Depositary System in India

India has adopted the Depository System for securities trading in which book entry is done electronically and no paper is involved. The physical form of securities is extinguished and shares or securities are held in an electronic form. Before the introduction of the depository system through the Depository Act, 1996, the process of sale, purchase and transfer of securities was a huge problem, and there was no safety at all. A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities. At present two Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI. The minimum networth stipulated by SEBI for a depository is Rs 100 crore. A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor and provides depository services. Public financial institutions, scheduled commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India, state financial corporations, custodians, stock-brokers, clearing corporations /clearing houses, NBFCs and Registrar to an Issue or Share Transfer Agent complying with the requirements prescribed by SEBI can be registered as DP. Banking services can be availed through a branch whereas depository services can be availed through a DP. As per the available statistics at BSE and NSE, 99.9 per cent transactions take place in dematerialised mode only. Therefore, in view of the convenience of trading in dematerialised mode, it is advisable to have a beneficial owner (BO) account for trading at the exchanges. However to facilitate trading by small investors (Maximum 500 shares, irrespective of their value) in physical mode the stock exchanges provide an additional trading window, which gives one time facility for small investors to sell physical shares which are in compulsory demat list. The buyer of these shares has to demat such shares before further selling.

Key Features of the Depository System in India 1. Multi-Depository System: The depository model adopted in India provides for a competitive multidepository system. There can be various entities providing depository services. A depository should be a company formed under the Company Act, 1956 and should have been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992. Presently, there are two depositories registered with SEBI, namely:
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National Securities Depository Limited (NSDL), and Central Depository Service Limited (CDSL)

2. Depository services through depository participants: The depositories can provide their
services to investors through their agents called depository participants. These agents are appointed subject to the conditions prescribed under Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and other applicable conditions.

3. Dematerialisation: The model adopted in India provides for dematerialisation of securities. This is a
significant step in the direction of achieving a completely paper-free securities market. Dematerialization is a process by which physical certificates of an investor are converted into electronic form and credited to the account of the depository participant.

4. Fungibility: The securities held in dematerialized form do not bear any notable feature like
distinctive number, folio number or certificate number. Once shares get dematerialized, they lose their identity in terms of share certificate distinctive numbers and folio numbers. Thus all securities in the same class are identical and interchangeable. For example, all equity shares in the class of fully paid up shares are interchangeable.

5. Registered Owner/ Beneficial Owner: In the depository system, the ownership of securities
dematerialized is bifurcated between Registered Owner and Beneficial Owner. According to the Depositories Act, Registered Owner means a depository whose name is entered as such in the register of the issuer. A Beneficial Owner means a person whose name is recorded as such with the depository. Though the securities are registered in the name of the depository actually holding them, the rights, benefits and liabilities in respect of the securities held by the depository remain with the beneficial owner. For the securities dematerialized, NSDL/CDSL is the Registered Owner in the books of the issuer; but ownership rights and liabilities rest with Beneficial Owner. All the rights, duties and liabilities underlying the security are on the beneficial owner of the security.

6. Free Transferability of shares: Transfer of shares held in dematerialized form takes place freely
through electronic book-entry system.

Functions of Depository:
1. Services to investors

2. Services to Participants in the capital market such as clearing members, stock exchanges, investment institution, banks and issuing corporate 3. 4. 5. 6. Account opening Dematerialization Rematerialization Settlement of trades

7. Advanced facilities like pledging, distribution of non- cash corporate actions, distribution of securities to allot tees in case of public issues etc.

Benefits of Depository System:

1. This system will eliminate paper work as the book entry system does not need physical movement of certificates for transfer process. 2. The risk of bad deliveries, fraud and misplaced, mutilated and lost share certificates will not exist.

3. The electronic media will shorten settlement time and hence the investor can save time and increase the velocity of security movement. 4. Investors will be able to change portfolio more frequently.

5. The capital market will be more transparent as the trading, clearing and settlement mechanism have to be highly automated and interlinked with the depository among themselves. 6. The market will be highly automated and efficient due to the usage of computing and telecommunication technology for the back office activities for all the capital market players.

