Customersatisfactiontowardskarvystockexchangeprojectreportmbamarketing 120619223129-phpapp01

A Study of Customer Satisfaction towards Depository Participants

EXECUTIVE SUMMARY

Karvy, the FINAPOLIS Ltd. is a stock Broking Company that deals

in shares. Apart from security broking Karvy is in to Demat services,

Mutual fund and Insurance services. It offers a wide range of financial

services in order to meet different individuals financial planning.

The project emphasizes on “Customer satisfaction towards

depository participants”

Objectives of the Study:

To know the function of DP.

To know the percentage of have satisfied the service of DP.

To know how demat account is helping in the trading

To know the exception of the customer.

To know the loops and draw backs of DP.

Research Methodology:

Data source:

Primary Data: Through Questionnaire

Secondary Data: Karvy’s Record & Report, Magazine & Websites. Sample size: 100 customers of Karvy Stock Broking Ltd.

Area Covered for research: Only Dharwad KARVY customers.

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http://www.karvy.com/bottom.asp


Sampling Procedure: Random sampling method from available database.

In the present scenario the service industry has given an utmost

importance of doing a particular task at a fastest time in order to satisfy

the customer and to attract new customer. In this project we can find out

the customer of Karvy Consultant have satisfied with demat service and

this DP is overcoming the disadvantages of the physical trading of the

securities in the stock exchange.

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FINDINGS:

1) I have carried out this exercise on Dematerlisation. So in my studies I

have tried to see whether the customer have satisfied the service given by

depository participants.

2) I have also seen that awareness of KARVY service given by Karvy

finical consultant is from friends.

3) It is also seen that more than 84% of the respondent have satisfied with

the service of demat.

4) It is also seen that more than 55% to 60% of the respondent has

satisfied with the service of Freezing/ Defreezing and loan against share.

Also 40% respondents are not aware about these services.

5) Also found that nearly 2% of the respondents are dissatisfied with bill

Acceptance.

6) 5% improper format of Holding/Transaction statement and 4%

Frequently reminders are given to karvy consultant ltd., for update the

information Are Dissatisfied.

7). 38% of respondent feel tariff structure of Karvy Stock Broking Ltd

charged is high and very high.

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8) Also found that 53% respondent have satisfied 80% of the service

9). 35% of respondent prefer Karvy Stock Broking Ltd DP to Other Dp

because

Of Quality service And, 40% for safety service.

INTRODUCTION

India has two hundred years old tradition in Securities. Infact that

first India stock exchange established in Bombay is the oldest in Asia.

The earliest security dealings were Transactions in loan securities of 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 brokers Association” which is now known as the

Bombay Stock Exchange.

The Indian Capital grew at a very moderate rate from 1951 to

1980. However it registered an impressive growth in 1980s. the process

of liberalization and the transparency in operation has raised the interest

of foreign investors in India. Till 1978 there were only 8 recognized

exchanges in India. Initially the exchange operated on an outcry system

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i.e. manual system of trading Due to increase in the trading volumes, the

number of issuer increased substantially, and the birth of NSES highly

transparent automated system come 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 shareholder name and due this it increased the back

office paper work intermediaries These outdated systems have increased

settlement risks and have rendered the implementation of a delivery of a

versus payment system impossible. National Stock Exchange of India

Limited to provide electronic depository facilities for securities traded in

the equity and the debt market. NSDL commenced its operations in the

year 1996 and is the first depository in India.

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DESIGN OF THE STUDY

Tile of the project:

“Service Analysis & Customer satisfaction towards Depositary

participants”.

Statement of the Problem: KARVY STOCK BROKING Ltd is providing

the Demat service. Hence in this report an attempt is made to know the

present customer satisfaction towards depository participants.

RESEARCH OBJECTIVES:

To know the function of DP.

To know the percentage of have satisfied the service of DP.

To know how demat account is helping in the trading

To know the exception of the customer.

To know the loops and draw backs of DP.

.

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METHODS AND METHODOLOGY

Sampling Design:

Sampling since segment wise investors in KARVY STOCK

BROKING Ltd were available the overall customers were

considered for the study. Hundred Percent coveraged. Hence

random sampling survey method was adopted for the purpose of

the study.

Sampling Size: A sample of 100 was chosen for the purpose of the

study. Sample consisted of small investor, large investors and

traders of KARVY STOCK BROKING Ltd.

Sampling Procedure: From large number of customer of KARVY

STOCK BROKING Ltd. Were randomly selected from the

available customer database.

Field Study: Directly approached respondents.

DATA COLLECTION METHOD:

1. PRIMARY DATA: For a study of this nature primary data is collected

through Questionnaire.

2. SECONDARY DATA: This is been is collected through Karvy’s

Record & Report, Magazine & Websites.

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MEASUREMENT TECHNIQUE:

For this purpose measurement technique used for survey is

questionnaire to collect information from the respondent

ANALYTICAL TECHNIQUE:

Statistical technique used for measuring the response is in terms of

percentage.

LIMITATION OF STUDY

Since Sample size is only 100 all Hundred customers are

approached .

Since segment wise investor is available in KARVY STOCK

BROKING Ltd. Overall concept is taken for the study.

Information is partly based on secondary data and hence the

authenticity 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.

BACKGROUND

Karvy Stock Broking Limited, one of the cornerstones of the Karvy

edifice, flows freely towards attaining diverse goals of the customer

through varied services. Creating a plethora of opportunities for the

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customer by opening up investment vistas backed by research-based

advisory services. Here, growth knows no limits and success recognizes

no boundaries. Helping the customer create waves in his portfolio and

empowering the investor completely is the ultimate goal.

KARVY, is a premier integrated financial services provider, and

ranked among the top five in the country in all its business segments,

services over 16 million individual investors in various capacities, and

provides investor services to over 300 corporate, comprising the who is

who of Corporate India. KARVY covers the entire spectrum of financial

services such as Stock broking, Depository Participants, Distribution of

financial products - mutual funds, bonds, fixed deposit, equities,

Insurance Broking, Commodities Broking, Personal Finance Advisory

Services, Merchant Banking & Corporate Finance, placement of equity,

IPOs, among others. Karvy has a professional management team and

ranks among the best in technology, operations and research of various

industrial segments.

The birth of Karvy was on a modest scale in 1981. It began with

the vision and enterprise of a small group of practicing Chartered

Accountants who founded the flagship company…Karvy Consultants

Limited. We started with consulting and financial accounting automation,

and carved inroads into the field of registry and share accounting by 10



1985. Since then, we have utilized our experience and superlative

expertise to go from strength to strength…to better our services, to

provide new ones, to innovate, diversify and in the process, evolved

Karvy as one of India’s premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route,

towards building a reputation as an integrated financial services provider,

offering a wide spectrum of services. And we have made this journey by

taking the route of quality service, path breaking innovations in service,

versatility in service and finally…totality in service.

Our highly qualified manpower, cutting-edge technology,

comprehensive infrastructure and total customer-focus has secured for us

the position of an emerging financial services giant enjoying the

confidence and support of an enviable clientele across diverse fields in

the financial world.

Over the years we have ensured that the trust of our customers is

our biggest returns. Factors such as our success in the Electronic custody

business has helped build on our tradition of trust even more.

Consequentially our retail client base expanded very fast. Our values and

vision of attaining total competence in our servicing has served as the

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building block for creating a great financial enterprise, which stands solid

on our fortresses of financial strength - our various companies.

With the experience of years of holistic financial servicing behind

us and years of complete expertise in the industry to look forward to, we

have now emerged as a premier integrated financial services provider.

And today, we can look with pride at the fruits of our mastery and

experience – comprehensive financial services that are competently

segregated to service and manage a diverse range of customer

requirements.

GROUP OF COMPANIES

KARVY SECURITY LTD

Deals in distribution of various investment products, viz, equities,

Mutual fund, bounds debenture fixed deposits, insurance policies

& other financial products

Member –Hyderabad stock Exchange (HSF)

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KARVY STOCK BROKING LTD.

Deals in buying & selling equity shares & debenture &on the

national stock exchange (NSE), the Hyderabad stock exchange &

over the counter exchange of India (OTCEI)

Member-national stock exchange (NSE)

KARVY CONSULTANTS LTD

Transfer agency services for corporate & mutual funds

Registrar for IPO\book building

Depositary participant services

Registered with both NSDL/CDSL

It enable services –MT/call center /data classification

Karvy .com comprehensive financial advisory site

KARVY INVESTER SERVICES LTD.

Deals in issue management, investor banking & merchant

banking of fixed income & other financial products.

Trading through BSE

DEPOSITARY SEVICES

Registered as DP both with NSDL & CDSL

Serving over 2 lac investors

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Online connectivity at Hyderabad, Lucknow &Bangalore

Ranked among the top 5 DPS in the country

High synergy with registry & broking activities for higher services

levels to the customer information

Web based customer information

Provision of service in over 75 locations

IT SERVICES GROUP

1. Medical transcription

First strategic initiative into global processing

Among the top MT companies in India

2.E-BUSINESS GROUP

Strategic intent: to develop a comprehensive financial services

portal which includes

Investor servicing: mutual funds, corporate shareholders &

depository clients.

Distribution of financial products

Net trading

Insurance distribution

1. Call center

2. Started with a 30 agent e-call center

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MISSION

Our mission is to be a leading, preferred service provider to our

customers, and we aim to achieve this leadership position by building an

innovative, enterprising and technology driven organization which will

set the highest standards of service and business ethics.

QUALITY POLICY

To achieve and retain leadership, Karvy shall aim foe complete

customers satisfaction, by combining its human and Technological

resources, to provide superior quality financial Services. In the process,

Karvy will strive to exceed Customer’s expectations.

QUALITY OBJECTIVES

As per the Quality Policy, Karvy will:

1. Build in- house process that will ensure transparent and harmonious

relationship with its clients and investors to provide high quality of

services.

2. Establish a partner relationship with its investor service agents and

vendors that will help in keeping up its commitments to the customers.

3. Provide high quality of work life for all its employees and equip them

with adequate knowledge &skills so as to respond to customer’s need.

4. Continue to uphold the values of honesty & integrity and strive to

establish unparalleled standards in business ethics.

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5. Use state –of – the art information technology in developing new and

innovative financial products and services to meet the changing needs

of investors and clients.

6. Strive to be a reliable source of value-added financial products and

services and constantly guide the individuals and institutions in

making a judicious choice of it. Strive to keep all stake- holders

(shareholders, clients, investors and regulatory authorities) proud and

satisfied.

