Electronically held shares are held by share depositories. Shares were stored in the form of actual paper certificates in the past, when share trading was only possible in offline modes. What banks are to cash and fixed deposits is what CDSL and NSDL are to shares. Banks assist you in holding electronic currency rather than real cash in your cupboards, and share depositories assist you in storing shares in a dematerialized form. The government-registered share depositories in India are Central Depositories Services India Ltd. (CDSL) and National Securities Depository Ltd. (NSDL).
When firms have to issue dividends to their shareholders, depositories play a significant role. Companies will want information about their shareholders, which is where share depositories come in. Previously, you had to transfer share certificates when you acquired or sold shares from another person. It’s now only a matter of transferring funds between two demat accounts.
- Difference between CDSL and NSDL
- The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are the two stock exchanges in the country that trade stocks. NSE’s depository is NSDL, whereas BSE’s depository is CDSL.
- The CDSL was founded in 1999, and the NSDL was founded in 1996.
- Third difference between the two is who promotes them. IDBI Bank Ltd., Unit Trust of India, and the National Stock Exchange of India all support NSDL. As of December 2019, CDSL is solely marketed by BSE.
- There is a distinction in the demat account number format between CDSL and NSDL. CDSL demat accounts contain 16 numeric digits, while NSDL demat accounts have two alpha numeric digits (‘IN’) and 14 numeric digits.
- CDSL has 599 depository members registered with itself, whereas NSDL has 278 depository participants registered on its system. This is based on the most recent data.
- More than 1.5 crore active investor accounts are held by NSDL. NSDL has roughly 26,000 service centers spread over 1,900 locations. CDSL has roughly 161 branches and 1.10 crore client accounts as of 2017.
- Banks such as IDBI Bank, UTI, are supporting the NSDL. Whereas banks such as The State Bank of India (SBI), HDFC Bank, Bank of Baroda, Bank of India, Standard Chartered Bank are among the Indian banks and financial institutions that support BSE.
- Services provided by CDSL and NSDL
- Changing account details
- Maintenance of Demat accounts
- Share transfers
- Market and off-market transfers
- Rematerialisation and dematerialisation
- Trade settlement
- Account opening
- Account statement
- Distribution of non-cash corporate actions
- Which is better? CDSL or NSDL?
To determine which is superior, both depositories must have opposing distinctions that might push one depository ahead of the other; however, this is not the case with CDSL and NSDL. They’re both aboard the same ship.
It is not difficult to get to the conclusion that CDSL and NSDL have no significant differences. Their operating approach and services supplied are identical, and they are both regulated by SEBI. The demat account numbers, promoters, and establishment years are only a few of the distinctions between CDSL and NSDL.
- Which bank should I use to create an account? CDSL or NSDL?
The broker with whom you submit your application will choose which depository you should create an account with. If the broker notices that CDSL rates are less than NSDL, he may choose that alternative. Brokers are opening an increasing number of new accounts these days. One cannot be certain if one is preferred over the other due to prices, service, or other factors.
- How do CDSL and NSDL work as depositories?
As a result, when you sell stocks, the depository debits them immediately, and when you acquire them, the depository credits them automatically. In other words, when you create a demat account, these depositories hold your shares. The two depositories in India can provide information to a firm that wants to identify its shareholders in order to issue dividends, rights, or any other communication. The National Securities Depository Ltd and the Central Depository Services Ltd are India’s only two depositories. You will receive a delivery instruction and other information from your depository, thus you will need to contact them for such information.