About NSDL
Although India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialised form in the Indian capital market. Using innovative and flexible technology systems, NSDL works to support the investors and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfers. This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates.

Joining NSDL:
NSDL carries out its activities through service providers like Depository Participants (DPs), Issuing companies and their Registrars and Share Transfer Agents, Clearing corporations/ Clearing Houses of Stock Exchanges. These entities are called business partners in NSDL terminology. These entities need to get integrated into NSDL depository system to be able to provide various services to the investors and Clearing Members. The investor can obtain depository services through a depository participant of NSDL. Just as one opens a bank account in order to avail of the services of a bank, an investor opens a depository account with a depository participant in order to avail of depository facilities. A clearing member can open a special account in the depository system for the purpose of settling trades done on stock exchanges. The clearing account enables the clearing member to receive securities from its clients for delivery to the Clearing House/Clearing Corporation as pay-in, and to distribute the pay-out to its clients received from the Clearing House/Clearing Corporation. Issuer can make dematerialisation services available to their shareholders by signing an agreement to that effect with NSDL. After the agreement is entered into, an electronic link is established between NSDL, Issuer or its R & T Agent. The clearing corporations/houses of stock exchanges also have to be electronically linked to the depository in order to electronically receive securities delivered by clearing members towards pay-in and to give out securities to clearing members towards pay-out.

Services of NSDL
Basic Services
Under the provisions of the Depositories Act, NSDL provides various services to investors and other participants in the capital market like, clearing members, stock exchanges, banks and issuers of securities. These include basic facilities like account maintenance, dematerialisation, rematerialisation, settlement of trades through market transfers, off market transfers & inter-depository transfers, distribution of non-cash corporate actions and nomination/ transmission The depository system, which links the issuers, depository participants (DPs), NSDL and clearing corporation/ clearing house of stock exchanges, facilitates holding of securities in dematerialised form and effects transfers by means of account transfers. This system which facilitates scripless trading offers various direct and indirect services to the market participants.

Account Maintenance To avail of the various services offered by NSDL an investor/ a broker/ an approved intermediary (for lending & borrowing) has to open a NSDL depository account with any of its DPs. Depository accounts are of three types:
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Beneficiary account: An investor who wants to hold securities in dematerialised (demat) form
and receive or deliver securities by inter-account transfers must have a depository account called beneficiary account with a DP of his choice.

Clearing member account: Member brokers of those stock exchanges which have established
electronic connectivity with NSDL need to open a clearing member account, with a DP of his choice, to clear and settle trades in the demat form. This account is popularly known as Settlement account or "Pool account". This account is meant only to transfer securities to and receive securities from the clearing corporation/ house and hence, the member broker does not have any ownership (beneficiary) rights over the shares held in such an account. Further, clearing members of stock exchanges permitting Automatic Lending or Borrowing Mechanism (ALBM) transactions can request for a "clearing member ALBM" account to participate in ALBM transactions. These additional CM Accounts maintained for the purpose of ALBM transactions will have to be necessarily opened with the clearing house of the concerned stock exchange e.g. a BSE clearing member's "normal clearing member account" could be with a DP XYZ, but his "clearing member ALBM" account will have to necessarily be with the clearing house of the BSE.

Intermediary account: Any person choosing to act as an approved 'intermediary' for stock lending and borrowing needs to open an intermediary account with any DP of his choice. An intermediary account may be opened with the DP only after the intermediary has obtained registration from the Securities & Exchange Board of India and with the prior approval of NSDL. This account is meant only to deposit the securities received from the lender and lend them to the borrower under stock lending and borrowing scheme. The intermediary does not have any ownership (beneficiary) rights over the shares held in such an account.

Various services offered by DPs with respect to these accounts are as follows: Standing Instruction Facility : DP enters the advise for the transfer of securities to or from a beneficial owner's account only on receipt of instructions from the client. The clients need to give delivery instruction to transfer securities from their account & receipt instruction to get credit into their account. However, for ease of operation, a facility of standing instruction is provided to the clients for receiving securities to the credit of their accounts without any further instruction from them. Change in Address : The client can change his address by submitting the changes in writing to the DP
along with proof of identity, proof of new address with original document of new address for verification and latest transaction statement received from the DP of the client. The changes conveyed to the DP will be automatically communicated to the companies in which he is holding shares in dematerialised form.

