A RESEARCH PROPOSAL ON

Impact of transferring Physical shares into Dematerialisation form & Functioning of Depository Participant
Submitted for the partial fulfilment of Master of Business Administration MBA (2010-2012) Gujarat Technological University- Ahmadabad.

Submitted by: Varin A Patel MBA-II (2010-2012) Enroll. No. 107550592029 Under the Guidance of Assit-Prof. Mehul Shah
Submitted to: SARDAR PATEL COLLEGE OF ADMINISTATION AND MANAGEMENT (SPCAM- MBA) Approved by All India Council for Technical Education,(AICTE) New Delhi Affiliated with Gujarat Technological University, Ahmadabad. SPEC Campus, Vidhyanagar, Vadtal Road, Bakrol-388315, Anand. (Gujarat)

Introduction to Topic
A Depository is a provider of facility for holding and/or transacting securities in, book entry form. Physical securities can be converted in to book entry form i.e. electronic form by way of immobilization or dematerialization. (so that they exist only as electronic records). India has chosen the dematerialization route. A depository functions somewhat similar to a commercial bank. To avail of the services offered by a depository, the investor has to open a demat account with a registered DP Your money may be held in the form of liquid cash at your home or may be deposited in a bank. The bank holds your funds in the electronic form and subsequently debits or credits the account, depending on your issuance of cheques or deposit of cheques. The advantages of safety and convenience of dealing with a bank overweigh the reasons for holding liquid cash in your home. Your financial assets such as Equity Shares may be compared to the above example. You may hold physical share certificates in your home and be exposed to the various risks of lack of safety, mutilation, loss etc. Alternatively, you may deposit your shares in an organization called a Depository, which holds your shares in the electronic form. A Depository is a securities "bank," where dematerialized physical securities are held in custody, and from where they can be traded. This facilitates faster, risk-free and low cost settlement. Thus, a Depository is akin to a bank and performs activities similar in nature. Dematerialization of financial securities is the first sign of financial reforms in India. Finance Ministry and SEBI realized the need of more efficient financial system. As a result of this NSDL and CDSL came into picture. It aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimize risk and reduce costs. The earlier settlement system on Indian stock exchanges was very inefficient as it was unable to take care of the transfer of securities in a quick/speedy manner. Since, the securities were in the form of physical certificates; their quick movement was again difficult. This led to settlement delays, theft, forgery, mutilation and bad deliveries and also to added costs.

National Securities Depository Limited (NSDL) Performs the tasks for trades done on NSE. It is a joint venture of: IDBI (Industrial Development Bank of India Limited); NSE (National Stock Exchange); and UTI (Unit Trust of India). NSDL is the first depository to be set up in India. It was registered by SEBI on June 7,1996. Central Depository Services Limited (CDSL) The second depository has been promoted by Bombay Stock Exchange and Bank of India. It was formed in February 1999. Both depositories have a network of Depository participants (DPs) which are further electronically connected to their clients. So, DPs act as a link between the depositories and the clients. Depository Participant A Depository Participant (DP) is an agent of the depository who is authorized to offer depository services to investors. Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP. Further information on DP, can be accessed from CDSLs web site www.cdslindia.com. An investor will always interact with a DP for the services and can not directly approach the depository for any services. Legal Frameworks Following are the acts and regulations under which a depository functions: 1. The Depositories Act, 1996, 2. SEBI (Depositories and Participant) Regulations. 3. CDSL Bye-laws which are framed under the above two documents. 4. Prevention of Money Laundering Act (PMLA), 2002.

Research Methodology

Objective of the study:To understand the importance of dematerialization of securities and the process involved. To understand the process of transfer of shares. To apply the knowledge in real life situation. To understand meaning and importance of ISIN (International Securities Identification Number) To understand the working of a Depository Participant and thereby get an overall view of how the securities transfer takes place electronically in the share bazaar. To understand the financial system better, it is very necessary to understand the mechanism that facilitates it. Considering the contemporary developments in the Indian financial mechanism I felt that it would be better for me to understand the Demat system of Indian securities market. Why several share holder are not preferring to get their share transfer into electronic form to gain the advantage of this wonder full facility. To Study the relationship between Physical share and Dematerialized shares To understand the process of Dematerialization & its necessity.

Problem of the Study: Need for Dematerialization of Share What is the difference Between Physical Share & Dematerialized Share?

How the dematerialization of share is done?

What are the effects on financial market by dematerialization? Who are the Depository participants? What are the Function of Depository participant & how they are operating? Which way Customers are attracted towards Depositary participant? How is the Demat accounts handled?

Scope of the Study: The tedious process of physically transferring ownership of shares is shortened. Instead of several months, ownership is supposed to change hands instantly. The chance of a bad transfer because a signature doesn't match is reduced to zero. So are the opportunities of thievery in the mail or forged share certificates. The twin problems of odd lots and jumbo lots both disappear since it is possible to trade either a single demat share or any Number of share at any point of time. So demat solves various familiar problems that plague every stock market that operates with physical paper. No wonder when SEBI initiated the process of demat it was welcomed wholeheartedly by most investors. So in this project we had tried to understand the Dematerialisation of share in India how it operates & how the public is attracted towards this source of income.

METHOD OF DATA COLLECTION

The method of data collection I have implemented for my project is secondary method of data collection. I will also prefer primary method such as phone calls, questionnaires,. In my project I will give a complete view of the mechanism of the Demat system as a base. I will also gain some important knowledge about the fundamentals of the system by referring to NSDL & CSDL Website . A large amount of information on the related topics will be retrieved from the Internet without which our knowledge would have remained shallow and incomplete. I am going to collect the necessary information from the Brokers also for analysis of various Demat Account data. The journals and Periodic issued by various Brokers is also being consider in Data Analysis.

Hypothesis Testing
Null Hypothesis: Dematerialization is better than Physical Shares Alternative Hypothesis: Physical Shares is better than Dematerialization

Chapter Scheme:Sr.No
01 02 03

Particulars
Acknowledgment Executive Summary Introduction of Dematerialization of financial securities

Pag No

04
05 5.1 5.2

Demat System in INDIA

Research Methodology Objective of the Study Scope of the Study

5.3
5.4 5.5 06 07 08 09 10 11

Data Collection
Analysis of Data Limitation Hypothesis Testing Comparison of depository with bank Comparison of depository system with physical share system Benefits & Process of dematerialization A clients perspective towards Dematerialization Findings & Conclusion

12

Recommendation & Bibliography

Questionnaires: Q-1 Why there is a need for dematerialisation?

Q-2 which one is more Preferable Physical share or Dematerialised shares & Reasons for it?

Q-3 What are the reasons one prefer to transfer shares into Dematerialisation form?
Q-4 Q-5 Q-6 Q-7 Q-8 How customers are attracted towards the Depository Participant? What is the impact on liquidity by transferring the share into Dematerialisation? Which particular service that get your attraction towards particular Depository Participant? As a Depository Participant What are your Activities? How the Depository Participants categorised their Customers?

Thank You