entering the
Indian capital market. In this scenario, it was felt that the getting up of a

depository and the introduction of scrip less trading and settlement is

imperative for the efficient functioning of the market.
The Indian capital market has witnessed numerous changes in the recent
past. Historically stock market booms have always resulted in a number of
problems for the lay investor. Sometimes, the problem may magnify them and
threatens to engulf the entire capital market. A close introspection of these
problems will reveal that most of them are due to intrinsic nature of paper
based trading and settlement. All this may have driven away many potential
investors and Foreign Institutional Investors. Dematerialization of shares is
looked upon as the remedy for the ‘paper’ based problems.
With effect from august 19, 1998 SEBI has granted certificate of registration of
Central Depository Services (I) Ltd. (CDSL).
Yet even with demat, from the point of view of investors there are numerous
problems. Here Wallet Watch introduces you to setting up of a demat account
and introduction of scrip less trading and settlement. There are numerous
benefits of this scrip less trading and settlement, which Wallet Watch has
discussed in detail.
A Number of questions will be arising in the investor’s mind like;
 What is demat?
 What is depository?
 What is depository participant?
 How to dematerialize your shares?
 How to sell /buy the dematerialized shares?
1.2 INTRODUCTION TO DEMATERIALIZATION

Even as the European and American stock markets reckon with the changes
brought about by the Internet and IT/telecom advances, the Indian stock
market has quickly moved to global standards.
The sheer breadth of the changes since the National Stock Exchange started
operations in 1994 and with the Securities and Exchange Board of India
(SEBI) also driving the changes in the market system, have enabled the
Indian market to move well ahead in just five years.
Even as online automated trading and better clearing and settlement

mechanisms have been put in place, perhaps, the most significant change in
the Indian market has been the coming of paperless trading; it may well be a
precursor to the next big changes – rolling settlements and Internet trading.
But the push towards paperless trading stands out even in a decade when the
market landscape has changed beyond recognition.
Dematerialisation (holding and trading securities in paperless mode) was an

alien concept in India before 1995; in five years, large quantities of paper
have been flushed out of the system. Since the entry of the foreign
institutional investors (FIIs) and online trading, the old system, laden with
paperwork at every conceivable stage, was out of place in an otherwise fast
trading environment.
As the FIIs complained about the paperwork as a major constraining factor,

the government and SEBI took notice. The requisite legislative changes were
put in place quickly - the Depositories Act, 1996 was passed and the NSE,
with the UTI and the IDBI, set up the National Securities Depository Ltd
(NSDL).
But the depository concept did not gain popularity; the FIIs which had
clamoured for its introduction, now ignored it. The reason: Lack of liquidity.
But, unless the institutional investors stepped in, there could be no liquidity.
This stalemate frustrated the push for a paperless environment.

Until SEBI stepped in, that is.
With regulatory pushes SEBI, in phases, made demat trading in stocks

mandatory for institutions first and, then, for all investors. Mandatory
paperless trading, forced the FIIs to dematerialise their holdings quickly.
As a consequence of SEBI's action, most major stocks are traded in the

paperless mode now. The second phase will involve some 200 stocks in a few
months time. The effect of SEBI's action is evident from NSDL's statistics. A
total of 698 companies, with a market capitalisation of Rs. 7,37,300 crores
(almost 80 per cent of the market capitalisation of all listed stocks), is enrolled
with the NSDL.
With 13.65 billion shares in the demat mode, nearly 19 million investor
accounts, and securities valued at Rs. 3,96,800 crores ($91 billions) actually
dematerialised, the concept of dematerialisation can be said to have taken
roots. If the regulatory direction is any indication, more paper will be flushed
out of the system in the next two years.
The costs of dematerialisation have declined as the NSDL slashed charges as

volumes expanded and the competition _ from the Central Depository
Services Ltd (CSDL) floated by the BSE _ started in 1999 second half. A
series of measures by SEBI and NSDL also helped ease the strain faced by
retail investors.
From a long-term perspective, demat in India is of considerable significance.

Not only has the general trading environment improved and quickened,
volumes too have perked up, even in the demat segment. With demat taking
off, there is now scope for an improvement in the quality of investor services.
As a consequence of dematerialisation, the Indian market is also well

prepared for web-based trading though the quality of telecom infrastructure
and inadequacies in the banking system-stock exchange linkages may cause

delays. Notably, with regard to the thrust towards paperless trading, the Indian
market managed in three years what took even the US much longer.
With a high degree of dematerialisation a reality, the stage is set for rolling
settlements and web-based trading. Once these are in place, the Indian
market will have moved closer to the standards in advanced markets, such as
the US. And paperless trading may well be the catalyst for such a rapid
advancement.
This is the concluding week of Business Line's 20-week series Markets – a

Century in Retrospect, which featured the most significant market- and
corporate-related events. Other, equally significant, specific topics of a micro-
nature will be published through the year.
* As conducted the study of S. Vaidya Nathan and BL Research Bureau
AN ANALOGY:
Table No. 1.1 Difference between Bank and Depository Participant
Bank Depository Participant
- Holds funds in Accounts. - Holds securities in account.

- Transfer funds between accounts. - Transfer securities between
accounts.
- Transfers without handling cash. - Transfers without handling
physical securities.
- Safekeeping of money. - Safekeeping of securities.
1.3 DEPOSITORY SERVICES - BEGINNING OF THE ERA

OF STOCKS @ CLICK

Today it is a practical reality that you can arrange delivery of securities

(shares) sold anytime, anywhere, to anyone by a ‘click’ of the mouse and it is
possible to trade in securities and settlement of the accounts from the
convenience of a sitting room or through a laptop. This is made possible
because of the internet facility. The depository is responsible to deliver and
receive securities traded at the stock exchanges, which are the business
partners of the depository. It doesn’t deal with financial aspect of the
settlement of the trade.
Dematerialization of securities (shares) was the commencement of the era of

the stocks. The beginning was made in 1996, with legislation of the depository
act 1996 and SEBI regulations 1996. The securities are now a nattier
produced.
1.3.1DEOSITORY SERVICES
 Linked to the capital markets.
 Related to securities.
• Shares
• Debentures
• Bonds
• Commercial Papers
• Other Financial Instruments
1.4 THEORETICAL BACKGROUND
The dematerialized form of shareholding and the depository mode of trade

(scrip less trade) have been in operation in developed financial markets for

over 15 years. In India, the first depository commenced operation a decade

back and is relatively new. The Indian financial market is in need of both scrip-
based and scrip less trade, but the investing community, which is used scrip-
based trade, is bound to take some time to accept the latter. The scrip less
trading, till now a domain of the western world, institutional investors and GDR
holders is now mandatory even for small investors. All those who hold
physical share certificates have to get them dematerialized. If they do not,
they will be forced to do so at the time of sale.
The countless numbers of conservative Indians have to digest it, whether they
like it or not. First, the institutional investors succumbed. Then the high net
worth individuals, trading in more than a certain numbers of shares, were
forced to give in. now, it is the turn of the small investors of select-companies.
With their share certificates being replaced by small slips and receipts,
naturally the average investors will have their share of fears and
apprehensions. It is necessary to educate and convince these investors about
the benefit of Demat rather than forcing them to take part in the game.
DEMATERIALISATION
Dematerialization is the process by which physical certificates of an investor

are converted to an equivalent number of securities in electronic form and
credited to the investor’s depository account with his Depository Party (DP).
DEPOSITORY
A Depository account is similar to a bank account. It gives a summary of

investor’s holding of securities in the companies in the Indian Stock Exchange
and records transaction details of securities bought and sold during the

period. The information of securities holding is maintained in the electronic

form. The securities in the depository account do not have any numbers to
distinguish them and are identified by the total number of securities held for
each company by the depository on the investor’s account.
DEPOSITORY PARTICIPANTS
A Depository participant is an agent appointed by the depository and is

authorized to offer depository services to all investors. An investor can not
directly open a demat account with the depository. An investor has to open his
account through a DP only. The DP in turn opens the account with the
Depository. The DP in turn takes up the responsibility of maintaining the
account and updating them as per the instructions given by the investor from
time to time. The DP generates and provides the holdings statement from
time to time as required by the investor. Thus, the Depository Party (DP) is
basically the interface between the investor and the depository.
This system has now become mandatory for a list of specified shares. Under
this system, share certificates in the physical paper form as we know now
would be “Dematerialized” and the account of shares held would be kept like
money in a bank account. Whenever new shares are bought, the account
would be “credited” and whenever sold, the account would be “debited”. Such
accounts would be maintained by authorized agents are called “Depository
Participant” (DP).
WHAT IS A DEPOSITORY?
 A corporate body that can hold shares in electronic form.