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

Nomination : A client can make a nomination of his account in favour of any person by filing the
nomination form with his DP. Such nomination is considered to be conclusive evidence of the account holder'(s) disposition in respect of all the securities in the account for which the nomination is made.

Transposition cum Demat : This is a facility whereby securities held jointly can be dematerialised in an account of same joint holders but having different sequence of names. e.g. securities held in joint names of X and Y can also be dematerialised in an account opened in the names of Y and X by submitting an additional form called Transposition Form alongwith Dematerialisation Request Form (DRF) to the DP. Consolidation of Accounts : Some clients could have opened multiple accounts to dematerialise their
shares held in multiple combinations & sequence of names. However, they may not need so many accounts after they have dematerialised their securities and may want to bring all their shareholdings into one or fewer accounts. Using off-market account transfer instruction such consolidation can be done.

Closure of Account : A client can close a depository account by giving an application in the prescribed form. In case there is any balance in the account sought to be closed, the following steps are necessary.
(a) Re-materialisation of all securities standing to the credit of the account at the time of making the application for closure; or (b) Transferring the balance to the credit of another account opened by the same account holder(s) either with the same participant or with a different participant.

Freezing of Accounts : Account freezing means suspending any further transaction from the
depository account till the account is de-frozen. A depository account maintained with a DP can be frozen if the DP receives a written instruction in prescribed form from the client. A frozen account can be defrozen or re-activated if the client submits written instruction in prescribed form to the DP.

Dematerialisation
Dematerialisation is the process by which a client can get physical certificates converted into electronic balances. An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP. After intimating NSDL electronically, the DP sends the securities to the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/ R&T agent electronically, using NSDL Depository system, about the request for dematerialisation. If the Issuer/ R&T agent finds the certificates in order, it registers NSDL as the holder of the securities (the investor will be the beneficial owner) and communicates to NSDL the confirmation of request electronically. On receiving such confirmation, NSDL credits the securities in the depository account of the Investor with the DP.

Procedure:
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The client (registered owner) will submit a request to the DP in the Dematerialisation Request Form for dematerialisation, along with the certificates of securities to be dematerialised. Before submission, the client has to deface the certificates by writing "SURRENDERED FOR DEMATERIALISATION". The DP will verify that the form is duly filled in and the number of certificates, number of securities and the security type (equity, debenture etc.) are as given in the DRF. If the form and security count is in order, the DP will issue an acknowledgement slip duly signed and stamped, to the client. The DP will scrutinize the form and the certificates. This scrutiny involves the following : o Verification of Client's signature on the dematerialisation request with the specimen signature (the signature on the account opening form). If the signature differs, the DP should ensure the identity of the client. o Compare the names on DRF and certificates with the client account. o Paid up status o ISIN (International Securities Identification Number) o Lock - in status o Distinctive numbers In case the securities are not in order they are returned to the client and acknowledgment is obtained. The DP will reject the request and return the DRF and certificates in case: o A single DRF is used to dematerialise securities of more than one company. o The certificates are mutilated, or they are defaced in such a way that the material information is not readable. It may advise the client to send the certificates to the Issuer/ R&T agent and get new securities issued in lieu thereof. o Part of the certificates pertaining to a single DRF is partly paid-up; the DP will reject the request and return the DRF along with the certificates. The DP may advise the client to send separate requests for the fully paid-up and partly paid-up securities. o Part of the certificates pertaining to a single DRF is locked-in, the DP will reject the request and return the DRF along with the certificates to the client. The DP may advise the client to send a separate request for the locked-in certificates. Also, certificates locked-in for different reasons should not be submitted together with a single DRF In case the securities are in order, the details of the request as mentioned in the form are entered in the DPM (software provided by NSDL to the DP) and a Dematerialisation Request Number (DRN) will be generated by the system.

