Central Depositories Services India Ltd (CDSL)

Syllabus: General Studies Paper 3

Certain services at CDSL were disrupted due to a suspected cyber attack over the weekend.

What is CDSL?

• CDSL was founded in 1999. 
• CDSL, or Central Depositories Services India Ltd, is a government-registered share depository, alongside its other state-owned counterpart National Securities Depository Ltd (NSDL).
• Share depositories hold shares in an electronic or dematerialised form and are an enabler for securities transactions, playing a somewhat similar role to what banks play in handling cash and fixed deposits. 
• While banks help customers keep their cash in electronic form, share depositories help consumers store shares in a dematerialised form.
• It is a Market Infrastructure Institution or MII that is deemed as a crucial part of the capital market structure, providing services to all market participants, including exchanges, clearing corporations, depository participants, issuers and investors.
• Arth is a CSR Initiative from Central Depository Services (India) Ltd. with a mission to make financial education simple and accessible for all.
• Regulation: The Depository Act of 1996 regulates the establishment and operation of a depository in India.
• SEBI is the governing body that regulates the functioning of any depository.

About National Securities Depository Limited (NSDL)

• NSDL is India’s first & largest depository.
• It was set up on November 8, 1996, formed with the purpose of handling the securities held in dematerialized form in the Indian capital market.
• National Securities Depository Limited (NSDL) is promoted by the National Stock Exchange, Industrial Development Bank of India, and Unit Trust of India.

Benefits of Share Depository:

• Depository holds security in electronic form, allowing for its easy transfer between seller and buyer.
• Depository maintains and safeguards the securities on behalf of the investors. These investors do not need to spend time on its maintenance.
• Depositories offer mortgages or loans against securities held by investors which may be used for the purchase of other securities.
• The process of investment in share market has been simplified with the introduction of depository. There is no need for the procedure to change ownership.
• The depository enables T-2 rolling settlement, which is faster than the traditional method using physical share certificate.
• Transfer of securities through depositories reduces the back office paper work. As a result, the brokerage charged by brokers is also reduced considerably.