 The depository is the registered owner of the securities and the holders
are beneficial owners.
 Identifies beneficial owner of the shares.
 Since there is no change in the registered ownership there is no stamp

duty levied on the transfer of shares.
 Till some time back all shares were held in physical form. Ownership
vested with the registered holder.
CONCEPT OF DEPOSITORY
A depository means a place where anything is deposited. It can be anything

and can include securities, physical goods, cash or money or valuables. We
have safe deposit vaults where we deposit our valuables for safe custody but
under our control. This is also a form of depository. Internationally there are
two systems to hold securities.
1. The first is to hold securities in a physical form. The ownership can be

transferred by any means, including the electronic media. This is also
known as ‘immobilization of securities’. This system is followed where the
physical form of securities is low, for example, bullion.
2. The second system is to retain the details of the security holding in an
account in an electronic format, which is similar to maintaining a bank
account. This is known as ‘dematerialization of securities’. This system is
followed where the volume of securities is substantial.
With the growth of the Indian capital market in the decade and the increasing
trading activity in the stock market, the volume of paper being exchanged has
increased exponentially and will continue to increase. This was one of the
primary reasons for India opting for the ‘dematerialization’ depository route.
NEED FOR DEPOSITORY

 Compulsory Demat trading introduced by SEBI in 1998

 No market lots
 Eliminates bad - delivery
 Effects transfer of securities immediately
 No stamp duty for transfer of shares
 No handling of huge paper volumes (paperless trading)
 Reduces transaction costs
 Moving towards faster and smoother settlement cycles
 Facilitates easy lending and borrowing on securities as it eliminates paper-
related risk.
 Eliminates risks associated with physical certificates like loss, theft,
mutilation, forgery, etc
1.5 INDUSTRIAL BACKGROUND

DEPOSITORY SERVICES IN INDIA
India has two depository service providers, The National Securities

Depository Limited (NSDL) was incorporated on 8th November 1996, and
The Central Depository Limited (CSDL) was incorporated in 1996 as the
second depository, to provide depository services to the investors.
The depositories are required to operate with in the legal framework of:
 Depository Act 1996

 SEBI (Depository and participants) Regulation ,1996
 SEBI’s guidelines issued from time to time
 Bye-laws
 Business Rules
The bylaw and business rules are designed by the depository based on the
above to govern its functioning and operational procedures, and also that of
its business partners.
The procedures of NSDL and CSDL are not significantly different form as it
has to follow the same legal framework to operate.
ONLINE SHARE TRADING IS WAITING TO TAKE OFF IN INDIA
First, screen based trading changed the way of transactions was conducted.
Than demat enhanced the ‘ease’ quotient for investors. Today, it is buying
and selling of shares over the net. There is also quotes and trading ‘on the
move’, thanks to wireless application protocol. TV trading – you could soon be
buying and selling shares through television screens with high speed Internet
access. The technology ‘tango’ has truly revolutionized access and it
converged interest of the investors.
But, let’s get back to online share trading. The online brotherhood is currently
pegged at an approximate 75,000. And daily trading turnover is estimated in
the vicinity of 0.75% of the combined BSE and NSE daily turnover of about

Rs11, 000 crore. Point is there is tremendous scope for growth. Especially
when you consider the US, where trading over the net accounts for about
55% of the total volumes. And, in some Asian markets the figures as high as
70%.
The ‘do-it-yourself’ framework online share trading offers retail investors the
three benefits of transparency, access and efficiency. Paper work diminishes
significantly, and no more painful trips to your broker to check if everything are
in order. Online trading has made it possible to universalize access to retail
investors. This was earlier very difficult, as the cost of servicing often-
outweighed transaction volumes. Online brokerage ranges between 0.05 -
0.20 percent of the value of transactions for non-delivery-based trades, and
between 0.25 - 0.95 percent for delivery-based trades.
Once major investments in online infrastructure are over and done with and
with economies of scale coming into play – it is expected that brokerage rates
would head further downwards. Then there is always a flip side: Transaction
velocity is crucial. And more often than not, connections are lousy. There is
also a degree of investor skepticism about online payment and settlement
mechanisms in spite of all the encryption and fire walling brought into play.
Time and technology will soon assuage these concerns, which hark back to
the ‘physical’ days.
Its ‘hats off’ to the investors we’ve come to a stage where advances in
technology have significantly empowered the retail investor fraternity. Access
to online trading and latest financial happenings, apart from quotes and
unbiased investment analyses, all consolidate into a value-added product mix
in tandem with evolving markets that are more free and fairer. The Net Result:
An inquisitive, informed and demanding investor.
Today’s investor is more involved in managing his or her assets and analyzing
a vast array of investment options. Technology and today’s enabled investor
have, in turn, driven competition, resulting in reduced cost of trading,
transparency in dealings and pricing info that is accurate and real-time. More

and more investors now want to know how their trades are executed, and
whether they have received the best possible price. Critical components of
execution quality include the prices at which orders were executed as well as
the speed of execution.
The quality of execution, in turn, hinges on efficient order routing. We owe this
to our investor fraternity. On to some threat perception Domestic funds,
foreign institutional investors and operators comprise the three main market
constituents. And all three include term investors as well as opportunists in
their pecking order. Some, for instance, hitch their fate with what the Foreign
Institutional Investors are up to. All this spells spurting volumes. But nobody is
concerned about the resultant volatility. And some, not all, offer free
investment advice over the net to lure rookie investors with misleading
information. Prices of scrip’s can also be influenced to the advantage of
vested interests, courtesy to the net. Unlike in the US, stockbrokers out here
willingly (or under the force of circumstance) assume the role of ‘advisors’,
sans the neutral, non-vested stance. So, how do all things impinge on the
ordinary guys on the ordinary dreams?
Compare notes on margins, brokerage rates. But most importantly, think

carefully about the type, size and frequency of trades that you will be into
before opting for an online service provider. Most importantly, does your
online broker have what it takes to handle an upsurge in trading activity?
Goes without saying that it’s becoming easier to trade online, but it’s also
becoming easier to lose your money. So, carefully does it having said all that
it all boils down to investor confidence. This, to my mind, is a function of
investor education, streamlined and user-friendly systems, transparency,
efficiency and personalized service. All this assumes the cent restage, which
is illuminated by technology and choreographed by, well-meaning,
decipherable and implement able regulation.
CONCEPT OF DEPOSITORY
A depository means a place where anything is deposited. It can be anything

and can include securities, physical goods, cash or money or valuables. We

have safe deposit vaults where we deposit our valuables for safe custody but
under our control. This is also a form of depository. Internationally there are
two systems to hold securities.
1. The first is to hold securities in a physical form. The ownership can be

transferred by any means, including the electronic media. This is also
known as ‘immobilization of securities’. This system is followed where
the physical form of securities is low, for example, bullion.
2. The second system is to retain the details of the security holding in an

account in an electronic format, which is similar to maintaining a bank
account. This is known as ‘dematerialization of securities’. This system
is followed where the volume of securities is substantial.
With the growth of the Indian capital market in the decade and the increasing
trading activity in the stock market, the volume of paper being exchanged has
increased exponentially and will continue to increase. This was one of the
primary reasons for India opting for the ‘dematerialization’ depository route.
DE-MAT

over 15 years. In India, the first depository commenced operations a decade
back and is relatively new. The Indian Financial Markets is in need of both
scrip-based trade, but the investing community, which is used to scrip-based
and scrip less trade, is bound to take some time to accept the latter. The scrip
less trading, till now a domain of the western world, institutional investors and
GDR holders is now mandatory even for small investors. All those who hold
A process by which the physical certificates of an investor are taken back by

the company / registrar and actually destroyed and an equivalent number of

securities are credited in the electronic holdings of the investor.
1.6 HOW CAN ONE OPEN AN ACCOUNT IN DEMAT?
First an investor has to approach a DP and fill up an account opening form.