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The DRN so generated is entered in the space provided for the purpose in the dematerialisation request form. A person other than the person who entered the data is expected to verify details recorded for the DRN. The request is then released by the DP which is forwarded electronically to DM (DM Depository Module, NSDL's software system) by DPM. The DM forwards the request to the Issuer/ R&T agent electronically. The DP will fill the relevant portion viz., the authorisation portion of the demat request form. The DP will punch the certificates on the company name so that it does not destroy any material information on the certificate. The DP will then despatch the certificates along with the request form and a covering letter to the Issuer/ R&T agent. The Issuer/ R&T agent confirms acceptance of the request for dematerialisation in his system DPM (SHR) and the same will be forwarded to the DM, if the request is found in order. The DM will electronically authorise the creation of appropriate credit balances in the client's account. The DPM will credit the client's account automatically. The DP must inform the client of the changes in the client's account following the confirmation of the request. The issuer/ R&T may reject dematerialisation request in some cases. The issuer or its R&T Agent will send an objection memo to the DP, with or without DRF and security certificates depending upon the reason for rejection. The DP/Investor has to remove reasons for objection within 15 days of receiving the objection memo. If the DP fails to remove the objections within 15 days, the issuer or its R&T Agent may reject the request and return DRF and accompanying certificates to the DP. The DP, if the client so requires, may generate a new dematerialisation request and send the securities again to the issuer or its R&T Agent. No fresh request can be generated for the same securities until the issuer or its R&T Agent has rejected the earlier request and informed NSDL and the DP about it.

Rematerialisation
Rematerialisation is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the rematerialisation request to the DP with whom he has an account. The DP enters the request in its system which blocks the client's holdings to that extent automatically. The DP releases the request to NSDL and sends the request form to the Issuer/ R&T agent. The Issuer/ R&T agent then prints the certificates, despatches the same to the client and simultaneously electronically confirms the acceptance of the request to NSDL. Thereafter, the client's blocked balances are debited. Procedure
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The client will submit a request to the DP for rematerialisation of holdings in its account. On receipt of the request form, the DP will verify that the form is duly filled in and issue to the client, an acknowledgement slip, signed and stamped. The DP will verify the signature of the client as on the form with the specimen available in its records. If the signatures are different the DP will ensure the identity of the client. If the form is in order the DP will enter the request details in its DPM (software provided by NSDL to the DP). While entering the details, if it is found that the client's account does not have enough balance, the DP will not entertain the request.

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The DP will intimate the client that the request cannot be entertained since the client does not have sufficient balance. If there is sufficient balance in the client's account, the DP will enter the request in the DPM and the DPM will generate a Rematerialisation Request Number (RRN). The RRN so generated is entered in the space provided for the purpose in the rematerialisation request form. Details recorded for the RRN should be verified by a person other than the person who entered the data. The request is then released to the DM by the DP. The DM forwards the request to the Issuer/ R&T agent electronically. The DP will fill the authorisation portion of the request form. The DP will then despatch the request form to the Issuer/ R&T agent. While processing the request, the Issuer/ R&T agent may report some objections. Depending on the nature of objection, the Issuer/ R&T agent may reject the request or process it partially, seeking rectification for the remaining, and send an objection memo to the DP. The Issuer/ R&T agent accepts the request for rematerialisation prints and despatches the certificates to the client and sends electronic confirmation to the DM. The DM downloads this information to the DPM and the status of the rematerialisation request is updated in the DPM. The DP must inform the client about the changes in the client account following the acceptance of the request.

Market Transfers
Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers.

Off - Market Transfers

Trading in dematerialised securities is quite similar to trading in physical securities. The major difference is that at the time of settlement, instead of delivery/receipt of securities in the physical form, the same is affected through account transfers.

Inter-Depository Transfers
Transfer of securities from an account in one depository to an account in another depository is termed as an inter-depository transfer. This facility is quite similar to the account transfers within NSDL.
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It can be done only for securities that are available for dematerialisation on both the depositories. The account in NSDL can be either a clearing account or a beneficiary account. For debiting the clearing account or the beneficial account with NSDL, the form for "Interdepository delivery instruction" is required to be submitted by the clearing member/beneficial owner to its DP. For crediting the clearing account or the beneficial account, the standing instruction given for automatically crediting the account is applicable. In case the standing instructions are not given, then the form for "Inter-Depository Receipt Instruction" is required to be submitted by the clearing member/beneficial owner to its DP.

