Difference Between NSDL and CDSL

As an investor you must know about the depositories in the country. In India, there are two depositories: National Securities Depositories Ltd (NSDL) and Central Securities Depositories Ltd (CDSL). Both the depositories hold your financial securities, like shares and bonds in dematerialised form, and facilitate trading in stock exchanges. Before starting your trading journey, you must keep in mind that you are compulsorily required to open a demat account and a trading account. You must always remember to open the best demat account with a reliable stock broker as it will help you make wise investment decisions.

Understanding depositories and depository participants:

• Both NSDL and CDSL are depositories which maintain ownership records of financial securities. They are linked with investors through Depository Participants (DPs).
• A DP is an agent of the depository acting as an intermediary between the depository and its clients. DPs are registered with the depository via the relevant provisions of the SEBI Act. You have to open a demat account with a DP to avail the services of depositories.
• Typically, DPs are stock brokerage firms providing you with best demat accounts,along with trading platforms, reports pertaining to market movements and other value- added services.

Functioning of NSDL and CDSL:

• Once you start trading in securities, these are accordingly debited or credited from the depository, and reflected in your demat account.
• Depositories provide information to listed companies about shareholders, while facilitating trading transactions. For instance, investors can receive delivery instructions etc. from the depositories. On the other hand,the listed companies usually approach the depositories to get information about the shareholders to send notifications such as dividend rights, stock splits etc.

Knowing more about NSDL:

• NSDL is the oldest and largest depository in the country. It commenced operations in 1996 in Mumbai. It was the first depository to provide trading services in the electronic format.
• According to data from SEBI, this national depository has around 1.7 crore active investors with more than 30,500 depository participant service centres across 2,000 cities.
• NSDL is entrusted with the safekeeping of following financial securities in the electronic format:
  • Stocks
  • Bonds
  • Debentures
  • Commercial papers
  • Mutual Funds
• NSDL offers a wide range of services, like:
  • Dematerialisation services
  • Rematerialisation services
  • Transfers between depositories
  • Off-market transfers
  • Lending of securities
  • Collateral and mortgage of securities

Knowing more about CDSL:

• This central depository started operations in Mumbai in 1999. This is the second- largest depository in the country after NSDL.
• Similar to NSDL, it provides all services, like holding financial securities in the electronic format along with facilitation of trade and settlement of orders. All forms of stocks and securities - just like NSDL - are held at this central depository.
• According to data from SEBI, it has more than 1.6 crore active customer accounts with around 19,000 depository participant service centres.

Registration of DPs with NSDL and CDSL:

A stock broking firm usually selects registration with either of the depositories on the basis of fees and charges, services, and aspects like ease of doing business etc. As an investor, you can check with your DP to know whether they are registered with NSDL or CDSL. Some stock brokers are also registered with both the depositories.

Difference between NSDL and CDSL :

• In terms of services to investors, there is no key difference between having a demat account with a DP registered either with NSDL or CDSL. Both are regularised by the government and provide similar services.
• The only difference between both the depositories is their operating markets. While NSDL has National Stock Exchange (NSE) as the primary operating market, CDSL has Bombay Stock Exchange (BSE) as the primary market.
• According to industry experts, an investor can have a demat account linked to any of the depositories.

Role of NSDL and CDSL in transforming investment in stock markets:

Both the depositories transformed trading in stock markets by providing the facility to hold stocks, securities etc. in the electronic format. They paved the way for safe, secure and convenient trading transactions by adopting digital technology.

Conclusion:

Thus, as an investor you can easily open a demat account and a trading account with a DP linked with either of the depositories. While beginning your investment journey in stock markets, always remember to choose a trusted and reliable stock broker, who can provide you with cutting-edge trading platforms and the best demat account. Always look for features like free online demat account and zero Annual Maintenance Charge (AMC).