Discussion Topic: NSDL and CDSL
You have probably heard about NSDL and CDSL. And most probably you have wondered that what are they? Or which one is better? - Here we have answered all of your questions about CDSL and NSDL. So let’s jump into the topic: NSDL vs CDSL: What are the Differences between NSDL and CDSL? And Which Demat Account is Better for You (CDSL or NSDL)?
NSDL is the acronym for "National Securities Depository Limited", whereas CDSL is the acronym for "Central Depository Securities Limited”. [Note: Sometimes many of us wrongly spells it as CSDL]
NSDL and CDSL are both government registered depositories which are used to hold various securities like Stocks, Shares, money, property etc in an electronic form. NSDL works for National Stock Exchange (NSE), whereas CDSL works for Bombay Stock Exchange (BSE).
How Depositories Like CDSL and NSDL Work?
A depository is an administrative body that holds securities of investors in an electronic format when requested by an investor through a registered Depository Participant (DP). So they are similar to a bank, but while a bank holds your money, they hold stocks, shares, bonds etc.
In a depository, securities such as stocks, shares, and bonds etc are held for safekeeping under their depository terms. When you buy securities they are automatically credited to the depository account, and when you sell those securities they are automatically debited from your depository account.
So, when you open a demat account and buy any shares, your shares are held by these depositories. Moreover, when a company needs to know its shareholder detail to send dividend, rights or for any other notification, it can ask for the information from these two depositories in India (i.e. - CDSL and NSDL).
We will look into all the similarities and difference between NSDL vs CDSL later in this article.
What is NSDL and What Services It Offers?
NSDL is the oldest and largest electronic depository of securities in India, which started its operation in the year 1996, based in Mumbai, Maharashtra. It is the first depository in Indian to offer trading and settlement of securities in electronic or demat form.
The NSDL is promoted by the country’s some of the largest banks and institutions, i.e. IDBI Bank, UTI and National Stock Exchange (NSE). There are more than 1.5 crore active investor’s accounts in NSDL. NSDL is having around 26000 service centers covering approx 1900 cities.
Their demat custody is not limited to only shares and their service includes shares, bonds, debenture, commercial papers, mutual funds and so on.
Basic services facilitated by NSDL include account maintenance, dematerialization, settlement of trade, and re-materialization. It also facilitates inter-depository transfers, off-market transfers, pledge, lending, and hypothecation of securities.
What is CDSL and What Services It Offers?
CDSL is another electronic depository of securities in India, which started its operation in the year 1999 and also based in Mumbai, Maharashtra. It is the second largest securities depository in India and facilitates a book-entry transfer.
[Note: People oftentimes wrongly spells CDSL as the CSDL]
It is promoted by some prominent banks and financial institutions of India, such as State Bank of India (SBI), HDFC Bank, Bank of Baroda, Bank of India, Standard Chartered Bank, and Bombay Stock Exchange (BSE). It provides the same function as NSDL like holding of securities in dematerialized form and facilitates trading and settlement of securities in electronic or demat form.
In CDSL, they offer services to hold equity, debentures, bonds, commercial papers, government securities, certificate of deposit, mutual funds etc. As of 2017, CDSL has around 161 branches and approx 1.10 crore client accounts operating with them.
Can I Choose to Open an Account in NSDL or CDSL?
The answer is Not Really; you can’t directly choose which depository to open an account. It is the broker or the Depository Participant (DP) how decides on it.
If the broker or DP sees that the charges at NDSL are cheaper than CDSL he may opt for that option or vice versa. These Depository Participants (DP) are allowed to debit and credit securities on behalf of investor after valid instructions (Power of Attorney).
Though there is not much of scope to decide on the repository, still you may check with your respective broker before opening a demat account, if you have any special preference.
Differences Between NSDL and CDSL (Comparison):
Below table lists some key difference between NSDL vs CDSL.
|Abbreviation||National Securities Depository Limited||Central Depository Securities Limited|
|Headquarters||Mumbai, India.||Mumbai, India.|
|Promoters||IDBI Bank, UTI, etc.||HDFC, SBI, BOI, BOB etc.|
|Operating Market||National Stock Exchange (NSE)||Bombay Stock Exchange (BSE)|
|# Demat Account||1.5 Crore Approx||1.1 Crore Approx|
Which One is Better (NSDL or CDSL)? The Conclusion:
Securities are safely stored by the depository system in the depository accounts of investors, similar to holding money in a bank account. In this system, transfer of ownership of securities happens by way of simple account transfer.
This electronic system has eliminated all the risks and inconvenience that was faced in the physical certificate system. Moreover, the transaction cost of this system is comparatively lower than the previous system.
As seen above there is not much difference between this two depositories. So, there is not much of difference between the NSDL and CDSL demat account. Both NSDL and CDSL are regularized by Indian Government and offers same facilities to customers.
Hence, you being an investor have no reason to think much about which repository your account is registered to.
Though some of the brokers highlight the point of opening an account with either CDSL or NSDL as a premium benefit. In reality, that is only a marketing trick to convince you to open an account with them.
Hope you have enjoyed the above article describing the difference between CDSL vs NSDL. Be with us to explore forex trading, stocks trading, and other money-making opportunities.
Leave us some comments if you still have any doubts left about NSDL and CDSL. Also, let us know with which depository your broker is registered to.