NSDL – National Securities Depositories Limited

Before getting into the depth of the stock market, we must first understand the basic functions of how financial authorities monitor the market. NSDL is the security depository which has a key role to play in the securities market. Read this blog to know how NSDL functions.

What is NSDL?

NSDL stands for National Securities Depositories Limited which is an Indian central security depository that holds an investor’s securities like stocks, bonds and other financial instruments. NSDL was enacted in August 1996 to modernize the market of Indian securities by using dematerialization accounts and eliminating the physical certification of shares. Depositing securities with NSDL has made trading easier than before, more efficient and less prone to fraudulent activities.

Key Roles and Functions of NSDL

NSDL is a central depository which plays a key role in the share market to ensure the efficient and secure management of securities in electronic form in India. Some of its major roles and responsibilities include:

Dematerialization of Securities

The depository is responsible to convert the physical assets into electronic form which is the dematerialization process. An individual can open the demat account where the holdings are deposited with the central depository.

Settlement of Trades

NSDL also has the responsibility to settle the trades that are conducted on the stock exchanges. It ensures that the trade occurs without any need of physical certificates.

Pledging and Hypothecation of Securities

NSDL allows investors to pledge their securities in case of shortage of funds which act as a collateral to secure loans from banks or financial institutions. After the repayment of loan, pledge shares are released electronically.

Account Handling Services

Investors or traders can hold and manage their securities electronically through a demat account. All the operations under the demat account are held by NSDL.

Investor Protection

NSDL ensures transparency, safety and efficiency in the Indian securities market by providing a platform that conducts issues of investors related to their accounts or other demat account management services.

Corporate Action

NSDL informs investors about a company’s corporate actions such as distribution of dividends, interest, bonus shares, rights issues and other benefits to the holders of securities. It ensures timely distribution of securities into the demat of account holders.

Conclusion

Through this blog, we have come to know about the basic roles and responsibilities of National Securities Depository Limited. However, the functions of NSDL and CDSL are almost as over the years they similarized their working leaving hardly any differences in their working.

FAQs