Achievements

Among the top 5 stock brokers in India (4% of NSE volumes)

India's No. 1 Registrar & Securities Transfer Agents

Among the to top 3 Depository Participants

Largest Network of Branches & Business Associates

ISO 9002 certified operations by DNV

Among top 10 Investment bankers

Largest Distributor of Financial Products

Adjudged as one of the top 50 IT uses in India by MIS Asia

Full Fledged IT driven operations16



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MILESTONE

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ORGANIZATION CHART

Managing Director

Chief Managing Director

Vice-President Vice-President Vice-President Vice-President

Karvy Karvy Karvy Karvy Securities Stock Broking Consultants Investors Services Ltd. Ltd. Ltd. Ltd.

Deputy Deputy Deputy Deputy General General General GeneralManager Manager Manager Manager

Senior Senior Senior SeniorManager Manager Manager Manager

Branch Manager

N number of Team Leaders

N number of Executives

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INTRODUCTION

Dematerialization or "Demat" is a process whereby your securities

like shares, debentures etc, are converted into electronic data and stored

in computers by a Depository. Securities registered in your name are

surrendered to depository participant (DP) and these are sent to the

respective companies who will cancel them after "Dematerialization" and

credit your depository account with the DP. The securities on

Dematerialization appear as balances in your depository account. These

balances are transferable like physical shares. If at a later date, you wish

to have these "Demat" securities converted back into paper certificates,

the Depose Depository functions like a securities bank, where the

dematerialized physical securities are traded and held in custody. This

facilitates faster, risk free and low cost settlement.

In order to dematerialize certificates; an investor will have to first

open an account with a DP & then request for the dematerialization of

certificate by filling up a dematerialization request form (DRF), which is

available with DP & submitting the same along with the physical

certificates. The investor has to ensure that before the certificate are

handled over to the DP For demat, they are defaced by marking

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“Surrendered for dematerialisation” on the face of the certificates.

Depository is much like a bank and perform many activities that are

similar to a bank.

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.

Following table compares the two.

Bank Depository

Holds funds in accounts Holds securities in account

Transfers funds between accountsTransfers securities between

accounts

Transfers without handling moneyTransfers without handling

securities

Safekeeping of money Safekeeping of securities

Transacting the depository way has several advantages over the

traditional system of transacting using share certificates. Some of the

benefits are:

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Trading in demat segment completely eliminates the risk of bad

deliveries, which in turn eliminates all cost and wastage of time

associated with follow up for rectification. This reduction in risk

associated with bad delivery has lead to reduction in brokerage to

the extent of 0.5% by quite a few brokerage firms.

In case of transfer of electronic shares, you save 0.5% in stamp

duty.

You also avoid the cost of courier/ notarization/ the need for

further follow-up with your broker for shares returned for company

objection

In case the certificates are lost in transit or when the share

certificates become mutilated or misplaced, to obtain duplicate

certificates, you may have to spend at least Rs500 for indemnity

bond, newspaper advertisement etc, which can be completely

eliminated in the demat form.

You can also receive your bonuses and rights into your depository

account as a direct credit, thus eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against

demat shares as compared to the interest for loan against physical

shares. This could result in a saving of about 0.25% to 1.5%. Some

banks have already announced this.

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RBI has increased the limit of loans against dematerialized

securities as collateral to Rs2mn per borrower as against Rs1mn

per borrower in case of loans against physical securities.

RBI has also reduced the minimum margin to 25% for loans

against dematerialized securities as against 50% for loans against

physical securities.

In short the advantages of opening a demat account are

Shorter settlements thereby enhancing liquidity

No stamp duties on transfer of securities held in demat form.

Elimination of risk associated with physical certificated such as

bad delivery, fake securities.

Reduction in handling large volume of paper;

Nomination facility

Transmission of securities (such as shares, debentures, bonds

and units) is done by DP eliminating the need to correspond

with each company separately.

Change of name, address, dividend mandate, registration of

power of attorney, transmission etc. can be effected across

companies held in demat form by a single instruction to the DP

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Though under the Depositories Act, 1996, there is no compulsion

and the investor can hold shares either in physical or in dematerialized

form. But according to Sebi’s directive certain shares have to be traded

compulsorily in dematerialized form where the seller cannot sell in

physical form. However, after he has bought the shares the investor can

ask for rematerialization of the shares.

The Depository Account must be opened with a Depository

Participant. NSDL interfaces with investor trough Depository Participants

(DPS). A list of names and addresses of all Authorized DP’s is available

with the NSDL and CDSL and one can meet any of these DP’s place and

make a choice at your based on your comfort and convenience. Opening

a depository account is as simple as opening a bank account. One can

open a depository account with any DP.

To open a Depository Account, you have to submit the duly filled

in Account Opening form along with the following documents:

Fill up the account opening form, which is available with the DP.

Residential Proof - Copy of Ration Card, Passport, Driving

License, Telephone Bill, Electricity Bill or Rental Agreement.

Sign the DP-client agreement, which defines the rights and duties

of the DP and the person wishing to open the account.

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Receive your client account number (client ID).

This client ID along with your DP ID gives you a unique

identification in the depository system.

There is no restriction on the number of depository accounts a

person can open. However, if your existing physical shares are in joint

names, you have to open the account in the same order of names before

you submit your share certificates for demat. A sole holder of the share

certificates cannot add more names as joint holders at the time of

dematerializing his share certificates.

However, if the investor wants to transfer the ownership from his

individual name to a joint name, he should first open an account as the

sole holder (account A) and dematerialize the share certificates. He

should then open another depository account (account B) in which he is

the first holder and the other person is the second holder and make an off

market transfer of the shares from the account A to account B. The

investor will incur a charge on this transaction. Alternatively, the

certificates can be transferred to the joint ownership and then sent for

Dematerialization.

Right now, as per the Companies Act, there is no nomination

facility for shares (whether in the physical or in the electronic form). The

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nomination facility for shares can be availed of only when the relevant

provisions in the Companies Act are amended. NSDL captures the details

of the nominee when the account is opened so as to offer the facility as

soon as the relevant amendments are effected in the Law.

A client can choose to open more than one account with same DP.

In addition to this, he has a choice of opening accounts with more than

one DP. However a broker can open just one Clearing Member account

per card/ stock exchange for clearing purpose, but he can still open

multiple beneficiary accounts Beneficiary is the personal account wherein

brokers can keep their personal holdings.

Account opening

Any investor who wishes to avail depository services must first

open an account with a depository participant of NSDL The process of

opening a Demat account is very similar to a bank account The investor

can open an account with any depository participant of NSDL An

investor may open an account with several DPs or he may open several

account with single There are several DPs offering various depositary

related services. Each DP is free to fix its own fee structure Investors

have the freedom to choose a DP based on criteria like convenience ,

comfort has to enter into an agreement with the DP The form and

contents of this agreement are specified by the business rules of NSLD26



Types of depositary account depends on the operation to be

performed There are three types of Demat accounts which can be opened

with a depositary participant viz

(a) Beneficiary Account (b) Clearing member Accounts and (c)

intermediary account

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Types of accounts

Beneficial owner Clearing member Intermediary

Account Account Account

House Non-House

A DP may be required to open three categories of accounts for

client –beneficiary account, clearing member account and

intermediary account

A beneficiary account is an ownership account The holder/s of

securities in this type of account own those securities

The clearing member account and intermediary account are

transitory account The securities in these are held for commercial

purpose only

A clearing member account is opened by a broker or a clearing

member for the purpose of settlement of trades

An intermediary account can opened by a SEBI registered

intermediary for the purpose of stock leading and borrowing

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BENEFICIARY ACCOUNT

This is an account opened by investor to hold their securities in

dematerialized from with a depository and to carry out the transactions of

sale purchase of such securities in book entry form through the depositary

system A beneficiary account holder is legally entitled for all rights and

liabilities attached to the securities held in that account Therefore, the

account is called “beneficial owner account” a beneficial account can be

in the name of individual, corporate, HUF, minor, bank, financial

institution , trust etc or the broker himself for the purpose of his personal

investments in demat form . The account is opened with a DP

House account vs. non –house account opened by a DP for the

custody of and transactions in its own investment is referred to as a house

account DPS Are required to open house accounts for their own

investments to prevent co-mingling of asset with that of their clients

Neither the depositories ACT nor the regulations made under

the act lay down any specifications about who can open a beneficiary

account since all beneficial owners are deemed to be member of a

company (under section 41 (3) of the companies act) only those who are

eligible to become members of a company act can open a beneficiary

account with a depository Thus all legal entities with the exception of

partnership firms can open an account in the depository system

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Documents for verification: For the purpose of verification, all investors

have to submit the following documents along with the prescribed

account opening form

Proof of identity- a beneficiary account must be opened only after

obtaining a proof of identity of the applicant The applicants signature and

photograph must be authenticated by an existing account holder or by the

applicant bank or after due verification made with the original of the

applicants valid passport , voter id , driving license or PAN card with

photograph and further

Proof of address- The account opening form should be supported with

proof of address such as verified copies of ration card/ passport/ voter ID/

PAN card/driving license / bank passbook an authorized official of the

participant, under his signature, shall verify the original documents

In case any account holder fails o produce the original documents

for verification within the foreside period of 30 days, it must be

immediately brought to the notice of NSDL Failure to produce the

original within the prescribed time would invite appropriate action

against such account holder, which could even include freezing of their

accounts

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Common information: The process of opening an account with a

depository, nature of such an account, and various factors to be

considered for opening a depository account are explained below. Some

details are common to all types of accounts. These are:

1. Name of the holder

2. Date of birth (for individual accounts)

3. Occupation

4. Address & phone / fax number

5. Bank details like name of the bank, type of the account

(current/savings), accounts number, branch address, MICR, etc

6. PAN number, if applicable

7. Details of nomination

8. Specimen signatures

Beneficiary account- procedure for opening an account

Investor have the choice of selecting a DP based on their

convenience, comfort, service, levels, safety, reputation charges, etc they

have flexibility to have more than one account with the same DP or any

other DPS No minimum balance is required for opening a depository

account Investor also have the freedom to close an account with one DP

and open another one with any other DP

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The type of the account opening from to field by an investor and

the list of documents required depend on the type of beneficiary account

to be opened –whether it is for NRI’s or corporate or individual Further,

the individual account can be in a signal name or joint name clearing

members and brokers have to open in a beneficiary account if they have

to deal with their own holdings

There are several client types in the depository system and

different codes are allotted to them. These are listed below

1. Resident

Ordinary

HUF

2. Financial institutions

Government –sponsored FI

State financial corporation

Other

3. FIIS

Mauritius –based

Others

4. NRI

Repatriable

Non-Repatriable

Depository receipt

5. Body corporate

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Domestic company

Overseas corporate body Repatriable

Government company

Central government

State government

Co-operative body

NBFC

Non –NBFC

Broker

Foreign bodies

Group companies

Others

OCB-Nonrepatriable

Depository receipt

6. CM (clearing member)

7. Foreign national – national /depository receipt

8. Mutual fund –depository receipt

9. Trust, Bank

10.Intermediary

Clearing Member Account

The entities that are authorized to pay out from a clearing

corporation/ clearing house against traders done by them or their clients

are known as clearing members. CMs are identified in the system through

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their CM-BP ID. All pay-in and pay-out transactions are carried out

through their accounts.