The account opening form must be supported by copies of any one of the
approved documents to serve as proof of identity (POI) and proof of address
(POA) as specified by SEBI. Besides, production of PAN card in original at the
time of opening of account has been made mandatory effective from April 01,
2006.
All applicants should carry original documents for verification by an authorized

official of the depository participant, under his signature.
Further, the investor has to sign an agreement with DP in a depository
prescribed standard format, which details rights and duties of investor and
DP. DP should provide the investor with a copy of the agreement and
schedule of charges for their future reference. The DP will open the account in
the system and give an account number, which is also called BO ID
(Beneficiary Owner Identification number).
The DP may revise the charges by giving 30 days notice in advance. SEBI
has rationalised the cost structure for dematerialisation by removing account
opening charges, transaction charges for credit of securities, and custody
charges vide circular dated January 28, 2005.
Further, SEBI has vide circular dated November 09, 2005 advised that with
effect from January 09, 2006, no charges shall be levied by a depository on
DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO
transfers all the securities lying in his account to another branch of the same
DP or to another DP of the same depository or another depository, provided
the BO Account/s at transferee DP and at transferor DP are one and the
same, i.e. identical in all respects. In case the BO Account at transferor DP
is a joint account, the BO Account at transferee DP should also be a joint
account in the same sequence of ownership.
2.1 MEANING OF ICICI DIRECT.COM (ONLINE SHARE

TRADING):

ICICI Direct.com is a truly online share-trading site. Which means that from
the time you punch in a buy or sell trade on your computer to the final
settlement in your account, everything happens completely online? The 3-in-1
e-invest account integrates your brokerage, bank and one or more depository
accounts to make sure that you can do the otherwise cumbersome share
trading from the comfort of your home or office, at absolutely any time of the
day or night.
2.2 STATEMENT OF THE PROBLEM
Online trading and Demat are the two emerging concepts in the stock market.
It involves personal factors, technical factors, business factors and economic
factors. The interplay of these factors on stock market requires a deep study
about the pattern process and procedures and performance. This study is
intended to identify the various concepts about demat and the online trading
and its way of functioning
ICICI provisions are not exposing to its customers extensively. Hence in this
report an attempt has been made to link the potential customers and the ICICI
Capital Services Ltd.
2.3 REVIEW OF LITERATURE
DEMATERIALISATION
Dematerialization is the process by which physical certificates of an investor

are converted to an equivalent number of securities in electronic form and
credited to the investor’s depository account with his Depository Party (DP).
DEPOSITORY
A Depository account is similar to a bank account. It gives a summary of

investor’s holding of securities in the companies in the Indian Stock Exchange

and records transaction details of securities bought and sold during the
period. The information of securities holding is maintained in the electronic
form. The securities in the depository account do not have any numbers to
distinguish them and are identified by the total number of securities held for
each company by the depository on the investor’s account.
DEPOSITORY PARTICIPANTS
A Depository participant is an agent appointed by the depository and is

authorized to offer depository services to all investors. An investor can not
directly open a demat account with the depository. An investor has to open his
account through a DP only. The DP in turn opens the account with the
Depository. The DP in turn takes up the responsibility of maintaining the
account and updating them as per the instructions given by the investor from
time to time.
The DP generates and provides the holdings statement from time to time as
required by the investor. Thus, the Depository Party (DP) is basically the
interface between the investor and the depository.
2.4 OBJECTIVES OF THE STUDY
 Study of ICICI Direct.com (online share trading)

 Study of dematerialization in ICICI Capital Ltd.

 Customers satisfaction and awareness of ICICI Capital Services Ltd.
ICICI Capital Services Ltd., is depository participant (DP) and it is providing

the financial services to the share holders and various other DP’s also
providing almost same services which leads to a competition. So in order to
retain the existing customers of ICICI Capital Ltd. and to attract new
customers knowing the customers need and preferences and expectation is
very important. The study involves knowing the expectation and satisfaction
level of ICICI Capital Ltd. customers.
2.5 NEED FOR THE STUDY
 To study the various concepts of demat and online trading.

 To study the various plans of the
 To study the cost of online trading.
 To know the market leaders in this segment.
 To offer suggestions based on findings.
2.6 OPERATIONAL DEFINITION OF THE CONCEPTS
DEMATERIALIZATION:

REMATERIALIZATION:
Conversion of shares from electronic form into physical form of the investors.

DEPOSITORY:
An organization where the securities of a shareholder are held in the

electronic form, at the request of the shareholder through the medium of the
depository participant.
DEMAT BASICS:
Before coming to those issues let us first ponder over what exactly Demat
share is and what has compelled Indian markets to go for such alternative. A
Demat share is a share kept in the electronic form, on behalf of the investor.
This share is held in the electronic form by an agency called National Security
Depository Limited. This agency is promoted solely for this purpose IDBI, UTI
and NSE. The State Bank of India has also acquired a minor stake in NSDL
subsequently. A depository participant interfaces between NSDL and the
investor.
HOLDING SECURITIES IN ELECTRONIC FORM:
A Demat share is very much different from a physical share in the following
manner:
 It is held by NSDL on behalf of the investor whereas the investor holds a

physical share himself.
 The holding and handling of such share is in electronic form.
 An agent called depository participant wherein every investor who want to

hold share in Demat form has to open a account, provides the interface
between NSDL and the investor.
 The NSDL can also legally transfer the demat shares into buyer’s account
from seller’s account.

 The demat share kept in the electronic form can also be converted to
physical share on request.
 Unlike physical share the demat share doesn’t have folio number or
certificate number.
 There is no stamp duty in transfer of demat share from one account to

another, but depository participant charges some amount as transaction
fee as well as asset holding charges.
2.7 RESEARCH DESIGN OF THE STUDY
The study is based on survey technique. The study consists of analysis about
customer’s awareness and satisfaction of ICICI Capital Ltd. For the purpose
of the study 50 customers are picked up and their views solicited on different
parameters. The methodology adopted includes
 Questionnaire
 Random sample survey of customers
 Discussions with the concerned
Personal interviews and informal discussions were held with ICICI Capital Ltd.
customers to ascertain the awareness and satisfaction level. Further applying
simple statistical techniques has processed the data collected.
SOURCES OF DATA :
 Primary data: Questionnaire
 Secondary data: are published materials such as

periodicals, journals, news papers, and website.
2.8 SAMPLING PLAN:

 Sampling since segment wise investors in ICICI Capital Ltd. are not
available for the overall customers was considered for the study. 100%
coverage was difficult within the limited period of time. Hence sampling
survey method was adopted for the purpose of the study.
 Population: (universe) customers of ICICI Capital services Ltd.
 Sampling size: A sample of fifty was chosen for the purpose of the study.
Sample considers of small investor, large investors and traders of ICICI
Capital Ltd.
 Sampling Methods: Probability sampling requires complete knowledge

about all sampling units in the universe. Since due to time constraint non-
probability sampling was chosen for the study.
 Sampling procedure: From large number of customers of ICICI Ltd. were

randomly picked up.
 Field Study: directly approached respondents.
DATA COLLECTION INSTRUMENT
COLLECTION OF DATA THROUGH QUESTIONNAIRES:
The data collected for the study purpose is through questionnaires. Fifty
customers of ICICIdirect.com have been selected randomly for the study
purpose and then the information revealed from the customers is analyzed
and interpreted in the study.

ORGANISATION OF FIELD WORK
Initial field work has done for pre testing tools for data collection. The data is
collected through the direct interaction with the ICICI’s customers through
questionnaires answered by them. Fifty customers of ICICI were randomly
chosen for the purpose of the study in Bangalore
DATA PROCESSING AND ANALYSIS PLAN
Data processing is an intermediary stage of work between data collection and

data analysis. The raw data, after collection, has been processed and
analyzed in accordance with the outline laid down for the purpose of the
study. Tabulation is the process of summarizing raw data and displaying them
on compact statistical table for further analysis. Data is further classified and
categorized for the hypothesis testing.

2.9 AN OVERVIEW OF THE REPORT
Chapter 1: Contains the general introduction and theoretical background of

the study.
Chapter 2: Consists of aspects of statement of the problem, literature

review, objectives, need, research design, scope and limitation of the study.
Overall it’s a research methodology of the study.
Chapter 3: Consists of all details relating to ICICI Ltd., and its Groups,
origin of organization, its development and future prospects. It also includes
profile of the respondents.
Chapter 4: Analysis regarding the customer awareness, satisfaction level

and findings including testing of hypothesis.
Chapter 5: Summary of findings, conclusions and recommendations.

2.10 SCOPE OF THE STUDY:
 Globalization of the financial market has led to a manifold increase in

investment. New markets have been opened; new instruments have been
developed; and new services have been launched. Besides, a number of
opportunities and challenges have also been thrown open.
2.11 LIMITATION OF STUDY
 Since sample size is only 50, which is not a true representative of the
population as a whole.
 Since segment wise investors is not available in ICICI Capital Ltd. Overall
concept is taken for the study.
 Information is partly based on secondary data and hence the authentic of

the study can be visualized and is measurable.
 Level of accuracy of the results of research is restricted to the accuracy

level with which the customers have given their answers and the accuracy
level of the answers cannot be predicted.