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As both the depositories are connected to each another, the batches to effect inter - depository transfers are presently exchanged on each working day. Online transfer of inter depository instructions has commenced w.e.f December 14, 2002. In the online inter depository transfer (OLIDT) module, Inter Depository Transfer instructions for the day will be exchanged online between the two depositories. Thus, the instructions executed by DPs may get settled at shorter intervals. The deadline time for DPs to verify & release Inter Depository Transfer delivery/ receipt instructions is 6 p.m. on weekdays and 2.30 p.m. on Saturdays. The Issuer/Registrar & Transfer Agent is informed about the transfer by both the depositories and it amends its records accordingly. Government securities cannot be transferred from one depository to another using this facility.

Pledge / Hypothecation
Features: Securities held in a depository account can be pledged/hypothecated to avail of loan/credit facility. Pledge of securities in NSDL depository requires that both the borrower (pledgor) and the lender (pledgee) should have account in NSDL depository. The pledge/hypothecation transactions go through the following procedures:
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Pledge/hypothecation creation Pledge/hypothecation closure Pledge/hypothecation invocation

Transmission
One of the lesser-known but widely experienced problems with respect to dealing in share certificates is transmission of shares. The Companies Act distinguishes transmission of shares from transfer of shares. While transfer of shares relates to a voluntary act of the shareholder, transmission is brought about by operation of law. The word 'transmission' means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. While transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarised copy of death certificate) to the company. On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder. In case the deceased shareholder had holdings in different companies, then in order to effect transmission of shares for these shares, the relevant documents must be sent to each of the companies, alongwith the share certificates. This results in a heavy reliance on the postal system. Follow-up may have to be made with each of the companies in order get the transmission effected before the book closure, if the survivor(s) wishes to avail of the benefits accrued through these shares.

Corporate Actions Features:

Corporate actions are benefits given by a company to its investors. These may be either monetary benefits

like dividend, interest or non-monetary benefits like bonus, rights, etc. NSDL facilitates distribution of corporate benefits. Monetary benefits (dividends etc): NSDL will give the beneficiary ownership details to the Issuer/R & T Agent. The Issuer/R & T Agent will carry out the necessary processing and the distribution of such benefits will be outside the system. Non-monetary benefits (rights bonus etc): NSDL will give the beneficiary ownership details to the Issuer/ R & T Agent. The Issuer/R & T Agent will carry out the necessary processing and upload the beneficiary ownership details to NSDL. NSDL will then credit the beneficiary owners' accounts by downloading the data to the DPs.

Value Added Services Automatic Delivery Out Instructions(Auto DOs)

Delivery-out instructions for moving securities from CM Pool Account to CM Delivery Account can be generated automatically by the respective Clearing Corporations based on the net delivery obligations of its Clearing Members. The Clearing Corporation can generate Auto DOs on behalf of those Clearing Members who have authorised it in this regard. The Auto DOs will be generated around the time of download of the delivery obligations to the Clearing Members. Such Clearing Members will not be required to give delivery-out instruction forms to the Participants for Pay-in to the Clearing Corporation in respect of the automatically generated DOs. The Clearing Members can know the Auto DOs either by way of download from the Clearing Corporation or through the Auto DO Report from the Participants or from SPEED facility on Internet.