There are two types of clearing members:

1. All members of a stock exchange popularly know as brokers, are

clearing members;

2. Custodians who are permitted by the stock exchange to act as a

clearing members.

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PROCEDURE TO OPEN A CLEARING MEMBER ACCOUNT

The steps undertaken to open the account are same as those of the

individuals, difference lies in the type of the clearing members has to first

register itself with the depository and obtain a business partner

identification number (CM-BP-ID). The clearing member is identified by

the combination of CC-CM-ID given by the DP.

Immediately after opening a clearing account, the DP should

inform the depository the details of clearing members name, CM-BP-ID,

client-ID, and date of the opening the account in DPM system.

The clearing account should only be for clearing and settlement

purpose and nit for any other purpose, e.g., holding of securities received

in a settlement received in a settlement account should be transferred to

the transferred to respective beneficial accounts as soon as possible, but

in no case later than the time prescribed by the depository/ stock

exchange/ SEBI in this regard. The opening of clearing members account

constitutes a “standing instruction” to receive credits from the clearing

corporation when there is a pay-out.

The Clearing House deals with ONLY ONE designated account

for pay-in and pay-out with the Broker. This single account allows you to

know to which account securities must be delivered and received from.

35



One Clearing Member Pool Account is opened per card / Stock Exchange

to settle trades in the Dematerialised form.

Structure Of Clearing Account

The clearing account is identified in the depository system by its

CM-BP-ID. The internal structure of the Clearing Account consists of

three parts to facilitate easy book keeping.

Arrangement of clearing account

Pool Account

Delivery Account

Receipt Account

Clearing Corporation (CC)/Clearing House (CH)

Clearing Account

Delivery

Account

Pool AccountReceipt Account

a) Pool Account: It has two roles in clearing of Securities, viz.,

before pay-in, the selling client of the clearing member transfers

securities from his client Account to the Clearing Account. After 36

Selling client

BuyingClient



receiving pay-out, the clearing member transfers securities from his

Clearing Account to the account of the buying client.

b) Delivery Account: The securities before pay-in, the securities move

from the Pool Account To the Delivery Account. The movement

will be automatic if clearing member has given such an

undertaking to its Clearing If the Clearing Corporation. It will be

effected on the basis of instruction received from the Clearing

house/ Clearing Corporation. If the clearing house/ Clearing

Corporation has not taken such undertaking, the clearing member

to its DP must submit a delivery instruction form. At the time of

pay-in, NSDL flushes out the securities in the Delivery Account &

transfers the same to the Clearing house/ Clearing Corporation.

c) Receipt Account: On pay-out day, the Clearing house/ Clearing

Corporation transfers securities to the Pool Account (to The extent

of net receipt) through the Receipt Account. This account can be

used to trace details of settlement-wise receipt of the clearing

member.

Market Type & Settlements Number: A clearing account can be broken

into compartment and sub-compartments. Each compartment can be

called as market type and be as settlement number. Hence, if securities

are moved from any clearing account, apart from the CM-BP-ID, the

37



combination of market type and settlement number must be provided. A

diagrammatic illustration of the internal structure of a clearing account is

depicted in next page.

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Settlement calendar: Settlement calendar is decided by the stock

exchange. It contains details for each market type & settlement number.

The detail for each settlement consists of the date of trading, pay-in time,

pay-out date, settlement number etc. Clearing member can obtain the

settlement calendar from its own stock exchange. This is also available in

the depository software of the DP.

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Physical Rolling Action Rolling

2000014Delivery Pool Receipt









Clearing Account(IN503265)



MARKET TRANSFERS: Any trade, which is cleared & settled by the

clearing house/ Clearing Corporation of the stock exchange, is considered

as a market trade in the depository. Consequently, the transfers routed

through the clearing account. Typically, a market trade has the following

legs of transactions.

a. Receiving securities for pay-in from clients (client to clearing

members)

b. Delivering securities to the clearing house/clearing corporation

for pay-in. (clearing house/clearing corporation)

c. Receiving pay-out from the clearing house/clearing corporation.

(Clearing House/clearing Corporation to clearing member)

d. Distribution of pay-out to clients. (Clearing member to client)

A diagrammatic illustration of the settlement of a market trade in a

depository is depicted below:

D C

A B

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DP of Buyer’s CM

NSDL CH/CC

DP of buyer



41

DP of Seller’s CM

DP of Seller



Receiving securities for pay-in from clients (client to clearing member)

A selling client of a clearing member (broker) would transfer

securities from his beneficial owner account to the clearing account of the

clearing member for onwards delivery to the clearing house/clearing

corporation. This transfer is effected by his DP on the basis of a delivery

instruction provided by the selling client. A diagrammatic Illustration for

securities received for pay-in from clients is depicted below:

Indicates flow of securities

Indicates paper /electronic instruction

given.

42

NSDL

DP1 DP2

Seller A

AAAller A

Clearing Member

Seller C

Seller B



OFF MARKET TRANSFERS: Any trade, which is not cleared and

settled by the clearing house/clearing corporation of the stock exchange,

is considered as an off-market trade in the depository. Consequently, the

transfer is not routed through the clearing account. Such transfers take

place directly between two beneficiary accounts. Both buyer and seller

may open account either with the same DP or with different DPs. The

buyer and seller will trade amongst themselves and later on will exchange

money, i.e., settle funds amongst themselves. The selling client would

deliver securities from its beneficiary account to the beneficiary account

of the buying client. This transfer is effected by the DP of the selling

client on the basis of a delivery instruction provided by the selling clients.

A diagrammatic illustration of the settlement of an off-market trade in

depository is depicted below:

43



Indicates flow of securities

Indicates paper /electronic instruction

given.

44



Depository:

A Depository is a Company where the shares of an individual are

held in the electronic form, at the request of the shareholder. This

eliminates the physical form of holding. IDBI, UTI, SBI and NSE

promoted the National Securities Depository Limited (NSDL). The

Central Securities Depository Limited (CDSL) was promoted by BSE.

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. You can dematerialize shares of only those companies

that have signed agreement to dematerialize their shares with the

depository. You cannot dematerialize shares if they are not in your name,

i.e. shares held in street name (market deliveries) cannot be 45



dematerialized. However, when you send shares to the registrar to be

transferred to your name you can request that you want those shares in

dematerialized form.

Karvy Consultants Ltd. has four DPMs as on date. They are:

1.Hyderabad-IN300394

2.Lucknow - IN301557

3.Bangalore- IN301926

4. Mumbai - IN302470

In India depositories are required to be registered with SEBI and

are governed by the provision of the Depositories Act, 1996 and

regulation and bylaws framed for depositories by the SEBI.

The depositories work in a completely computerized environment

with electronic linkages with the point of origination for the transactions

that may cause the change in ownership of securities. A depository will

be electrically linked with the Register of the members maintained by the

company/registrar, clearing and settlement system in the stock exchanges,

stock lending organization (if in existence), custodians of securities,

depository participants and brokers.

46



Function of Depository

Dematerlisation: one of the primary functions of depository is to

eliminate or minimize the movement of the physical securities in the

market. This is achieved through dematerialisation of securities.

Dematerlisation is the process of converting securities held in physical

form into holdings in book entry form.

Account Transfer: The depository gives effect to all transfers resulting

from the settlement of trade and other transactions between various

beneficial owners by recording entries in the accounts of such beneficial

owners.

Transfer and Registration: A transfer is the legal change of ownership of

a security in the records of the issuer. For effecting a transfer, certain

legal steps have to be taken like endorsement, execution of a transfer of

security occurs merely by passing book entries in the records of the

depositories, on the instructions of the beneficial owners.

Corporate Actions: A depository may handle corporate actions in two

ways. In the first case, it merely provides information to the issuer about

the persons entitled to receive corporate benefits. In the other case,

47



depository itself takes the responsibility of distribution of corporate

benefits.

Pledge and hypothecation: Depositories allow the securities placed with

them to be used as collateral securities in physical form to the lender or

its custodian. These securities are verified for authenticity and often need

to be transferred in the name of lender. This has a time and money cost by

way of transfer fees or stamp duty. If the borrower wants to substitute the

Pledging/Hypothecating the securities makes the process very simple and

collateral accounting through book entries in the records of the

depository.

Linkage with clearing system: whether it is a separating clearing

corporation attached to a stock exchange or a clearing house (department)

of a stock exchange, the clearing system performs the function of

ascertaining the pay-in (sell) or pay-out (buy) of brokers who have traded

on the stock exchange. Actual delivery of securities to the clearing system

from the selling and delivery of securities from the clearing system to the

buying broker is done by the depository. To achieve this, depositories and

the clearing system should be electronically linked.

48



Depository Participant:

Depository Participant (DP) is an organisation that acts as an Agent

of the Depository and interacts with the investor. A DP is responsible for

maintaining your securities account and operating it only under your

written instructions. The Depositories Acts mandates that investors can

use Depository facilities only through DP’s. The distribution channel and

geographical spread of the DP’s offices allows you to access the

Depository at a low cost. DP can only access their own clients'

information. They cannot access the client information of any other DP.

The information of your holdings in the account is completely

confidential& it is similar to your account balance in a bank.

You can select your DP to open a demat account just like you select a

bank for opening a savings account. Some of the important factors for

selection of a DP can be:

1. Convenience - Proximity to your office/residence, business hours.

2. Comfort - Reputation of the DP, past association with the

organisation, whether the DP is in a position to give the specific

service you may need?

3. Cost - The service charges levied by DP and the service standards.

49



Individual accounts can be opened by Ordinary Resident, HUF,

NRI Repatriable and NRI Non-Repatriable. Body Corporate, Banks,

Trusts, Financial Institutions, Foreign Institutional Investors, and

Overseas Commercial Banks etc can open corporate Accounts. An

account can be opened in the name of HUF in a similar way to individual

account and mentioning the account category as HUF. However, Kartha

of HUF will sign the application, agreement and all transactions under the

account

An account cannot be opened in the name of the firm. It has to be

opened in the name of any of the Partner as an Individual account only.