3.1 ORIGIN OF THE ORGANIZATION
INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD
In 1955, the government, the World Bank and a steering committee of 5

prominent businessmen and others to cater to private sector needs of long
term finance promoted ICICI. Since then, the capital structure of the company
has undergone significant changes with the role of the government getting
minimized. In the last fiscal, the company created history by becoming the first
Indian Company to list its shares on NYSE (New York Stock Exchange). The
company has presence in various businesses in the financial sector the
prominent ones are Infrastructure finances, Structured finance, Project
finance, Treasury services, Corporate finance, Advisory services, Demat
services etc. Due to the increased competition in the financial markets and
fund based business getting affected by lower margins and higher levels Non
Performing Assets (NPAs), the company is trying to get a major share in the
retail segment where the margins are better. This has been made possible
through the various subsidiaries, which the company has floated, and through
expansion of the distribution network. The company had realized the growing
importance of technology revolution in the market and has taken major
initiatives to enter the e-commerce segment in the year 1999 - 2000. It has
launched a number of portals and has also entered into alliances with other
major portals in the market. Over the years, ICICI has gained prominence in
most of the segments in financial sector through its various subsidiaries.
Some of the important ones are ICICI Personal Financial Services ICICI
InfoTech ICICI web Trade.
ICICI has transformed itself from the role of a Financial Institution to a

Universal Bank. The company is making constant efforts to take first mover
advantage in the technology-related businesses. In the past, there has been a
considerable amount of influence and direction from the government in ICICI’s
policies. However, of late, under the direction of Mr. K. V. Kamath, ICICI has

quite successfully broken away from direct government interference. Private

participation in equity since inception and its image of a professionally
managed company has enabled ICICI to recruit professional managers and
fresh MBAs from premier institutes consistently. Key appointments rest with
professional managers. ICICI is undoubtedly one of India’s best-managed
financial institutions. ICICI’s project loans’ team has considerable depth and
wide experience in project and loan appraisals. The quality of manpower is
very good and ICICI is forging ahead very strongly on its mission to transform
itself from a project-finance / development banking institution to a universal
bank catering to all kinds of needs of both retail and corporate customers. The
company has placed itself in a perfect position to take any benefit accruing in
the Indian Financial Sector because of further technological changes. Its
diversification of business portfolio will also help it to leverage its strength
from one segment to another.
ICICI GROUP
Founded in 1955 at the initiative of the Government of India, the World Bank
and representatives from the Indian Industry, ICICI’s primary goal then was to
facilitate the development of the Indian Industry through project financing.
Today it has graduated into being among the leading financial institutions and
offers almost every service in the gamut of corporate and retail finance. At
present, ICICI commands a position of respect in the global business
community. This trust and confidence is embodied by ICICI becoming the
first Indian Company to be listed on the New York Stock Exchange, on
September 22nd, 1999. It is also the first Indian Company to have its accounts
conform to GAAP guidelines. In terms of technology initiatives, the ICICI
Group is recognized as among the first to bring internet banking services, the
first in providing WAP - enabled financial services and one of the first to
introduce web broking in India.

3.2 GROWTH, DEVELOPMENT AND PRESENT STATUS OF

THE ORGANIZATION
Infrastructure financing, corporate financing and retail have been the strong
pillars of ICICI's growth. They expect these to remain thrust areas in the future
too. The financial institution sees significant opportunities in the power sector,
and in the rapid de-regulation of the Telecom sector. On the retail side, ICICI
has established a retail franchisee through a physical presence across 42
cities. Its retail thrust has been on the planks of technology enabled low cost
distribution channels like the Internet, Call centers and ATMs.
It occupies the number one position in automobile financing (over 20% of the
market share), number one in credit cards on an incremental basis. It also has
a growing presence in home finance and on-line trading.
ICICI BANK
ICICI Bank is a commercial banking outfit set up by the ICICI Group. The
Bank was registered a banking company on January 5th, 1994 and received
its banking license from the Reserve Bank of India on May 17 th, 1994. The
Bank has an authorized capital of INR 300crore (USD 75.96 million), of which
subscribed and paid-up capital is INR 165 crore (USD 41.78 million). The first
ICICI Bank branch was started in Madras in June 1994. The branches are
fully computerized with state-of-the-art technology and systems. All of them
are fully networked through V-SAT (Satellite) technology. The Bank is
connected to the international SWIFT network since March 1995. ICICI Bank
offers a wide spectrum of domestic and international banking services to
facilitate trade, investment, cross-border business, and treasury and foreign
exchange services. This is in addition to a whole range of deposit services
offered to individuals and corporate bodies. ICICI Bank’s Infinity was the first
Internet banking service in the country, and a prelude to banking in the next
millennium. Currently the Bank has around 150,000 customers.

ICICI VENTURE FUNDS MANAGEMENT COMPANY LIMITED
With the recent spurt in entrepreneurship in the country, venture capital and
private equity capital financing are fast attaining a role of prominence.
Uniquely positioned to take the Indian entrepreneur further is ICICI Venture
Funds, the wholly owned subsidiary of ICICI, with its keen understanding of
the Indian Financial Markets, entrepreneurial ethos, access to global capital
and a network through influential global alliances. Strong parentage and
affiliates provide ICICI Venture with access to a broad spectrum of financial
and analytical resources. An affiliation with (Trust Company of the West)
provides a platform for networking Indian Companies to global markets and
technology. ICICI Venture Funds currently manages / advises 11 Funds
aggregating US$ 400 million, making it the most significant private equity
investor in the country. The investment experience of ICICI Venture’s
professionals is the foundation its strengths and success in several areas of
investing. ICICI Venture seeks to invest in opportunities where its network
through ICICI and TCW can create value for all involved. ICICI Venture’s
primary investment objective is capital investment through investments by
way of equity or equity-related securities in unlisted companies with significant
growth potential. ICICI Venture’s investments span a broad spectrum of
industries and stages of development, the investment focus being on
• Information Technology
• Biotechnology and Life Sciences
• Media and entertainment
• Retail Services
ICICI SECURITIES AND FINANCE COMPANY LIMITED
Formed in 1993 when ICICI’s Merchant Banking Division was spun off into a
new company, I-SEC today are India’s leading Investment Bank and one of
the most significant players in the Indian capital markets. Its client list includes
some of the best known, most respected names in Indian business and

industry, and I-SEC offers them what are probably the widest, most in-depth
range of services in the market, with the highest standards of professionalism.
Backed by a strong distribution network, I-SEC is acknowledged to be at the
forefront of all new developments in the Indian debt market. I-SEC Research
Reports, Compendia, Updates, I-BEX and sovereign Bond Index, have
become industry standards, sought after by finance, business and reputed
publications alike. The Project Finance Group has helped take strategic
projects from the drawing board to financial closure, leveraging the expertise
of parent organization. I-SEC has also executed several assignments in M &
A, including business valuations, spin-offs and mergers, for both domestic and
overseas clients. The range of products offered by i-SEC includes:
• Corporate Finance – Mergers and Acquisitions, Equity, Bidding

(especially for Telecom Projects)
• Fixed Income – Primary Dealership, Debt Research
• Equities – Lend management, Underwriting, Syndication, Private

Equity placement, Sales, Trading, Broking, Sectoral and Company
Research I - SEC
Continues to sustain a steady rate of growth by offering the most
extensive range of services combined with unrivalled standards of
professionalism.
ICICI BROKERAGE SERVICES LIMITED
Set up in March 1995, ICICI Brokerage Services is a 100% subsidiary of I-

SEC. It commenced its securities brokerage activities in February 1996 and is
registered with the National Stock Exchange of India Limited and The Stock
Exchange, Mumbai. We are a joint venture between ICICI and the leading
financial services provider in India, and prudential plc of U.K., one of the finest
Life insurance companies in the world. Together we provide you with an
extensive range of insurance products to suit your various needs at various

life stages. We aim to keep you covered, at every step in life. Their policies
are need-specific and address particular age groups. This means that no
matter where in life you are, we offer specific products to suit your needs for
savings, protection and retirement. Our products can be categorized into the
following:
• Saving plans
• Protection plans
• Retirement plans
ICICI PERSONAL FINANCIAL SERVICES LIMITED
ICICI Personal Financial Services Limited (ICICI PFS), formerly ICICI-Credit,

was one of the first four companies to obtain registration as a Non-Banking
Financial Company (NBFC) from the Reserve Bank of India (RBI) on
September 10, 1997 under the new section 45IA of the Reserve Bank of India
Act, 1934. During the year 1998-99, there was a significant shift in the
Company’s operation from leasing to hire purchase to distribution and
servicing of all rental products for the ICICI Group. It is now a focal point for
marketing and distribution of all rental asset products for ICICI, including auto
loans, consumer durable finance and other financial products. The Company
has thus become part of ICICI’s retail strategy aimed at offering a
comprehensive range of products and services to retail customers. In view of
this reorientation of the business, the name of the Company was changed
from ICICI Credit Corporation to ICICI Personal Financial Services Limited
(ICICI PFS) effective March 22, 1999.
ICICI CAPITAL SERVICES LIMITED
ICICI Capital Services Ltd. was incorporated in the name of SCICI Securities
Ltd. on September 24, 1994 as a wholly owned subsidiary of erstwhile SCICI
Ltd. with the objective of providing stock broking services to the institutional
clients and undertaking activities such as underwriting, primary market

placements & distribution industry & company research etc. After the
amalgamation of SCICI with ICICI effective from April 1, 1996, resulting in the
change of the name. The company is mandated, under review by ICICI, to
carry out on its behalf the retail resource raising activities and to provide front
office services related to all retail and semi retail liability products of ICICI.
The company also operates the network of ICICI Centers being set up by
ICICI. As on date the company has set up 91 centers across the country.
ICICI INFOTECH
ICICI InfoTech is a leading provider of end-to-end IT solutions. We have an in-

depth experience of having worked on varied technologies with leading
corporations worldwide. Our service portfolio includes the following:
 IS & IT Consulting
 Software Design and Development
 Enterprise Application Integration
 Value Chain Management Solutions (SCM, CRM etc.)
 Application Re-engineering and Management
 Knowledge Management Solutions
 Embedded System Applications
 Technology Incubation, IT-enabled Services & IT Outsourcing
ICICI Capital Ltd.
Its products are