Auto DOs will not be generated in the following cases and the Clearing Members will have to give Delivery-out Instruction forms to their Participants as usual: (a) Non Pari-Passu shares or multiple ISINs - The Auto DOs will be generated only for the main ISIN. Example: A Clearing Member has to deliver 1000 shares of L & T for Pay-in. If he has 600 shares under ISIN INE018A01014 and 400 shares under ISIN INE018A01022 i.e. L & T (LE), the Auto DO will be generated for the entire 1000 shares under ISIN INE018A01014. In respect of the 400 shares lying under ISIN INE018A01022, the Clearing Member will have to give Delivery-out Instruction form to the DP. If the Clearing Member wants to deliver shares under an ISIN different from the one for which Auto DO is generated, then he has to cancel the Auto DO and give Delivery-out Instruction form to the DP for the ISIN he wants to deliver. (b) Irreversible Delivery-out (IDO)- Auto DOs will not be generated for IDOs required to be given for the purpose of margin payment / exemption, etc.
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In case IDO is given before generation of Auto DO, Clearing Members will have to ensure that an instruction is given to the DP subsequently for cancellation of the corresponding Auto DO alongwith Delivery-out Instruction form for the balance quantity. In case IDO is given after generation of Auto DO, Clearing Members will have to ensure that the Auto DO is first canceled before execution of the IDO. Further, a Delivery-out Instruction form for the balance quantity should also be given to the Participant.

(c) Shifting of CM Pool Account from one Participant to another Participant - Auto DOs will be generated only in respect of one CM Pool Account i.e., the CM Pool Account which is designated for receiving Pay-out as of the date of generation of Auto DOs. The Clearing Member must carefully monitor the delivery instructions for Pay-in as the securities might be lying during the shifting process in both the CM Pool Accounts. Clearing Members will be required to give Inter-settlement Instructions to the Participants for securities lying in another settlement as usual. Participants can generate separate reports from the DPM both for Auto DOs and manual DOs. All the existing features of DOs viz.; remaining valid till the NSDL Deadline time and partial delivery for insufficient balance will be applicable for Auto DOs also. Dividend Distribution At present, NSDL merely facilitates distribution of cash corporate benefits like dividend etc., to shareholders. Details in respect of all beneficial owners of the security as on the record date of the concerned company are provided by NSDL to the company/ its registrar and share transfer agent (R & T agent). Thereafter, the company/ R & T agent dispatches dividend entitlements to the eligible beneficial owners in the same way as is done for shareholders holding physical certificates. NSDL intends to extend the service of distributing cash benefits directly to beneficial owners. On a pilot basis NSDL had extended the dividend distribution service to shareholders of certain companies. Keeping in view this successful experiment, NSDL, in future, may consider extending this service to other issuers too who have joined the NSDL depository system.

Stock Lending and Borrowing

The transactions involving lending and borrowing of securities are executed through approved intermediaries duly registered with SEBI under the Securities Lending Scheme, 1997. Such an intermediary may deal in the depository system only through a special account (known as Intermediary Account) opened with a DP. An intermediary account may be opened with the DP only after the intermediary has obtained SEBI approval and registered itself with SEBI under the Securities Lending Scheme. The intermediary has also to obtain approval of NSDL.

Public Issues
Investors have an option to seek allotment of public issues in electronic form. As per SEBI guidelines trades in shares issued through public issue shall be settled only in demat form. Therefore, it is advisable that investors seek allotment in demat form.

Procedure:
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The Issuer provides an option in the application form to the beneficial owners to opt for securities either in physical or electronic form. The beneficial owner who opts for electronic securities will indicate the DP Id and the beneficial owner account number in the application form and send it to the Issuer/R&T agent. The Issuer/R&T agent will issue securities in physical form in respect of those beneficial owners who do not indicate any choice.

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The Issuer/R&T agent will provide allotment details and the date on which the necessary credit entries are to be made in the accounts of the beneficial owners (referred to as execution date) to NSDL. NSDL will perform the necessary bookings and the relevant credit entries are booked in the DPM on the execution date. The Participant will give the statement of holdings and transaction statement to the beneficial owners, giving the updated positions after the shares are credited.

Charges
NSDL provides depository services to investors and clearing members through market intermediaries called Depository Participants (DPs). NSDL does not charge the investors and clearing members directly but charges its DPs, who are free to have their own charge structure for their clients. NSDL charges to DPs are uniform for all DPs. Some charges are payable by Issuers also.
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Fee Payable by Depository Participants.

Fee Payable by Issuers.

A Comparative Chart of Fees Charged by the DPs.