Procedure for Dematerialisation

Dematerialisation Process:

1

2A 2 5

3

4

Steps:

1. Client/ investor submits the DRF (Demat Request Form) and

Physical certificates to DP. DP checks whether the securities are 50

Investor

R & T Agent

DP

NSDL



available for demat. Client defaces the certificates by stamping

‘Surrender for Dematerlisation’. DP punches two holes on the

name of the company and draws two parallel lines across the face

of the certificate.

2. DP enters the demat request in his system to be sent to NSDL. DP

dispatches the physical certificates along with the DRF to the R &

T Agent.

3. NSDL records the details of the electronic request in the system

and forwards the request to the R&T Agent.

4. R&T Agent, on receiving the physical documents and the

electronic request, verifies and checks them. Once the R&T Agent

is satisfied, Dematerialisation of the concerned securities is

electronically confirmed to NSDL.

5. NSDL credits the dematerialized securities to the beneficiary

account of the investor and intimates the DP electronically. The DP

issues a statement of transaction to the client.

a. DPs provide Dematerlisation request forms (DRF) to their

clients.

b. The client completes the DRF in all respect 7 submits to the

DP along with the security certificates to be dematerialized.

51



c. The DP checks the DRF for validity, completeness and

correctness. The following points should be checked particularly:

The security certificate sought to be dematerialized

are attached to DRF.

The attached security certificates are marked (defaced)

with the words ‘surrendered for dematerialisation’. This is a

precautionary measure to prevent misuse of share certificates by

anyone.

The certificate are not mutilated or defaced in a

manner affecting any material information.

The name of client on DRF and the certificates is

exactly the same as in the client’s account in DPM. However,

minor variations in the name (like abbreviated name, initials in

the place of first name, middle name, minor name mistake in the

name) may be permitted if it can be reasonably established that

both names are of the same person. The permitted variations

refer to initials not being spelt out fully or put prior to after the

surname. In such cases, if the signature on the DRF matches the

specimen signature available with the DP, the securities can be

considered for demat.

Details like security type, face value, paid-up value,

pari passu status, certificate numbers, distinctive numbers,

number of certificates, total quantity of securities and lock-in

statues are filled-in correctly.52



d. If the DRF & the accompanying security certificates are

found in order, the DP should accept the DRF and certificates.

e. If DRF and the accompanying security certificates are not

found in order, the DP should return the DRF and certificates.

f. The DP should enter the dematerialisation request in the

DPM. DPM generates a request number (DRN), which should be

mentioned on DRF.

g. An authorized person, other than one who entered the DRF

details in the DPM, should verify the details of DRN and release a

request to NSDL.

h. Once the DP has received the certificates defaced by

investor, the DP punches two holes on the name of the issuer or its

R&T Agent for dematerialisation. DRF and enclosures have to be

sent at the “address to which physical certificate to be sent”

communicated by NSDL. The forwarding letter should refer to the

allotted DRN and should refer to the allotted DRN and should Be

sent within seven days of accepting it from the client.

i. The issuer or its R&T Agent verify the DRF & the

accompanying certificate for validity, completeness and

correctness. They also match the details with the intimation

received from NSDL against the same DRN.

53



j. In case DRF is not found in order, the issuer or its R&T

Agent send an objection memo to the DP, with or without DRF &

security certificates depending upon the reason for rejection.

k. DRFs & Certificate are sent back on the following grounds:

DRN does not match with message from DM

Quantity of actual securities is less than DRF

Quantity of actual securities is more than DRF

l. DRF & certificate are not sent back:

If the certificate is fake

If the certificate has been reported to be stolen

If the duplicates of the original certificates sent for demat have

already been issued

If the endorsements are forged

If the securities are not in the name of the account holder as per

DRF

If the details of the certificates do not pertain to the R&T Agent

If the signatures differ

If there is any court order on the securities

If the certificate are received after 15 days of the electronic request.

m. The DP informs the client accordingly & requests removal

of reasons for objection. The DP removes these or provides

54



additional information to the issuer or its R & T Agent within

15days of receiving the objection memo.

n. The DP, if the client so requires, may generate a new

dematerialisation request & send the securities again to the issuer

or R &T Agent.

Precaution to be taken while processing DRF

Ensure account to have the same sequence of names of holders

and name structure as printed on the physical certificate.

Ensure ISIN is activated

Separate DRF for:

Partly & fully paid-up shares

Locked & free holding

Holdings locked in for different reasons

Locked in holdings having different release date

Different ISINs of the company

ISIN to be entered by DP.

All joint holders to sign DRF.

Check DRF form with details on certificate.

55



DEMAT PROCESS

The demat process requires defacing of securities which will make

the security certificate undeliverable unless the demat formalities are

completed. Therefore, the client should be assisted in ascertaining

whether the securities in question are available for demineralisation.

Clients should be helped in filling up the demat request properly. Demat

rejection causes great inconvenience to the client. DP should attend to

this area with care and caution. One of the important reasons for demat

rejection is signature mismatch. Taking the following precaution can

reduce this:

If the client is aware that the signature with the company&

signature of the client should be advised to the register the new

signature.

If the signature is slightly different, client should be advised to sign

as per the signature that was recorded by the company and as

recorded with the DP.

Ensure dispatch of DRFs and certificate to R &T Agents within

seven days.

56



Client may be encouraged to use the Transfer-cum-demat facility if

it is offered by the company. They should be made aware of the

procedures of the scheme.

In case of joint holdings, the clients should be informed about the

availability of Transposition cum Demat facility.

57



CLOSURE OF ACCOUNT:

Closure on Client’s Request- A DP can close a depository account

on receipt of an application in the prescribed format. The application

should be made by the account. In case joint-holders. An account can be

closed sought to be closed, the following steps are necessary.

a. Re-materialization of all securities standing to

the credit of the same account 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.

Before closing the account the DP should ensure that all pending

transactions have been settled. The request for closure should be

processed only after ensuring that there is no balance lying in the account.

Consolidations of accounts- Some clients have opened multiple accounts

to dematerialize their shares held in multiple combination and sequence

of names. However, they may not need so many accounts after they have

dematerialized their shares and may want to bring all their share holdings

into one or fewer accounts. This can be achieved by using normal off

Market transfer instruction.

58



Closure by DP – the DP may also initiate closure of a client’s account if

the client has defaulted in performing should give sufficient notice to the

client before initiating closure of his account. The notice should clearly

state the reasons for closure of his account. The notice should clearly

state the reasons for closure of account. The process of closing account in

such a case is the same that of client-initiated closure.

Closure/ Shifting of Clearing Account –A clearing member may transfer

its clearing account from one DP to another DP. For this, simultaneously

applications have to be made for closure of account to the earlier DP and

for opening of new clearing member account to the new DP. On receipt

of the application, the new DP forwards the application to the depository

for approval and allotment of a new CM-BP-ID is allotted, the new DP

opens a new Clearing account and intimates the depository about the new

client- ID. On receipt of intimation from the intimates the clearing

member. All pay-out of securities, subsequent to the closure of old

clearing account, take place in the new account. Pg-17-3

59



TRADING & SETTLEMENT:

This is the an area where the DP must the DP must take immense

care while accepting and processing request listed below should from the

account of his client to another account. The aspects listed below should

be kept in mind.

Ensure that the delivery instruction book given to each client has

pre-printed serial number and client-ID.

Inform clients about the pay-in deadline of the stock exchange and

the deadline of the DP.

Each DIS received should be inwarded correctly with the date and

time stamp.

Late stamp must be affixed on the instructions received after the

expiry of the deadline set by the DP.

Ensure the correctness of execution date on the DIS.

Ensure signature on DIS matches with the records of the DP.

Ensure that the signatures of all holders are obtain in case of joint

accounts.

If the client has not issued “standing instructions”, he should be

made aware that a receipt in instruction will be required to the

credits into the account on purchase of shares.

Client should be made aware of the accounting freezing facility.

60



61



SETTLEMENT

The settlement of trades in the stock exchanges is undertaken by

the clearing corporation (CC)/ clearing house (CH) of the corresponding

stock exchanges. While the settlement of dematerialized securities is

effected through depository, the funds settlement is effected through the

clearing banks. The clearing members directly with the CC/ CH settle the

physical securities.

Exclusive demat segment follows rolling settlement (T+5) cycle

and the unified (erstwhile - physical) segment follows account period

settlement cycle. In case of rolling settlement cycle, the account period is

reduced to one day.

In case of settlement of trades done in exclusive demat segments,

the pay-in and pay out of funds and securities are effected on the

same day afternoon and evening (same day) thus reducing the

blockage of funds and limiting exposure to the clearing

corporation.

Settlement of funds is effected through the clearing banks and

depository plays no role in this.

Settlement of securities is effected through NSDL depository

system.

62



Clearing and settlement of the regular market trades is effected

through the clearing members of the clearing houses of respective

stock exchanges. All trading members of stock exchanges are

clearing members of clearing houses. In addition, for settlement of

institutional trades, custodians are also allowed to act as clearing

members.

Clearing members of clearing house, dealing in dematerialized

securities are expected to open a clearing account with any DP for

the purpose of settling trades in dematerialized securities. As, in

the mixed (unified) segment, there is a possibility for all clearing

members to receive dematerialized securities, they are expected to

open clearing accounts.

If there is any short delivery at the time of pay-in of securities,

these short positions are auctioned in the Demat segment as done in the

Unified (erstwhile-physical) segment.

Selling and Buying Of Shares:

Selling dematerialized shares in stock exchanges is similar to the

procedure for selling physical shares. Instead of delivering physical

shares to the broker, you instruct your DP to debit your account with the

number of shares sold by you and credit your broker's clearing account. 63



For this, a delivery instruction has to be given to your DP in a

standardized format, which will be available with your DP.

In short, for selling demat shares;

You can sell shares in any of the stock exchanges linked to a

depository through a broker of your choice.

Give an instruction to your DP to debit your account and credit

your broker's clearing member pool account. (this is a depository

account used exclusively for settling transactions by a broker)

On the pay-in day, your broker gives instruction to his DP for

delivery of the shares to clearing corporation of the relevant stock

exchange.

The broker receives payment from the clearing corporation

You receive payment from your broker for the sale in the same

manner you would receive payment for a sale in the physical mode.