 RBI Bonds
 E-invest (ICICI Direct.com)
 Fixed Deposits
 Mutual Funds
 Bonds
 Demat

 Equity IPO
RBI BONDS:
A bond or a Debenture is basically a loan. Every time you invest in a bond or

debenture, you are lending your money to an issuer who is in need of funds.
Bonds can be issued for specific period of time; the period can range from
short term to a very long time like 20 or 30 years too. Government issues
bonds (Treasury bills and Government securities) for a medium term to very
short term like even for a few weeks. RBI Bonds are marketed through the
ICICI Capital Ltd. it is also known as Infrastructure Bonds of RBI. RBI issues
those bonds (3 or 4 times) in a year.
E - INVEST (ICICIDIRECT.COM):
ICICIDirect.com is a truly online share-trading site. This means that from the
time you punch in a buy or sell trade on your computer to the final settlement
in your account, everything happens completely online. The 3-in-1 e-invest
account integrates your brokerage, bank and one or more depository
day or night.
MUTUAL FUNDS:
Mutual Funds are a pool of money collected from many persons and invested
in tradable securities. The gains or losses arising out of such investments are
distributed among the investors of the fund in proportion to their investments.
In a way, a mutual fund is an agent of the investors on whose behalf, it
manages their funds to enhance the returns and reduce their investments
through a careful selection of securities amongst several sectors of industries,
companies and products. Achieving such a selection is normally beyond the
means of an individual investor. All Mutual Funds are open-ended ones.

Customers are
 Franklin Templeton Investments
 Birla Mutual fund
 Kothari Pioneer
 Alliance Capital
 Sun F & C Mutual Fund
 Kotak Mahindra Mutual Fund
 Prudential ICICI Mutual Fund
ICICI BONDS:
A bond or a debenture is basically a loan. Every time you invest in a bond or

debenture, you are lending money to an issuer who is in need of funds. Bonds
can be issued for specific period of time; the period can range from short term
to a very long like 20 or 30 years too. ICICI Bonds are generally for periods
upwards of one year. ICICI target the retail market for subscription to their
bonds issue. Corporate issuer captures major portion of the small investors in
ICICI Bonds.
DEMAT:

over 15 years. In India, the first depository commenced operations a decade
back and is relatively new. The Indian Financial Markets is in need of both
scrip-based trade, but the investing community, which is used to scrip-based
and scrip less trade, is bound to take some time to accept the latter. The scrip
less trading, till now a domain of the western world, institutional investors and
GDR holders is now mandatory even for small investors. All those who hold


EQUITY IPO:
ICICI Capital Service Ltd., also undertake the equity IPO for other corporate
products. It looks after all the transactions related to equity IPO in the market.
FIXED DEPOSITS: ICICI FIXED DEPOSITS
ICICI Ltd. issues the Fixed Deposits to a large number of customers. FDs are
rated by the rating agencies like CARE, ICRA and etc., Those FD are highly
safe, Tax benefit under section 80L, No TDS on interest up to Rs.5000 in a
Financial Year and Premature withdrawal facility.
Services offered by ICICI Capital Services Limited
INSTITUTIONAL INVESTORS:
As the first time Depository Participant of National Securities Depository

Limited (NSDL), services offered by ICICI in respect of securities held in
electronic form include;
DEMATERIALIZATION:
Gets clients’ physical certificates converted into electronic balances

maintained in its account with NSDL.
REMATERIALIZATION:
Assists in converting the electronic holding into physical certificates through

the process of Rematerialization as and when desired by the client.
SETTLEMENT:
Offers settlement services involving book entry transfers for both on-market
and off-market trades carried out by clients.

RECORD KEEPING:
Provides a transaction statement as well as holding statement to clients at

periodic intervals.
PLEDGING:
Completes various formalities relating to pledging of securities held in

dematerialized form with any institution based on the instructions received
from the clients.
INDIVIDUAL INVESTORS:
ICICI Capital Services Ltd. offers the aforementioned services to individual

investors as well.
SUBSIDIARY GENERAL LEDGER A / C (SGL):
Offers services to clients dealing in Government securities through the SGL

A/C. besides holding the securities, ICICI Capital Services Ltd.
 Provides records update based on the transactions made by the

clients.
 Collects and credits the benefits and proceeds from sale to the clients’
account; and
 Supplies periodical reports on the transactions and holding of the
clients.
TRADING:
Next function activates when an investor buys or sells in the market.
Buying:

1. An investor gets order executed and makes payment to the broker.
2. Investor instructs his Depository Participant to expect credit on

settlement day. Broker instructs his DP to debit his Clearing Member
account on settlement day.
3. Before settlement day Broker makes payment to clearinghouse through
Clearing Bank.
4. On settlement day Clearing house releases shares to broker’s Clearing

Member account which is then transferred to investors account through
NSDL (National Securities Depository Limited). Investor gets credit in his
account.
SELLING:
1. An investor gets order executed.
2. Investor instructs his Depository Participant to debit his account with

immediate effect. The shares move from investors account to Brokers
Clearing Member account via NSDL. A Broker clearing member accounts
is credited.
3. Before settlement day broker transfers shares from his clearing

member account to Clearinghouse via NSDL. His account is debited.
4. On settlement day Broker receives payment from clearing house which

he passes on to the investor.
ICICIDirect.com
ICICIDirect.com is a truly online share-trading site. This means that from the
time you punch in a buy or sell trade on your computer to the final settlement
in your account, everything happens completely online. The 3-in-1 e-invest
account integrates your brokerage, bank and one or more depository

day…or night.
ADVANTAGES OF ICICIDIRECT.COM
 Its hassle free: No more tracking the settlement cycles or waiting

cheques for cash settlement.
 It’s easy: You don’t need to be an Internet guru or a financial genius to

trade in shares online.
 It’s faster: No phone calls, on paperwork, any time lags, everything at the
click of the mouse.
 It’s secure: Internationally benchmarked 128-bit encryption, making all

your transaction absolutely safe.
 It’s from ICICI: An organization that millions of Indian trust.
OTHER FEATURES:
 Trade shares on margin for up to 3 times with brokerages at very low

percentage.
 With BARRA Global Estimates glance through the recommendations of

leading analysts.
 Through our markets section, track the movement of indices and stocks
along with the news that affect shares.
Table No. 3.1 Different types of accounts in ICICI Direct.Com

Bank A/c Online trading A/c Demat A/c

Savings Bank A/c With 5 combinations
TWO TYPES:
 Cash
 Margin
CASH:
While buy or sell transactions in cash segment are settled by delivery unless
squared off within the same settlement.
MARGIN:
Normally to buy shares, an investor will have to place (ensure availability of

limit) 100% of the order value, while to sell shares, investors needs to have
shares in his demat account. However, margins are blocked only to safeguard
against any adverse price movement. With margin trading, investor can
leverage on his trading limit by taking buy/sell positions much more than what
he could have been taken in cash (delivery) segment.
In margin trading the investor can buy/sell positions in stock(s) with the
intention of squaring off the position within the same settlement cycle. If
during the course of the settlement cycle, the price moves in investor’s favour
(rise in case of a buy position or fall in case of a sell position) the investors
makes a profit. In case the price movement is adverse, the investor incurs a
loss. However, the investor also has the option to take/give delivery of buy/sell
position respectively if he has sufficient cash or securities to do so.
DIFFERENCE BETWEEN MARGIN AND CASH SEGMENT
While buy/sell transaction in cash segment are settled by delivery unless

squared off within in the same settlement, buy/sell transactions in the Margin
Segment are squared off unless converted into delivery (cash segment). All

margin positions have to be closed out at specified time mention on previous

day of the last trading day of the settlement.
Share transaction: Only National Stock Exchange stocks are traded.
Normal Settlement: That day only.
Rolling Settlement: T+2 day’s settlement of shares.
Major Competitors: HDFC.com, Indiabull.com, Euitymaster.com, 5paise.com
E-INVEST ACCOUNT OPENING CHARGES: RS 750
Table No. 3.2 Different Charges of ICICI Direct.Com
Total Turnover Delivery Second Leg of Effective

(Volume of Trades Squared Off Commission per leg
Transaction) Trades for squared off
Slabs trades
Less than Rs. 10
0.85% Nil 0.425%
lacs per quarter
Rs. 10 lacs - Rs.
0.60% Nil 0.30%
50lacs per quarter
Rs. 50lacs - Rs. 1
0.50% Nil 0.25
cores per quarter
Rs 1 crore+ 0.40% Nil 0.20%
COMPUTATION OF COMMISSION:
While the first leg of transaction would be charged commission @ 0.85%

(subject to the minimum of Rs. 25 per trade as mentioned above) initially on
the transaction date, an appropriate rebate would be calculated at the end of
each quarter based on the total value of transaction and shall be credited to
your account.