FEE PAYABLE BY DEPOSITORY PARTICIPANTS ENTRY FEES Each Participant shall pay at the time of submitting its application to the Depository, a non-refundable Entry Fee of Rs. 25,000. TRANSACTION RELATED FEES The following transaction related fees shall be payable by the Participants to the Depository: Settlement fee: i. A settlement fee at the rate of Rs.4.50 per debit instruction in a Client's account shall be charged to the Participant of the Client.

ii.

A settlement fee at the rate of Re.1.00 per instruction in respect of securities received from the Clearing Corporation into the Pool account of each Clearing Member maintained with the

Participant subject to a minimum of Rs. 1,000 and a maximum of Rs. 5,000 per quarter per CM Account shall be charged to the Participant.

iii.

A settlement fee at the rate of Rs.4.50 per debit instruction for transfer of securities by way of inter-settlement transfers in the CM Account(s) shall be charged to the Participant.

iv.

A settlement fee at the rate of Rs.4.50 per debit instruction for transfer of securities from the CM account of a Clearing Member to the CM account of another Clearing Member shall be charged to the Participant of the delivering Clearing Member.

Provided further that no settlement fee shall be charged : a. in respect of commercial papers and short term debt instruments such as certificate of deposits, MIBOR linked papers etc.; and

b. in case of :

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transfers necessitated by transmission on death of the Client; and

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transfer of the accounts of Clients from one Participant to another as a consequence of expulsion or suspension of such Participant.

Pledge fee A fee at the rate of Rs.25 per instruction for creation of pledge / hypothecation shall be charged to the Participant of the pledgor/ hypothecator. No fee shall be charged when a pledge / hypothecation is closed or invoked. CUSTODY FEES Nil

FEE FOR DEMATERIALISATION & REMATERIALISATION No fee shall be charged by the depository for dematerialisation of securities. Participant shall be charged the following fee for rematerialisation of securities: a. a fee of Rs.10 for every hundred securities or part thereof ; or

b. a flat fee of Rs.10 per certificate, whichever is higher. No rematerialisation fee shall be charged for Government Securities. MINIMUM FEE In case the total fee billed to the Participants in a financial year is less than the minimum fee of Rs.1,00,000 then the Participant shall be charged the difference thereof. SECURITY DEPOSIT Every Participant shall pay to the Depository Rs.10 lakh by way of interest free refundable security deposit. However, a Clearing Corporation or a Clearing House of a Stock Exchange will be exempt from payment of security deposit.

Top FEE PAYABLE BY ISSUERS ANNUAL CUSTODY FEE i. With effect from April 1, 2009, an Issuer of listed securities shall pay an annual custody fee at the rate of Rs. 8 per folio (ISIN position) in NSDL, subject to a minimum amount as mentioned below, plus taxes as applicable:

Nominal Value of Securities admitted (Rs.) Amount (Rs.)

Upto 5 crore Above 5 crore and upto 10 crore Above 10 crore and upto 20 crore Above 20 crore

6,000 15,000 30,000 50,000

ii.

The above fee would be applicable on all securities i.e. equity, debt, Units of mutual funds, pass through certificates, certificates of deposit, commercial papers, preference shares etc., except Government securities.

iii.

The fee will be based on the total ISIN positions (folios) as on March 31, of the previous financial year. Provided however that, in case the issued capital or ISIN positions increase during the financial year due to issue of further shares, by way of public offer, the annual custody fee would be charged on a pro-rata basis, at the time of such issue.

iv.

The fee will be charged every year on a financial year basis and shall be payable by April 30 of that financial year. If an Issuer fails to pay the fees mentioned under "Annual Custody Fee" by the due date, the Depository may charge interest @ 12% p.a. on the amount, from the due date of payment till the payment is received by the Depository. Provided further that the Depository may stop providing details of clients / clearing members / clearing corporation / intermediary to the Issuer and / or its Registrar and Transfer Agent as mentioned in the Bye Laws and Business Rules. Provided further that the Depository may not permit the Issuer to use its infrastructure including for issue of further securities in electronic form.