64



Buying Demat Shares:

The procedure for buying dematerialized shares in stock exchanges

is similar to the procedure for buying physical shares. When you want to

purchase shares in electronic form, you have to instruct your broker to

purchase the dematerialized shares from the stock exchanges linked to a

depository.

Once the order is executed, you have to instruct your DP (vide a

simple format which is available with the DP) to receive securities from

your broker's clearing account.

Alternatively, you may give a standing instruction to receive

credits into your account and do away with giving a separate receipt

instruction each time you expect a credit. You have to ensure that your

broker too gives a matching instruction to his DP to transfer the shares

purchased on your behalf into your depository account.

You should also ensure that your broker transfers the shares

purchased from his clearing account to your depository account, before

the book closure. This is really important because shares that remain in

the clearing account of the broker on the book closure/ record date will

not be eligible for corporate benefits.

In brief, the transactions relating to purchase of shares are:

65



You can purchase shares in any of the stock exchanges connected

to a depository through a broker of your choice and make a

payment to your broker;

Your broker receives credit in his clearing account with his DP on

the pay-out day;

Broker gives instructions to his DP to debit his clearing account

and credit your account;

You instruct your DP for receiving credit into your depository

account either through a specific receipt instruction or using the

"standing instruction" facility.

In case you are not using the "standing instruction" facility then,

your depository account is credited only if the instructions given by

you and your broker match.

Other Services

Besides demat and trading Depositories also offer other services, these

are:

o Pledging/ hypothecation of dematerialized securities.

o Electronic credit in public offerings of companies.

o Receipt of non-cash corporate benefits such as bonus, rights in

electronic form.

o Stock lending and borrowing.

66



o Transmission of securities.

Pledging: Dematerialized shares could be pledged; in fact, this is more

advantageous as compared to pledging share certificates.

To pledge your Demat shares

Both you (pledgor) as well as the lender (pledgee) must have

depository accounts.

You must initiate the pledge by submitting the details of the

securities to be pledged in a standard format (available with DPs).

The pledgee should confirm the request through his DP.

Once this is done, your securities are pledged

All commercial documentation between the pledgor and the

pledgee are handled outside the depository system.

After you have repaid your loan, you can request for a closure of

pledge by instructing your DP through a standard format. The pledgee on

receiving the repayment as well as the request for closure of pledge will

instruct his DP accordingly.

Even the locked-in securities can be pledged, however they cannot

be invoked before the lock-in release date.

67



Even after the securities are pledged, the pledgor continues to

remain the beneficiary holder of those securities and will receive benefits

of a corporate action, if any.

68



Initial Public Offerings: Credits for public offers can be directly received

into demat account. In the public issue application form of depository

eligible companies, there will be a provision to indicate the manner in

which securities should be allotted to the applicant. All you have to do is

to mention your client account number and the name and identification

number of your DP.

Any allotment due to you will be credited into your account.

If the applicant is allotted securities in dematerialized form, but the

details regarding the beneficiary account are incomplete/ wrong, the

person will get physical delivery of allotted securities.

If securities were allotted in the dematerialized form, these would

be credited to applicant’s account any day between allotment date and

listing date, at the discretion of the company.

The issuer company/ their R&T agent will forward the applicant

the allotment advice giving the number of shares allotted in

dematerialized form. Through this you can come to know that you have

been allotted shares.

An amendment to the company law requiring all future public

issues above Rs100mn to compulsorily offer securities in dematerialized

69



form is awaiting legislative approval. After this all the issues above

Rs100mn will require investors to trade only in demat way.

Partly paid up and fully paid up shares in the depository, will be

given separate ISINs (International Securities Identification Number).

These are also traded separately at the stock exchanges.

The company issues call notices to the beneficial holders of

securities in the electronic form. The details of such beneficial holders

will be provided to the issuer/ their R&T agent by NSDL. After the call

money realization, issuer/ their R&T agent will electronically convert the

partly paid up shares to fully paid up shares.

Receipt Of Cash/ Non-Cash Benefits: When any corporate event such as

rights or bonus or dividend is announced for a particular security,

depository will give the details of all the clients having electronic

holdings in that security as of the record date to the registrar. The

registrar will then calculate the corporate benefits due to all the

shareholders. The disbursement of cash benefits such as dividend/ interest

will be done directly by the registrar. In case of non-cash benefits,

depository will directly credit the securities entitlements in the depository

accounts of all those clients who have opted for electronic allotment

based on the information provided by the registrar.

70



The bonus/ rights issue against holding in dematerialized form can

be either in the physical/ dematerialized form as per the choice of the

investor. If no choice is given, by default, the securities will be issued in

the physical form.

Even if an investor has holdings in physical form, he can receive

the bonus/ rights issue against this in the dematerialized form.

In case of fractional part, as in the physical segment, it would be

paid in cash and the remaining whole part would be credited to the

investors account.

The statement of holding and transaction statement is sent by the

investors DP, it will show the bonus/ rights credit into investor’s account.

This report is sent to the investor every fifteen days. In addition, an

allotment advise will be send by the issuer/ their R&T agent for bonus/

rights entitlement.

Stock Lending and borrowing: Through the depository account securities

in the demat form can be easily lent/ borrowed. Securities can be lent or

borrowed in electronic form through an approved intermediary, who has

opened a special 'intermediary' account with a DP.

71



To Lend Securities: You have to instruct your DP through a standard

format (which is available with your DP) to deposit your securities with

the intermediary.

If the intermediary accepts your deposit of securities, the securities

will be moved from your account into the intermediary's account. If you

wish to recall the securities lent by you, you can make a request vide a

standard format available with your DP.

To Borrow Securities: You have to instruct your DP through a standard

format (which is available with your DP) to borrow securities from the

intermediary.

If the intermediary accepts your request, the securities will be

moved from the intermediary's account to your account. If you wish to

return the securities borrowed by you, you can make a request vide a

standard format available with your DP.

Transmission Of Securities: Transmission of securities due to death,

lunacy, bankruptcy, and insolvency or by any other lawful means other

than transfer is also possible in the depository system. In the case of

transmission, the claimant will have to fill in a transmission request form,

(which is available with the DP) supported by valid documents. The DP,

after ensuring that the application is genuine, will transfer securities to the

72



account of the claimant. For this, the claimant must have a depository

account. The major advantage in transmission of dematerialized holdings

is that the transmission formalities for all securities held with a DP can be

completed in one go, unlike in the case of share certificates, where the

claimant will have to interact with each issuing company or its R&T

Agent.

In case where the deceased was one of the joint holders in the

Client account, the surviving client(s) shall be the person(s) recognized

by depository as having title to the securities held in that joint Client

account. In case where the deceased was a sole holder of the Client

account, his legal heir(s) or the legal representative(s) will be the

person(s) recognized by depository as having title to the securities held in

that sole Client account.

Security: National Security and Depository Limited claims to have

undertaken sufficient security measures. These measures are:

A DP can be operational only after registration by Sebi, which is

based on the recommendation from NSDL and Sebi’s own

independent evaluation. Sebi has prescribed criteria for becoming a

DP in the regulations.

73



DPs are allowed to effect any debit and credit to an account only

on the basis of valid instruction from the client.

Every day, there is a system driven mandatory reconciliation

between the DP and NSDL.

There are periodic inspections into the activities of both DP and

R&T agent by NSDL. This also includes records based on which

the debit/ credit are effected.

The data interchange between NSDL and its business partners is

protected by standard protection measures such as encryption. This

is a SEBI requirement.

There are no direct communication links between two business

partners and all communications between two business partners are

routed through NSDL

All investors have a right to receive their statement of accounts

periodically from the DP.

Every month NSDL forwards statement of accounts to a random

sample of investors as a counter check.

In the depository, the depository holds the investor holdings on

trust. Therefore, if the DP goes bankrupt the creditors of the DP

will have no access to the holdings in the name of the clients of the

74



DP. These investors can then either dematerialize their holdings or

transfer them to a different account held with another DP.

Investor grievance: All grievances of the investors are to be

resolved by the concerned DP. If they fail to do so the investor has

the right to approach NSDL.

Insurance Cover: NSDL has taken a comprehensive insurance

policy to protect the interest of the investors in cases of failure of

the DP to resolve a genuine loss. The details of the policy is as

under:

Upper limit per claim: Rs200mn.

Number of claims allowed: unlimited

Minimum value of the claim: Rs150, 000

To cover claims valued less than Rs150, 000 NSDL has an investor

protection fund in place.

Besides all these safety measures efforts have been done to make this

electronic system foolproof.

DEMAT SHARES: ARE THEY 100% SAFE

When you buy physical shares from the stock market, you could

never be certain of the validity of the title of shares. There were many

75



reasons- the sellers' signature did not match, or the certificates were fake,

forged or stolen, and so on.

Demat shares are supposed to obviate these problems. Buying

shares in the demat form always guarantees you a good title as soon as

the settlement is over. The biggest attraction of trading in demat shares is

that the shares you buy come with a clean title and immediately after the

settlement on the relevant stock exchange.

Rule 100 of market regulator SEBI determines whether the shares

delivered in a settlement, are good or not. Under rule 100, the shares that

have been transferred the company can still withdraw any number of

times, if a transfer is found to be invalid for any reason.

Suppose a sells physical shares to B and B gets them

dematerialized. Later B sells the shares in the stock exchange and C buys

them. Meanwhile A discovers that his share certificates were stolen and

fraudulently sold by someone else. He gets a court order restraining the

company from further transferring the shares and attaching them

(currently in possession of C). This is known as 'stop transfer'. So C who

has bought dematerialized shares is now struck with the shares. He cannot

sell these shares since they would be frozen in his account

76



In demat shares, pre-demat problems about the validity of a share

do not effect the interest of the buyers after dematerialization. Shares go

through a verification process at the registrars' before they are

dematerialized.

Therefore the responsibility lies with the registrar. The registrar

must find a remedy if the original transfer of shares, before their

dematerialization comers under doubt. But there is a catch. The company

and its registrars are not responsible if the reasons for original transfer

being invalid were not available at the time of dematerialization. Matters

have to be dealt with on a case-to-case basis. Which means that even

demat buyer may find that his shares have been frozen in his demat

account. This kind of case has to be contested in court by the parties

involved.

This issue is not directly addressed in The Depositories Act, 1996.

Sebi’s regulations on depositories and depository participants also do not

mention the issue.

Matters get more complex if an investor has traded further in

shares of the same company in his demat account. Demat shares are

77



fungible and don’t have distinctive numbers. It is not easy to track the

sale or trade of shares after they are dematerialized.