No rebate shall be calculated on transactions, which have not attracted

commission in the first place being in the nature of square up trades. Rebate
shall also computed as the respective slab (0.25% to 0.45% based on
turnover slab) on the transactions, which have attracted minimum commission
of Rs. 25 per trade.
MARGIN SEGMENT COMMISSION SCHEDULE:
Table No. 3.3 Margin Segment Commission in various turnover slabs
Total Turnover (Volume of Each leg

Transaction)
Slabs
Up to Rs 1 cr per quarter 0.15%
Rs 1 cr+ per quarter 0.10%
The minimum value of the trade that would be accepted be Rs 1000/- and the
minimum commission would be Rs 15/- per trade inclusive service taxes and
postage of contract note.
COMPUTATION OF COMMISSION:
As in the cash segment, the trades would be charged commission as

mentioned above on the transaction date, an appropriate rebate would be
calculated at the end of each quarter based on the total value of transaction
and shall be credited to your account.
CONVERSION OF MARGIN POSITION TO DELIVERY:
Any margin position converted to delivery shall attract additional commission

for the difference in brokerage on cash trades and margin trades. For the
purpose of calculating rebate on the basis of total turnover, such conversions
would be considered as the volume in the cash segment and not considered
in the margin segment.

FUTURE PROSPECTS AND PLANS OF THE ORGANIZATION
For ICICI the past half has been a trying period more so because of the
adverse environmental conditions such as the depressed equity markets and
the volatile currency markets. However, its retail thrust and a perceptible shift
in financing from manufacturing projects to corporate finance will put it in good
stead for the quarters to come. Its growing importance in the telecom and
infrastructural sectors, which have huge potential, will be a key driver of
growth for the future
3.3 ORGANIZATIONAL STRUCTURE:
STRUCTURE OF DEPOSITORY PARTICIPANT:
A depository is an organization where the securities of the shareholder are

held in electronic form. In order to reach out the general investor depository
goes through its intermediaries called the Depository Participant. The
structure of this Depository Participant System has mainly two types of
accounts:
 The Beneficiary Accounts

 Clearing Member’s Clearing Accounts
BENEFICIARY ACCOUNTS:
These are the accounts of investors, where their securities are held in
electronic form. The account opened by investor with DP is a beneficiary.
The balances in BENEFICIARY ACCOUNT are divided into the following sub
accounts:
Shares under Free Accounts can be transferred freely.
Lock-in Accounts hold shares under lock-in period (say promoters quota)

which cannot be sold (till the lock-in period is over, after which they move to
free account).
 Pending Demat Account: Securities waiting credit for dematerialization

from the company/ registrar are held in the pending demat account.
 Pending Remat Account: Securities sent for Rematerialization is held in

the remat account till the company / registrar confirms electronically that
physical securities have been issued.
 Pledged Account: Securities pledged to the other Beneficiaries are held

in the pledged account.
Clearing Members’ Clearing Account:
Any trade done on the Exchange, in a particular settlement, has to be settled

through the Clearing Member (through whom the trade is done). For this
purpose there is a “Clearing Account” of Clearing Member (i.e. broker). He
collects, in this account; securities sold by different clients and deliver it to the
Exchange. Similarly, in the case of purchases, he receives securities from
NSDL/ Clearing Corporation in this Clearing account and then disburses the
same to his clients (to their beneficiary account).
The Clearing Members’ Clearing Account has sub-account like –
 Pool Account – where securities are received from various sources are
pooled and held.
 Delivery Account: from where NSDL takes the securities for pay-in (the
clearing member moves the securities from pool account to the extent to
his net obligation to the Clearing Corporation).
 Receipt Account: where securities are received from NSDL after payout.

Securities are moved to pool account automatically from here.
Balances in Clearing Member account are held for each settlement and
market type, separately. NSDL takes/ gives the securities from/ to broker on
the basis of instructions from exchange/ Clearing Corporation.
3.4 FUNCTIONS OF THE ORGANIZATION:
SOURCES OF GETTING SECURITIES IN YOUR OPENED ACCOUNT:
There are three main sources of getting securities in your account:

 Dematerialization
 Subscribing to primary market issues (New issues, Rights issue)
 Buying the securities through the secondary market.
 These securities held in your account in electronic form are fungible; i.e.
they do not bear any distinguishing feature (Like Certificate Numbers,
DNRs etc)
PROCEDURE OF DEMATERIALIZATION:
The procedure is as follows:
You can check with us for the list of securities eligible for demats. Certificate
should stands in account holder’s name (viz., market purchase along with
transfer deeds cannot be dematerialized)
Once the certificates for demat are submitted to Depository Participant, they
are defaced on the face of the certificate by writing ‘SUBMITTED FOR
DEMATERIALIZATION’. The certificate should also be punched on the
Company name, but in such a manner that the company name is clearly
identifiable. The account holder before submitting his certificates for demats
has to ensure the following:

 Certificate should be standing in the exact name in which the account is

opened. In case there are joint account holders, all the names have to tally
and the names should be in the same order in which account is opened.
 The ISIN of the security enclosed and the ISIN mentioned on the form are
the same.
 The DFR is duly signed by you along with joint holders(if any)
 If part of the certificate issued for demat are looked-in, a separate DRF is
required for the same. Also securities look-in for different reasons and for
different periods should be submitted under different DRF’s.
 Certificates are not mutilated.
 The Depository Participant will issue an acknowledgement after verifying

the forms and securities.
 They record your request, generate Dematerialization Request Number

(DRN) and forward the securities to company / registrar.
 Registrar will check the certificates and if found in order, will inform the
DP, upon which the account will be credited.
 In case of reject, Registrar will forward necessary documents to

Depository Participant.
REGISTRAR MAY REJECT THE REQUEST FOR THE FOLLOWING

REASONS:
 Specimen signature on DRF differs from signature recorded with registrar/

Transfer agent.
 For any other reason like injunction order, duplicate certificates issued etc.

 The issuer/ R&T Agent is supposed to inform the DP of the acceptance/

rejection within 15 days of receipt of request.
 Rejects will be returned to the account holder with the covering letter
explaining the reason of reject.
Primary Issue: In case a primary issue, securities in electronic can be

obtained ab-initio:
 While applying for a primary issue, you have to mention the following in
your application form, refer annexure
♦ Your wish to receive securities in electronic form.

♦ Your Depository Participant’s Id.
♦ Your account number (client Id)
 If any allotment is made to you, the issuer/ Registrar notifies the quantity
allotted along with client Ids and DP Ids to NSDL.
 The NSDL will generate the allotment of securities on the date specified by
the issuer/ Registrar.
 The account with the Depository Participant will be credited with allotted
securities.
 Holding statement sent to account holder by DP’s will reflect the updated
holding with credit.
REMATERIALIZATION:
It is the process by which you can get your electronic holdings converted into
physical certificates. The steps involved are:

 Submit to the Depository Participant the duly filled-in Rematerialization

request form. Kindly ensure the holding of that particular ISIN.
 The Depository Participant will verify the form, check for signatures and
holding and forward the form to the company registrar. They will also
inform the registrar about the request electronically.
 Securities are moved from the holder’s free account to pending remat
account.
 Issuer/ Registrar will accept the Rematerialization request, print and

dispatch the certificates to the holder and will also send electronic
confirmation to the Depository Participant.
STEPS REGARDING SETTLEMENT OF YOUR TRADES:
For the knowing how to settle the trades, I have taken 3 types of transaction
most commonly used, they are:
1. Settlement sale
2. Settlement purchase
3. Off-market
The procedure for the above three transactions are as follows:
Before selling, please ensure that you have sufficient holding of that security
(that ISIN) in your free account and not in demat, remat, blocked, locked
account. Securities can not be moved, if you may freeze your account.
 You should precisely tell your broker the security you want to deal in while
giving buy or sell order. E.g.: in case you have only reliance petrochem
securities and if you instruct your broker to sell Reliance Petroleum
securities, you may be able to settle your trade.
 As of now, in electronic segment, trades are settled on rolling basis. Every

