National Securities Depository Limited (NSDL), the first depository in India, was set-up in Nov 1996. It is promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI)and National Stock Exchange (NSE). Later on, State Bank of India, HDFC Bank, HSBC, Citibank, Deutsche Bank, Dena Bank, Global Trust Bank and Standard Chartered Bank have taken a stake in NSDL. More than 1000 companies, representing about 85 % of the market capitalisation, have joined NSDL for admitting their securities in the depository. More than 125 depository participants (DPs) are servicing more than 2.5 mn investors from more than 1400 locations spread across more than 285 cities & towns across the country. More than 90% of the settlement by value on all stock exchanges in the country is now facilitated through NSDL. "

NSDL is a public limited company, incorporated under the Indian Companies Act, 1956. It started operations from November 8, 1996. Its subscribed equity capital is Rs.1050 million. NSDL is organised as a for-profit organisation. One of the biggest users of the depository (viz., UTI) is a promoter of NSDL. NSDL also ensures participation of market players and depository users through membership of the Executive Committee (EC) which plays a key role in the operations of NSDL.

NSDL offers the following types of membership:

1. Depository Participant (DP): A DP is an agent of NSDL who interfaces with investors on behalf of NSDL. Eligibility criteria for DPs have been specified in the SEBI (Depositories and Participants) Regulations, 1996 and NSDL Bye-Laws. Rights and obligations of DPs have also been spelt out in the said documents.

2. Clearing Corporation (CC) / Clearing House (CH): A clearing corporation/ clearing house, in the context of NSDL, is an entity which settles trades carried out in the dematerialised segment of a stock exchange (i.e. in the electronic environment). Admission criteria for clearing corporation/ house have been specified in NSDL Bye-Laws.

The following securities are eligible for being held in dematerialised form in a depository:

1. shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

2. units of mutual funds, rights under collective investment schemes and venture capital funds, commercial paper, certificates of deposit, securitised debt, money market instruments and unlisted securities shall also be similarly eligible for being held in dematerialised form in a depository.

The risks and cost associated with dealing in the physical form has always been very high for investors, in particular NRI Investors. The depository system, which allows the investor to hold securities in an account and to transfer theses securities by means of account transfers provides an efficient solution to these problems and substantially removes the inconveniences due to geographical distances. NSDL heralds the transition of the Indian Capital Market from a physical phase to a dematerialised, electronic market.

1. Dematerialisation of securities

2. Transfer of securities

3. Freezing/defreezing of accounts

4. Non-cash Corporate Actions

5. Electronic credit in public offerings of issuers

6. Pledging/hypothecation of securities

7. Securities settlement in demat form for connected stock exchanges

8. Securities lending and borrowing

9. Retail participation in government securities

10. Public Offer Module

11. Beneficiary position information to issuers

NSDL uses hardware, software and communication systems which conform to industry standards and further, the systems are accepted only after a rigorous testing procedure. The central system comprises an IBM mainframe system with a back-up facility and a remote disaster back-up site. The production and the disaster back-up sites use IBM maniframes of identical configuration, viz. 9672 S/390 Parallel Enterprise Servers (SPES) Model T-26. Further, a third IBM Mainframe (Model R22) is used for testing and software development. The system features processor and disk sparring, and has an availability of 99.78%

All network components like router, communication controllers etc., have on-line redundancy. Further, the system is designed to do data reconciliation on a daily basis. The system components are continuously reviewed in order to make them more secure. These reviews are a part of an ongoing exercise wherein security consideration is given as much importance as operational efficiency.