In a rare event of your DP going bankrupt or closing the

operations, the interests of the investors will be fully protected. In such a

situation, the investors will be given an option of either transferring the

securities to a new DP or they may rematerialise the securities

78



ANALYSIS OF CUSTOMER SATISFACTION

Sample size selected: 100

Total Number of customer available for survey: 100

The sample size selected for the survey was 100.(Hundred)

customers of KARVY CONSLUTANT STOCK BROKING were

available for survey. So opinion was taken to know the customer

satisfactions towards demat account.

79



1.Respondent came to know the about “KARVY FINANCIAL CONSULTANT “

Total no. Of sample taken: 100

1 2 3 4 5

Friends

News Papers/Business Magazines Online

Agent/Financial Others

47 18 10 14 11

Source: Survey Data The above table and chart shows the respondents know

KARVY FINANCIAL CONSULTANT :-

47.00% of respondent know KARVY FINANCIAL

CONSULTANT through their Friends.

18% of of respondent know KARVY FINANCIAL

CONSULTANT through News Papers & Magazine.

80



14% of respondent know KARVY FINANCIAL CONSULTANT

through Agents & Financial Institutions.

11% of respondent know KARVY FINANCIAL CONSULTANT

through Others.

2.They are interested to visit “KARVY FINANCIAL CONSULTANT “

Source: Survey Data

Yes No

94 6

81



The above table and chart shows that 94% of respondents are

interested to visit KARVY FINANCIAL CONSULTANT & only 6% of

Respondent are not interested to visit the same .

82



Agree Just agree No OpinionJust Disagree

Disagree

47 45 8 0 0 3. They Respondents are interested to visit “KARVY FINANCIAL

CONSULTANT “ because of visual pleasure, hospitality & Excellent

Guideline etc

Source: Survey Data

The above table and chart shows that 47% of Respondents are

interested to visit “KARVY FINANCIAL CONSULTANT “ , 45% of

Respondent just agree & 8% of Respondent are not interest to give there

opinion .

83



4. They Respondents are definitely use service “KARVY FINANCIAL

CONSULTANT

“Because attitude of employee.

Agree Just agree No OpinionJust Disagree Disagree

69 24 7 0 0

Source: Survey Data

The above table and chart shows that 69% of Respondents are interested

to visit “KARVY FINANCIAL CONSULTANT “Because of there

attitude, and, 24% of Respondent just agree only 7% of Respondent are

constant.

84



85



5. They Respondents are definitely using service of “KARVY FINACIAL CONSULTANT because what they benefit gets from them.


Disagree

50 41 8 1 0

Source: Survey Data

The above table and chart shows that 50% of Respondents are

interested to visit “KARVY FINANCIAL CONSULTANT because they

get that much of benefits from them , and, 41% of Respondent just agree

only 8% of Respondent constant..1% of Respondent just disagrees.

86



87



6 They Respondents are interested “KARVY FINANCIAL

CONSULTANT “

because they introduce new scheme and we get benefit .

Source: Survey Data


interested to use service of “KARVY FINANCIAL CONSULTANT”

because they introduce new scheme and we get benefit & only 14% of

Respondent are not interested to visit the same.

Yes No

86 14

88



7 They Respondents use “KARVY FINANCIAL CONSULTANT

“because Karvy People know customer value and money value.

Agree Just agree No Opinion

Just Disagree Disagree

54 39 6 1 0

Source: Survey Data


satisfied with the service of “KARVY FINANCIAL CONSULTANT”

because the Karvy People know customer value and money value. 39%

89



Respondents just agree .6% of parole say no opinion and only 1% of

Respondent say just disagree.

8. They Respondents specify “KARVY FINANCIAL CONSULTANT “better then other Dp.


Disagree

41 37 20 1 1

90



Source: Survey Data

The above chart shows that 41% of respondents are interested in

“KARVY FINANCIAL CONSULTANT” because of their best service

which is better then other DP services. 41% of Respondents agree.31% of

Respondents just agreed. 20 % of Respondent has not given their opinion.

Only 1% of Respondent disagrees.

91



9. Demat

Extremely satisfied

Satisfied Neither satisfied/ norunsatisfied

Unsatisfied Extremely unsatisfied

38 46 16 0 0

Source: Survey Data

The above table and chart shows demat services offered by

KARVY FINANCIAL CONSULTANTS are satisfied. 38% of the

Respondents are extremely satisfied, 46% just Satisfied, 16%of of

Respondents neither satisfied / Unsatisfied..

92



b. Settlement (Selling/ Buying)

Extremely Satisfied

Satisfied

Neither satisfied/nor Unsatisfied

Unsatisfied

Extremely unsatisfied

25 49 26 0 0

Source: Survey Data

The above table and chart shows that 25% of the respondents

are extremely satisfied by the service of Karvy, 49% of respondents are

satisfied and 26% of the respondents are having neutral opinion about the

service provided by the Institution.

93



c. Freezing/Defreezing

ExtremelySatisfied Satisfied

Neither satisfied/norUnsatisfied

Unsatisfied


6 49 45 0 0

Source: Survey Data

The above table and chart shows the services of freezing/

defreezing 49% of the respondent are aware and satisfied with these

services. And 45% of respondent are having neutral opinion about

freezing/ defreezing, 6% of respondent are dissatisfied with this service

because they are don’t have understood the core concept.

94



d. Loan against Shares

Extremely satisfied

Satisfied Neither satisfied/nor unsatisfied

Unsatisfied Extremely unsatisfied

22 33 45 0 0

Source: Survey Data

The above table and chart shows most of the respondent are

having neutral opinion i.e., 45% and 33% have satisfied this service. 22%

of respondent are extremely satisfied.

95



e. Share Trading

ExtremelySatisfied

Satisfied

Neither satisfied/norUnsatisfied

Unsatisfied

Extremelyunsatisfied

49 47 4 0 0

Source: Survey Data

The above table and chart shows the service of share trading, 49%

of the respondent have Extremely Satisfied with this service, and 47% of

respondent are satisfied; In all we can say that 96% respondent have

satisfied with the services of Share trading.

96



F. Periodic statements

ExtremelySatisfied Satisfied

Neither satisfied/ unsatisfied Unsatisfied


48 44 8 0 0

Source: Survey Data

The above table and chart shows the services given by Karvy about

Periodic statements 48% of the respondent are extremely satisfied &

44% of the respondent is satisfied .In all 92%(appr) of respondent have

satisfied with this service.

97



g. Telephone Quires

Extremelysatisfied Satisfied

Neither satisfied/norunsatisfied

Unsatisfied


40 48 12 0 0

Source: Survey Data

The above table and chart shows the 48% of the respondent are

satisfied with the Telephonic service; 40% of the respondent are mostly

satisfied & in all 88% of the Respondent satisfied; 12% having neutral

opinion.

98



h. Co-operation by Staff

Extremely satisfied

Satisfied Neither satisfied/nor unsatisfied

unsatisfied Extremely unsatisfied

60 35 5 0 0

Source: Survey Data

The above table and chart shows overall 60% of the respondent

are extremely satisfied with the co-operation by staff; 35% of the

99



respondents are satisfied & 5% of the respondents are having neutral

opinion.

100



I. Bills acceptance.

Extremelysatisfied

SatisfiedNeither satisfied/nor unsatisfied

unsatisfiedExtremely unsatisfied

50 32 16 1 1

Source: Survey Data

The above table and chart shows overall 50% of the respondent

are extremely satisfied; 32% of the respondents are satisfied &16% of the

respondents are having neutral opinion.

101



10. Dissatisfied with services/ scheme

AFrequently reminders are given to karvy consultant ltd., for update the information

4 4%

B Irregular receipt of Holding/Transaction statement 1 1%

CImproper attention given to the enquires

5 5%

D Improper format of Holding/Transaction statement 1 1%

EBilling problems

1 1%

F Inadequate information 2 2%

a B c d e f4 1 5 1 1 2

Source: Survey Data

The above table and chart shows that 5% of the respondents are

unsatisfied with Improper attention given to the enquires . & 4% of the

respondent are unsatisfied with frequently reminders are given to karvy

102



consultant ltd., for update the information given by DP .So proper

communication with the Respondent & update information is required.

11.

Tariff Structure

Source: Survey Data

The above table and chart shows that 62% of the respondents think

the tariff structure of the KARVY CONSULTANT is very

Very high

High Reasonable Low Very low

13 25 62 0 0

103



reasonable.25% of the respondent thinks the tariff structure is high. 13%

of the respondent feels the tariff structure is very high.

12. Rate of Satisfaction for DP services

0% 20% 40% 60% 80% 100%0 0 11 31 53 5

Source: Survey Data

The above table and chart shows that 53% of the

respondent have satisfied 80% of service given by DP; 31% of the

respondent have satisfied 60% of service and 11% of the respondent have

104



satisfied 40% of the service. Only 5% of respondent have satisfied 100 of

the service.

105



13. Preference of own DP over other DP

Quality service

Rate Charged

Nothing in particular Safety Reach

35 14 10 40 1

Source: Survey Data

The above table and chart shows that 40% of the respondents

preferred this DP because of Safety & 35% of the respondents preferred

this DP because of the quality service. In all 75% prefer KARVY

CONSULTANT because of safety& quality.

106



Recommendation

Customer service should be improved and more co-operation also

provide.

Time taken for transfer of script from trading account into demat

account should be reduced.

Statement copy should made more clear and figure should be

mention in respective column.

More space provide in trading place.

The commission charged should be reduced.

The office should be situated near bus stand or subhas road.

107



CONCLUSION

Since it is service based industry, the customer plays vital role, so

in order to satisfy the customer appoint more no of well qualified agents

who can communicate respondents to improve the services, hence give

more advertisement in News paper, local TV channel, to over come the

over crowding and non availability of telephone links proper measure

should be taken.

108



QUESTIONNAIRE

Dear Sir/ Madam

NAME : ____________________________

ADDRESS : ____________________________

__________________________

OCCUPATION: __________________________ Phone No:

__________

1. I came to know about KARVY FINANCIAL CONSULTANTS from

1 2 3 4 5Friends News Papers

/Business Magazine

Online Agent/Financial Agency

Others

2. I am interested in visiting KARVY FINANCIAL

CONSULTANTS because they provide quick and timely service.