day is treated as fresh settlement and trades are settled on T+2 day’s
basis (excluding Saturday and Sunday). However settlement date (i.e.
Pay-in/ Payout date) may be alerted in unusual in circumstances (E.g. In
case of Holidays). You should check with your broker exact pay-in/ payout
day. Your broker may ask you to move the securities to his account after
pay-in (in case of sales) or may wish to transfer the securities to your
account after the payout (purchase). In such cases, execution date may be
different than the settlement date. However, you shall note that securities
can be moved to broker’s clearing account only till pay-in deadline date
and time. If you do not move the securities to your broker’s account by this
deadline, broker in turn may fail to fulfill his obligation to the exchange and
the securities may get auctioned.
 Settlement Trade (or Market Trade) is a trade in a particular settlement

and market type on the exchange. As of now, there are (apart from auction
settlement) three settlement types on NSE (i.e. Rolling Market Lot, Rolling
Odd Lot and Physical) and two on BSE (Rolling Market Lot and Physical).
You shall get from your broker, precisely, the settlement number and
settlement type in which your securities are traded. 9798 (no.) e.g.
9798011 and NSE prefix settlement number on BSE by 1998(no.) e.g.
1998011. Settlement numbers for every trading day (trading period) are
decided by respective exchanges in advance.
 If the holders do not get the securities on payout, he may get it probably, in
auction settlement (generally after three days) or you may get square off
money from your broker. Your broker will make these details available.
 If securities moves from one beneficiary account to other beneficiary

account, it is treated as off market trade and attracts charges applicable
for off market trades. For trading, one normally transacts through broker at
the exchange, the holder will be delivering / receiving the securities to /
from the broker’s clearing account. As mentioned above, these are called
Settlement / Market trades.
 In a depository system, only securities movement takes place. Funds part

will have to be settled by the holder with the concerned broker as is done
in paper segment at present.
 Transaction instructions are matched on the basis of ISIN codes, counter-

party codes (Client / CM Ids), counter-party DP’s code, CM-BP Ids,
quantity execution date, settlement number and market type. Hence, the
holder is requested to mention all this information completely and
correctly. Once this is done the holder must send the instructions to the
Depository Participant.
 The instructions will be also fail in case the holder does not have sufficient
holdings.
 In case of joint account, any instruction (transaction, demat, remat, etc.) or

any letter has to be signed by the holder along with joint holders in the
same order in which the account is held.
 After this the account opener will be getting the holding statement at
regular intervals provided he is holding any securities.
 If the securities are delivered to a member with some other DP, the shares
will move into holder’s blocked account until the transaction are matched
and then out of blocked account if successful.
 Lastly, as mentioned earlier, the beneficiary can give the DP standing

instruction to receive the securities in his account.
Rights and Obligation of Depositories, Participant, Issuers

and Beneficial Owners:
AGREEMENT BETWEEN DEPOSITORY AND PARTICIPANT:

 A depository shall enter into an agreement with one or more

participants as its agent.
 Every agreement under sub-section (1) shall be in such form as may

be specified by the by laws.
SERVICES OF DEPOSITORY:
Any person, through a participant may enter into an agreement, in such form
as may be specified by the bylaws, with any depository for availing its
services.
SURRENDER OF CERTIFICATE OF SECURITY:
 Any person who has entered into an agreement under section 5 shall
surrender the certificate of the security, for which he seeks to avail the
services of depository, to the issuer in such manner as may be specified
by the regulations.
 The issuer, on receipt of certificate of security under sub-section (1),

shall cancel the certificate of security and substitute in its records the
name of the depository as registered owner in respect owner in respect of
that security and inform the depository accordingly.
 A depository shall, on receipt of information under sub-section (2),

enter the name of the referred in sub-section (1) in its records, as the
beneficial owner.
REGISTRATION OF TRANSFER OF SECURITIES WITH DEPOSITORY:
 Every depository shall, on receipt of intimation from a participant,

register the transfer of security in the name of the transferee.
 If a beneficial owner or a transferee of any security seeks to have

custody of such security the depository shall inform the issuer

accordingly.
OPTIONS TO RECEIVE SECURITY CERTIFICATE OR HOLD

SECURITIES WITH DEPOSITORY:
 Every person subscribing to securities to offer by an issuer shall have

the option either to receive the security certificates or hold securities with
a depository.
 Where a person opts to hold a security with a depository, the issuer

shall intimate such depository the details of allotments of the security,
and on receipt of such information the depository shall enter in its record
the names of the allottee as the beneficial owner of that security.
SECURITIES IN DEPOSITORIES TO BE IN FUNGIBLE FORM:
 All securities held by a depository shall be dematerialized and shall be

in a fungible form.
 Nothing contained in section 153,153A, 153B, 187B, 187C and 372 of

the Companies Act, 1956 (1 to 1956) shall apply to the securities held by
a depository on behalf of the beneficial owners.
RIGHTS OF DEPOSITORY AND BENEFICIAL OWNER
 Notwithstanding anything contained in any other law for the time being
in force, a depository shall be deemed to be the registered owner for the
purpose of effecting transfer of ownership of security on behalf of a
beneficial owner.
 Save as otherwise provided in sub-section (1), the depository as a
registered owner shall nit have any voting rights or any other rights in
respect of securities held by it.
 The beneficial owner shall be entitled to all the rights and benefits and

be subjected to all the liabilities in respect of his securities held by a

depository.
REGISTER OF BENEFICIAL OWNER
 Every depository shall maintain a register or index of beneficial owner

in the manner provided section 150, section 151, section 152 of the
Companies Act, 1956 (1 to 1956).
PLEDGE OF HYPOTHECATION OF SECURITIES HELD IN A

DEPOSITORY
 Subject to such regulations and bylaws, as may be made in this behalf,

a beneficial owner may with the previous approval of the depository
create a pledge or hypothecation in respect of a security owned by him
through a depository.
 Every beneficial owner shall give intimation of such pledge or

hypothecation to the depository and such depository shall thereupon
make entries in its records accordingly.
 Any entry in the records of a depository under sub-section (2) shall be

evidence of a pledge or hypothecation.
FURNISHING OF INFORMATION AND RECORDS BY DEPOSITORY AND

ISSUER
 Every depository shall furnish to the issuer information about the

transfer of securities in the name of beneficial owner at such intervals and
in such manner as may be specified by the bylaws.
 Every issuer shall make available to the depository copies of the

relevant records in respect of securities held by such depository.

OPTION TO OPT FOR, IN RESPECT OF ANY SECURITY
 If a beneficial owner seeks to opt out of depository in respect of any

security he shall inform the depository accordingly.
 The depository shall on receipt of intimation under sub-section (1)

make appropriate entries in its record and shall inform the issuer.
 Every issuer shall within thirty days of the receipt of intimation from the
depository and on fulfillment of such conditions and on payment of such
fees as may be specified by the regulation issue the certificate of
securities to the beneficial owner or the transferee as the case may be.
BANKERS’ BOOKS EVIDENCE ACT TO APPLY TO DEPOSITORIES
 The Bankers’ Book Evidence Act, 1891(18 to 1891), shall apply in

relation to a depository as if it were a bank as defined in section 2 of that
Act.
DEPOSITORIES TO INDEMNIFY LOSS IN CERTAIN CASES
 Without prejudice to the provisions of any other for the time being in
force, any loss caused to the beneficial owner due to the negligence of
the depository or the participant, the depository shall indemnify owner.
 Where the depository indemnifies the loss due to the negligence of the
participant under sub-section (1), the depository shall have the right
under sub-section shall have the right to recover the same from such
participant.
Rights and obligations of depositories

 Subject to th4 provision of this Ordinance the rights and obligations of

the depositories, participant and the issuers whose securities are dealt
with by a depository shall be specified by the regulations.
 The eligibility criteria for admission of securities into the depository

shall be specified by the regulations.
TRADING:
You can trade through any broker of your choice registered with the stock
exchanges connected with NSDL but will have to provide the details of your
account with the DP. The moneys would receive from the broker/ paid to the
broker in the same fashion as done in case of buying/ selling of physical
shares. The DP will provide you a statement updated every fortnight giving
detail of your holdings.
Shares bought in the electronic form can be pledged/ hypothecated by

making application to the DP in a prescribed form. For the purpose
calculation of capital gains tax, the cost of acquisition of shares would be
determined on the principle of first in first out.
The process of opening an account with a depository participant is similar to

the opening of bank account. Photographs, introduction and signing the
prescribed agreement form are some of the requirements.
If there are any discrepancies in your holding statement o pass book, you
can contact your DP. If the problem cannot be resolved at DP’s end, you can
approach NSDL. There is absolutely no restriction to the number of DP’s you
can open accounts with. Opening an account with DP is very similar to
opening a bank account. Just as you can have savings or current account
with more than one bank, you can open accounts with more than one DP.