1) Yes 2) No

3. I have been using service of KARVY FINANCIAL CONSULTANTS because of the low cost, visual pleasure, Hospitality, Communication, and new concept of financial consultancy

1 2 3 4 5Agree Just Agree No opinion Just

disagreeDisagree

109



4. In future I will be definitely using the service of KARVY

FINANCIAL CONSULTANTS because of the attitude of the employees

towards customers.


disagreeDisagree

5. I will definitely use service of KARVY FINANCIAL

CONSULTANTS because of the benefit I get from KARVY

FINANCIAL CONSULTANTS


disagreeDisagree

6. I am interested in KARVY FINANCIAL CONSULTANTS

because of the new scheme introduced frequently and benefit from such

scheme

1) Yes 2) No

7. I use KARVY FINANCIAL CONSULTANTS because they know

customer

value as well as money value of customers

1 2 3 4 5

110



Agree Just Agree No opinion Just disagree

Disagree

8. KARVY FINANCIAL CONSULTANTS service of dp are better

then other dp services.


disagreeDisagree

111



9. Express your satisfaction level about the following scheme/service please tick.

Schemes/servicesExtremely Satisfied

Satisfied Neither satisfied/norunsatisfied

unsatisfied

Extremely Unsatisfied

a. Dematb. Settlement(Selling/purchasing)c. Freezing/ defreezing Of an accountd. Loan against sharese. Share tradingf Periodic statementsg. Telephone queriesh. Co-operation by staffi. Bills Acceptance

10. If you have faced any when dealing through your DP or you are unsatisfied with the above mentioned services/schemes.

Frequently reminders are given to KARVY FININCIAL CONSULTANTS., for

update the information Irregular receipt of Holding/Transaction statement

Improper attention given to the enquires

Improper format of Holding/Transaction statement

Billing problems

Inadequate information

Other specify___________________

112



11. Please tick the following:

TariffStructure

1 2 3 4 5

Very High

High Reasonable Low Very Low

12. How do you rate the services of your DP

0% 20% 40% 60% 80% 100%

13. How do you justify your preference for your KARVY FINANCIAL

CONSULTANTS DP over other DP’s?

1 2 3 4 5QualityService

RatesCharged

Nothing in particular

Safety Reach

14. A) Your age (Yrs)

<25 26-35 36-45 46-60 > 60

B) Income (Pa) <60000 60000-1.2 L 1. 2 L– 2.4 L

2.4 L– 3.6L 3.6 L – 6.0.L 6.0 L –12.0 L

C) Education

Up to Xth Graduate Post Graduate. PhD. Others.

D) Yearly of investment.

113



1L-5 L 5L-10L >10L

15. Suggestion ______________________________________________

______________________________________________

Thank you for your co-operation

114



CODE SHEET OF CUSTOMER RESPONSE

Q. 9. Extremely Satisfied: 1; Satisfied: 2;Neither Satisfied/Nor

Dissatisfied: 3; Unssatisfied:4; Extremely Dissatisfied: 5

Q11. Very High: 1;High: 2;Reasonable: 3;Low: 4;Very Low:

Q12. 0%: 1; 20%: 2; 40%: 3; 60%: 4;80%: 5;100%:

Q813. Quality Service: 1;Rates charged: 2;Nothing in particular: 3; Safety: 4;Reach: 5

DATA CODE - SHEETSl No

123456789a9b9c9d9e9f9g9h9i10a10b10c10d10e10f111213a13b13c13d13e

1 1 1 1 1 1 1 1 2 2 2 3 3 1 2 1 1 2 2 3 5 3 2 1 1 1 1 1 2 2 2 1 2 2 2 2 2 2 1 2 3 4 1 3 1 1 1 1 1 1 2 1 2 2 2 2 2 2 3 2 3 3 2 4 4 4 1 1 2 2 2 2 2 2 2 2 3 3 2 2 2 2 2 2 3 3 5 1 1 1 1 1 1 1 1 1 2 2 3 1 1 1 2 2 3 5 1 6 1 1 2 1 1 1 2 1 1 1 2 1 1 2 1 1 2 2 5 4 7 1 1 1 1 1 1 1 1 2 2 2 2 1 1 1 1 1 3 5 1 8 4 1 1 1 1 1 1 1 2 1 3 3 1 1 1 1 1 3 6 4 9 1 1 1 2 2 1 2 3 2 2 3 3 2 1 1 1 1 3 5 1 10 1 1 2 3 1 2 3 2 2 3 2 3 2 3 2 2 2 3 4 2 4 3 11 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 1 1 3 5 2 12 2 1 2 1 2 1 3 2 2 2 2 2 2 2 2 2 2 3 5 1 13 2 1 2 2 2 1 2 2 2 1 1 3 1 1 1 3 1 1 3 4 3 14 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 1 1 1 5 1 15 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 1 2 3 5 4 16 1 1 1 1 1 1 1 1 2 2 2 2 1 1 1 1 2 3 4 1 17 2 1 1 1 1 1 1 3 1 2 3 3 2 2 1 1 1 3 5 1 18 1 1 2 1 2 1 1 2 2 1 2 1 1 1 1 1 1 3 5 4 19 1 1 1 1 1 1 2 2 1 1 2 2 1 1 1 2 1 3 5 1 20 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 1 1 3 5 1 21 1 1 2 2 3 1 2 1 1 2 2 2 1 1 2 1 1 2 5 4 22 4 1 2 1 1 1 2 3 1 2 3 3 1 2 1 1 3 2 5 4 23 1 1 1 1 1 1 2 1 1 1 2 3 1 1 1 1 1 3 5 4 24 1 1 1 1 1 1 2 3 1 1 3 3 2 1 1 2 1 3 5 4

115



25 1 1 1 1 1 1 1 1 3 2 2 3 1 1 2 1 2 3 5 1 26 4 2 3 2 3 2 2 2 3 2 3 3 2 2 2 2 2 2 4 3 27 1 1 1 1 1 1 2 1 1 1 2 3 2 1 2 1 1 3 4 1 28 1 1 2 2 3 1 1 1 2 2 2 3 2 2 1 1 1 3 5 1 29 1 1 2 1 3 2 1 2 1 2 3 3 1 1 1 1 1 1 5 4 30 2 1 1 1 1 1 1 1 2 1 3 3 1 2 1 1 1 3 5 1 31 2 1 1 1 1 1 1 1 2 2 2 3 2 2 2 2 2 3 5 4 32 1 1 2 1 1 1 1 1 2 2 2 3 2 2 2 2 2 1 3 3 1 33 1 1 1 1 1 1 2 2 2 2 2 3 2 2 1 1 2 3 4 1 34 2 1 2 2 1 2 2 2 2 2 2 3 2 2 2 2 2 3 5 1 35 1 1 1 1 1 1 1 1 2 2 2 3 1 1 2 2 2 1 3 5 4 36 5 1 2 1 2 2 2 5 2 2 2 3 2 3 2 2 5 1 3 6 2 4 3 37 1 1 1 2 2 1 2 2 2 3 3 2 2 1 2 1 1 3 3 1 38 1 1 1 1 1 1 1 2 2 1 2 1 1 1 1 1 1 5 2 5 4 39 1 2 3 3 4 2 4 4 2 2 3 3 2 2 3 2 4 3 6 3 3 3 40 1 1 1 1 1 2 2 2 2 2 3 3 2 2 2 2 2 2 4 4 41 1 1 2 1 2 2 1 3 2 2 3 3 2 2 1 1 2 3 5 1 42 2 1 1 1 2 1 1 1 1 2 2 3 1 1 2 1 1 2 5 4 43 4 1 2 1 1 1 1 2 1 2 3 3 1 1 1 1 1 3 5 1 44 1 1 3 2 1 2 2 3 2 2 3 3 2 2 1 1 2 3 1 3 2 45 1 1 1 1 2 1 1 2 2 1 2 3 1 1 2 1 2 3 4 2 46 2 1 3 3 2 1 1 1 1 1 2 2 1 1 1 1 1 3 5 1 47 1 2 2 1 2 1 1 1 3 2 1 2 1 2 3 1 1 3 4 1 48 2 1 2 2 1 1 3 2 2 3 3 1 2 2 3 2 3 2 4 2 49 1 1 1 1 2 1 1 1 3 2 2 3 1 2 3 1 1 3 3 3 50 5 1 2 1 1 1 1 2 1 3 1 2 2 3 2 1 1 2 5 1 51 1 1 2 2 2 1 1 1 3 1 3 3 1 3 2 2 1 3 4 2 52 2 1 1 1 1 1 3 2 2 3 2 1 3 2 3 1 1 3 5 3 53 1 1 2 1 2 1 1 1 1 2 1 2 1 3 2 1 1 2 4 2 54 1 2 2 2 1 1 3 3 3 1 3 2 2 1 3 1 1 3 3 1 55 3 1 1 1 2 1 1 1 2 3 2 3 1 2 2 1 1 2 5 3 56 1 1 2 2 1 1 1 2 3 2 2 2 2 1 2 1 1 3 4 2 57 2 1 1 1 2 2 1 1 1 1 3 1 1 2 3 2 1 3 3 2 58 4 1 2 1 1 1 3 2 2 3 1 3 2 1 2 1 1 1 4 1 59 1 2 2 2 2 1 1 1 3 2 3 2 1 2 3 1 1 3 5 2 60 3 1 1 1 1 1 2 2 2 3 2 1 2 1 2 2 1 3 3 4 61 1 1 2 1 2 1 1 1 3 1 3 2 1 2 3 1 1 3 4 2 62 3 1 2 1 1 1 2 3 1 3 2 3 2 1 2 2 1 1 5 1 63 1 1 1 1 2 1 1 1 3 2 2 2 1 2 3 1 1 3 4 4