There is no minimum balance prescribed form your account with DP. Infact,
you could have nil securities in your account with a DP.
With the security that a person have with respect to proof of his holding,
upon opening an account with DP indemnifies you for any misuse of your
holdings. NSDL will also ensure that the interests of the investors are
protected. Essentially grievances against the DP will be resolved by NSDL.
Besides, every transaction in your account will have to be authorized by you.
When any corporate event such as rights, bonus or dividend is announced

for a particular security, the depository will give details of the clients having
electronic holdings of that security as of record date/ book closure to the
registrar. The registrar will then calculate the corporate benefits due to all
shareholders. The registrar will do the disbursement of cash like dividend or
interest whereas the depository will do distribution of securities entitlements
based on information provided by the registrar.
The investor retains the choice of receiving the corporate benefits in physical
or electronic form. For discrepancies in corporate benefits in the form of
securities, you can approach your DP who will then approach the registrar. In
case of discrepancies in cash benefits, you will have to the registrar directly.
As long as shareholding in demat form is not made compulsory by a

suitable legislation, there will be a large number of shareholders that will
opt to hold their equity in scrip form. Even in US, where dematerialization
of shares is in practice for over 25 years, many investors prefer to hold
their equity in scrip form. In India, the number is likely to be higher.
Therefore, the possibility of counterfeit or fake shares being brought to
the market cannot be ruled out.
Companies issue duplicate share certificates in lieu of the original

reported lost stolen etc. They publish the particulars of such originals,
which are cancelled, in newspapers and also make this information
available to brokers. But the possibility of a broker introducing such
shares in the market cannot be ruled out.

 Also, it is possible that the canceled shares are presented to the

company for dematerialization, and in the absence of proper checks and
controls, which will make it unique, non-duplicate and non-copyable,
these get dematted. Once dematted a share, a share loses its individual
identity and the company may not be in a position to reverse its action.
Counterfeiting of shares and introduction them in the market is

relatively easy in the absence of duplication-proof security features and
where the brokers do not have the means by which they can check these
features. This is particularly relevant in case of companies that are old
and have issued shares from time to time.
DEMAT BENEFITS
 Freedom from worries over loss of certificates through theft, mutilation

etc.
 Reduction of paperwork when shares are sold.
 No delays or hassles in transfer of shares to your name when
purchased.
 Saving stamp duty charges.
 No requirement of filling up of transfer deeds and lodging shares for
transfer.
 No bad delivery of shares.
 No loss of certificates in transit.
 No courier/ postal charges.
 Faster payment in the case of sales of shares.
 No scope for forged shares.
There is, however, no differences between demat shares and physical

shares as far as the beneficial interests of the ownership of securities are
concerned. The owner is entitled to exactly the same benefits of ownership
of a security no matter in what form it is maintained.

ADVANTAGES OF HOLDING SHARES IN ELECTRONIC FORM
Holding securities gives some far-reaching advantages to the investors,

which hitherto were not available. Some of the advantages of holding
securities in electronic form are enumerated as follows:
 There is no risk of bad deliveries, which has plagued the markets time
and again.
 There is no risk of theft, mutilation or forgery.
 There is no stamp duty on transfer.
 Their transaction costs are drastically reduced.
 The securities can be transferred almost immediately from one account
to another account.
 The paper work involved in buying, selling and transfer are
considerably reduced.
 No separate custodian required as the shares are held by NSDL itself.
 No risk of loss of shares certificates in transit.
 All non-cash corporate benefits i.e., Rights & Bonuses can also be
obtained in electronic form automatically.
 Freezing of accounts is possible for any desired time duration.
It can be inferred easily from above that the paperless trading is a boon for
large investors and traders who buy/ sell and hold large chunk of securities
in their name. It is also widely known that the hassles of transferring physical
shares, problems, problems of custody, bad delivery and fake certificates
etc. have been keeping many FIIs as well as NRIs away from Indian stock
markets.
3.5 FUTURE SCOPE
The question now arises as to how to we touch the moon i.e., complete

paperless trading. A few suggestions are given below:
 It should be recalled that government had given many incentives to the

US-64 scheme during the initial years to spread the equity cult in India.
Similar incentives should be introduced for small investors to trade into
the demat share.
 All FIIs, FIs, large NRI and domestic investors should mandatory trade
among themselves sin demat form. The same can be achie4ved by
making it mandatory to trade in securities above a certain quantity of
shares or certain value of shares per transaction. The process can start
with few securities and their number can then be enlarged subsequently.
 The institutions are found reluctant to buy shares in physical form due
to the stamp duty involved. It is opined that the charges of stamp duty in
securities transfer have become obsolete concept. It is suggested that
the stamp duty should be reimbursed to the investors if and when they
convert there holding into demat form.
 The dematerialization of shares should not be permitted.
 The cost of holding shares into demat form must be brought down
particularly for investors so that they too, see an advantage in dealing in
demat shares.
 All stock exchanges should be linked to the depository as fast as

possible.
 The banks and other brokers should be encouraged to act as

depository participants.
 NSE brokers and othee4 sub-brokers having presence in smaller towns
should be permitted to function as depository participants.

 Dematerialization charges should be abolished and government should

subsidize the costs involved to NSDL.
 The disparity of settlement period between physical and demat

segment should be removed. The same can be achieved by acceding to
the demand of DPs to introduce a rolling settlement period in physical
segment of shares.
 All the above measures should be backed by a mighty effort I the

awareness campaign, which should involve the government, NSDL, DPs,
FIs, Brokers and investors alike.
DEMAT PROCESS
A request form together with the share certificates desired to be

dematerialized is given to the Depository Participant. He sends the request
along with the share certificates to the company/ registrars through National
Security Depository Limited for confirmation of dematerialization to NSDL.
NSDL then confirms the dematerialization of shares to your DP to credit the
holding of shares in your account electronically. This takes about 15 days
from the date of request. Electronic holdings can be converted back into
certificates, if so desired, in a similar fashion as that for dematerialization.

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A Study On ICICI Direct.Com, Demeterialisation of ICICI Capital Ltd.

East West College Of Management, Bangalore 1

Introduction of depository services is considered as the ‘Beginning of the Era

The scope of this study is limited to the performance of the industry.

1.1 GENERAL INTRODUCTION

East West College Of Management, Bangalore 2

PHYSICAL CERTIFICATES - THE TRADITIONAL WAY

This century-old system of trading and settlement requires handling of huge

 Unwarranted delay in transfer of shares. It takes 30 to 60 days for the

 Possibility of forgery on various documents leading to bad deliveries, legal

 Theft of shares leading to defective title in shares purchased and

 Prevalence of fake certificates in the market;

 Mutilation or loss of share certificates in transit;

 Increased transaction costs due to stamp duty, fake shares, rejection by

East West College Of Management, Bangalore 3

depository and the introduction of scrip less trading and settlement is

A Number of questions will be arising in the investor’s mind like;

1.2 INTRODUCTION TO DEMATERIALIZATION

East West College Of Management, Bangalore 4

Even as online automated trading and better clearing and settlement

Dematerialisation (holding and trading securities in paperless mode) was an

As the FIIs complained about the paperwork as a major constraining factor,

East West College Of Management, Bangalore 5

Until SEBI stepped in, that is.

With regulatory pushes SEBI, in phases, made demat trading in stocks

As a consequence of SEBI's action, most major stocks are traded in the

The costs of dematerialisation have declined as the NSDL slashed charges as

From a long-term perspective, demat in India is of considerable significance.

As a consequence of dematerialisation, the Indian market is also well

East West College Of Management, Bangalore 6

This is the concluding week of Business Line's 20-week series Markets – a

* As conducted the study of S. Vaidya Nathan and BL Research Bureau

Table No. 1.1 Difference between Bank and Depository Participant

Bank Depository Participant

- Holds funds in Accounts. - Holds securities in account.

1.3 DEPOSITORY SERVICES - BEGINNING OF THE ERA

East West College Of Management, Bangalore 7

Today it is a practical reality that you can arrange delivery of securities

Dematerialization of securities (shares) was the commencement of the era of

 Linked to the capital markets.

1.4 THEORETICAL BACKGROUND

The dematerialized form of shareholding and the depository mode of trade

East West College Of Management, Bangalore 8

over 15 years. In India, the first depository commenced operation a decade

Dematerialization is the process by which physical certificates of an investor

A Depository account is similar to a bank account. It gives a summary of

East West College Of Management, Bangalore 9

period. The information of securities holding is maintained in the electronic

A Depository participant is an agent appointed by the depository and is

 A corporate body that can hold shares in electronic form.

East West College Of Management, Bangalore 10

 Identifies beneficial owner of the shares.

 Since there is no change in the registered ownership there is no stamp

A depository means a place where anything is deposited. It can be anything

1. The first is to hold securities in a physical form. The ownership can be

NEED FOR DEPOSITORY

East West College Of Management, Bangalore 11

 Compulsory Demat trading introduced by SEBI in 1998

1.5 INDUSTRIAL BACKGROUND

East West College Of Management, Bangalore 12

DEPOSITORY SERVICES IN INDIA

India has two depository service providers, The National Securities