116



64 4 1 1 1 1 2 1 2 2 3 1 1 2 1 2 2 1 3 3 2 65 1 1 2 1 2 1 1 1 1 1 3 2 3 1 3 1 1 3 4 1 66 1 1 2 2 3 1 2 3 3 3 2 1 2 2 2 2 1 3 3 2 67 1 2 1 1 2 1 1 1 2 2 3 2 3 1 1 1 1 3 4 4 68 3 1 2 1 3 1 2 2 3 3 2 3 2 1 2 1 1 3 5 1 69 3 1 1 1 2 1 1 2 3 3 3 1 1 2 1 2 1 2 5 1 70 4 1 2 1 2 1 2 3 2 2 3 1 2 1 1 2 1 2 5 4 71 5 1 2 4 1 1 1 2 1 3 3 3 1 2 1 2 1 2 4 1 72 5 1 1 1 2 1 2 3 3 1 2 1 2 1 1 1 1 1 5 4 73 5 1 2 2 3 1 1 1 1 3 3 3 1 2 1 2 1 2 4 4 74 5 1 2 2 1 1 2 3 2 2 3 1 2 1 1 2 1 2 5 1 75 5 1 3 1 2 1 1 2 3 3 3 2 1 3 2 1 1 1 4 4 76 4 1 2 2 1 1 2 1 1 1 3 1 2 1 2 2 1 2 5 1 77 2 1 2 1 2 1 1 3 1 3 2 3 3 2 1 1 1 1 4 4 78 5 1 1 3 1 1 2 2 3 2 3 2 1 2 2 3 2 2 5 2 79 3 1 2 1 2 1 1 1 2 3 2 1 2 1 2 1 2 1 4 1 80 1 1 1 1 3 1 2 2 1 2 3 3 1 2 2 2 2 1 5 4 81 4 1 1 1 2 1 1 3 1 3 2 2 2 1 2 1 2 3 4 2 82 5 1 2 2 1 1 2 1 1 2 3 1 1 2 1 2 2 1 5 4 83 3 1 3 1 2 1 1 2 1 2 2 2 2 1 2 1 2 3 4 4 84 2 1 2 1 2 1 2 3 2 3 3 2 1 3 2 2 2 3 5 1 85 4 1 1 3 1 1 1 1 2 1 2 1 2 1 1 1 2 1 4 4 86 3 1 3 1 2 1 2 2 1 3 2 3 1 2 2 2 2 3 5 4 87 1 1 2 2 2 2 1 3 1 2 3 2 2 1 2 1 2 3 4 4 88 5 1 1 1 2 1 2 3 2 2 3 1 1 3 2 3 3 1 5 589 2 1 3 1 1 1 1 1 2 3 2 2 2 1 1 1 3 3 4 4 90 4 1 2 1 2 1 2 2 1 2 3 2 1 2 2 2 3 3 6 1 91 3 1 1 1 2 1 1 3 2 1 3 3 2 1 1 1 3 2 5 4 92 2 1 2 1 1 1 2 2 2 3 2 2 1 2 2 3 3 3 6 4 93 5 1 1 1 2 1 1 1 2 2 3 1 2 1 1 2 3 3 5 4 94 4 1 2 1 2 1 2 3 1 2 3 2 1 2 2 3 3 3 5 4 95 2 1 1 2 2 1 1 2 2 3 2 2 2 1 1 2 3 2 5 4 96 4 1 2 1 1 1 2 1 1 2 3 1 1 2 2 1 3 3 6 4 97 3 1 1 2 2 1 1 3 2 3 2 3 2 1 2 1 3 3 5 4 98 2 1 2 2 1 1 2 2 1 2 3 1 1 2 2 1 3 2 5 4 99 4 1 1 2 2 1 1 2 2 3 3 3 2 1 2 1 3 3 5 4 1002 1 2 3 1 1 2 1 1 1 3 1 1 2 2 1 3 3 5 4

117



GLOSSARY

Account Freezing: The Depository Participant may freeze the account of

a client maintained with him on written instructions received by the

Participant in that regard from the client concerned in the form specified

under the Business Rules.

Account Opening: Any person willing to avail the services offered by a

Depository shall open an account with a Depository Participant.

Beneficiary: A person who benefits from a trust set up on his / her behalf

& anyone who benefits from the proceeds of a will

A person who benefits from a contractual or fiduciary relationship

Beneficiary ID No: Each beneficiary is allotted an ID No. generated by

DP by which a beneficiary is identified. This is similar to your Bank A/c

No. Or the Folio No.

BSE: Bombay Stock exchange is one of the oldest stock exchanges in

Asia with over 6,000 stocks listed.

Beneficiary Account: An investor or a broker who wants to hold shares in

dematerialised (demat) form and undertake scrip less trading must have a

118



depository account called beneficiary account with Depository Participant

of his choice.

CDSL: Central Depository Securities Ltd is an organization promoted by

the stock exchange Mumbai, (BSE) in association with Bank of

India, Bank of Baroda, State Bank of India and HDFC Bank to provide

electronic depository facilities for securities traded in the equity and the

debt market. CDSL is the second depository in India. Karvy is one of the

Depository Participants of CDSL.

Client Id: Whenever any client opens an account with a Depository

Participant he /she is provided with an account number which is known as

the beneficiary account number or the Client Id. The combination of the

Client Id and the Depository Participant Id is unique.

Deface: The client (registered owner) shall submit a request to the DP in

the DRF for dematerialisation along with the certificates of securities to

be dematerialised. Before submission, the client has to deface or cancel

the certificates by writing "SURRENDERED FOR

DEMATERIALISATION”.

Defreezing of an account: The client can request his depository

participant to release the suspension order and defreeze the account for

regular operations. The Depository participant shall defreeze the account

119



only after receipt of the application for defreezing signed by all the

account holders

Delivery Instructions by client: In order to transfer securities from his

account to another a beneficial account owner must give an instruction to

his / her Depository Participant. A beneficial account owner must give

instruction to his / her DP to transfer

DRN: When the securities are found in order with the details of the

request as mentioned in the form, the depository participant enters the

details in the DPM (Depository participant Module, provided by NSDL to

the DP) a Dematerialization Request Number (DRN) is generated by the

system. The DRN so generated is entered in the space provided for the

purpose in the Dematerialization Request Form. The request is then

released to DM (Depository Module – Depository’s software system).

The DM forwards the requests to the Issuer / R & T agent electronically.

Once the DRN is confirmed or accepted by the Issuer / R & T agent the

DM electronically authorize the creation of appropriate credit balances in

the client’s account. The DPM shall credit the client’s account

automatically.

120



Electronic Public Offering (EPO): An initial public offering, or new issue

of shares, in which the process of applying for shares is handled

electronically (via websites).

Freezing of an account: Any client can give instructions, in the prescribed

form, to his Depository Participant to freeze his account either for debit

or for all operations. Only after receipt of the application for freezing the

account signed by all the account holders the Depository Participant shall

freeze the account till further notice received from the client in this

regard.

Fungible: Dematerialized shares do not have any distinctive numbers or

certificate numbers. These shares are fungible – which means that 100

shares of a security are the same as any other 100 shares of that security.

Hypothecation: The pledging of securities as collateral. A client having a

beneficiary account with a DP can hypothecate securities in electronic

form against loan / credit facilities extended by a pledge, who has a

beneficiary account with a DP. The creation of pledge / hypothecation

will be initiated by the pledgor through its DP and the pledgee will

instruct its DP to confirm the creation of the pledge. The pledge /

hypothecation so created can either be closed on repayment of loan or

invoked on default. After the pledgor repays the loan to the pledgee the

121



pledgor will initiate the closure of pledge / hypothecation. In case of

default by the pledgor in repaying the loan to the pledgee, the pledgee

may initiate invocation of pledge / hypothecation, after taking such steps

as may be necessary as per the terms of the underlying agreement with

the pledgor and the Bye Laws and Business Rules of NSDL and SEBI

Regulations. In case of hypothecation, the pledgor will instruct its DP to

confirm the invocation of the hypothecation.

Initial Public Offering (IPO) : The first offering of a company’s shares to

the public. The shares offered may be existing ones held privately, or the

company may issue new shares to the public.

Inter Depository Instructions: Inter-Depository Transfer means transfer of

securities which are admitted for dematerialisation on both the

depositories from an account held in one depository to an account held in

the other depository

ISIN: International Securities Identification Number (ISIN) is a code that

uniquely identifies a specific securities issue.

Market Trade: Trades which are settled through the Clearing

Corporation / Clearing House of an exchange are classified as " Market

Trades ".

122



NSDL: The National Securities Depository Limited is an organisation

promoted by the Industrial Development Bank of India, the Unit Trust of

India and the National Stock Exchange of India Limited to provide

electronic depository facilities for securities traded in the equity and the

debt market. NSDL commenced its operations in the year 1996 and is the

first depository in India.

NSE: National Stock Exchange is one of the leading stock exchanges in

India. The NSE has been set up by leading institutions to provide a

modern, fully automated screen – based trading system with national

reach.

Off Market Trade: Trades which are not settled through the Clearing

Corporation / Clearing House of an exchange are classified as " Off

Market Trades ". Negotiated trades which are not cleared and settled

through the Clearing Corporation / Clearing House are off-market trades.

Pledge: To deposit personal property as security for a personal loan of

money. If the loan is not repaid when due, the personal property pledged

shall be forfeit to the lender. A client (pledgor) having a beneficiary

account with a Depository Participant can pledge securities in electronic

form against loan / credit facilities extended by a pledgee, who too has a

beneficiary account with a Depository Participant.

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Rematerialisation: It 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 Issuer / R& T agent then prints the certificates,

dispatches the same to the client and simultaneously electronically

confirms the acceptance of the request to NSDL. Thereafter, the client’s

blocked balances are debited.

Registrar and Transfer Agent (RTA) : A transfer agent and registrar for a

publicly held company keeps record of every outstanding share certificate

and the name of the person to whom it is registered. When the share

changes hands, the transfer agent transfers the ownership of the stock

from the seller’s name to the buyer’s name. The registrar reconciles all

transfer records and makes sure that the number of shares debited is equal

to the number of shares credited.

Settlement: It is the process by which investors pay for shares they have

bought and receive payment for shares they have sold. It is also the

process by which the investor delivers the shares he has sold to the

clearing house and receives the shares which he has purchased from the

clearing house of a recognized stock exchange.

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Settlement Day: The day on which purchased securities are due for

delivery to the buyer and payment is due to be made to the seller.

Statement of Holding: A statement of holding details out the current

balance in a depository account. At least once every fortnight the

Depository participant sends a statement of Holdings to its clients.

Statement of transaction: A statement of transaction details out the

various transactions done through that depository account. At least once

in every fortnight the Depository Participant sends a statement of

transaction to its clients. Karvy’s Online Demat services enable its clients

to view their statement of transactions on the net.

Transferability of Shares: Shares in a company are freely

transferable, subject to certain conditions, such that no shareholder is

permanently or necessarily wedded to a company. When a member

transfers his shares to another person, the transferee steps into the shoes

of the transferor and acquires all rights of the transferor in respect of

those shares. For dematerialised shares the depository participant debits

and credits the account of the client with an authorisation from such

client.

Transmission: Transmission of shares denotes a process by which

ownership of share is transferred on legal heir or to some other person by

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operation of law. In case of transmission no transfer deed and no stamp

duty is required. Transmission of shares generally takes place in case of

death, insolvency or mental illness or purchase in case of shares by court

or in case of amalgamation, where the amalgamating company holds

shares in various companies.

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BIBLIOGRAPHY

Web sites www.karvy.com

www.indiainfoline.com

www.sharekhan.com

[email protected]

Books

Company books & Brochures

NSDL Books

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Economy & Finance

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