The Complete Guide On the Differences Between CDSL And NSDL- CDSL Vs NSDL
In India, Central Depositories Services India Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) are the government registered share depositories. In simple words, a share depository holds stocks, bonds, ETFs, MFs, shares, etc., in an electronic form. In the earlier days, share trading was only available in offline modes, they were held in the form of physical paper certificates. CDSL and NSDL are linked to one stock exchange in India. For example, there are two stock exchanges, one is National Stock Exchange (NSE), and the other is the Bombay Stock Exchange (BSE). Hence, CDSL is the Bombay Stock Exchange (BSE) depository, and NSDL is the depository for National Stock Exchange (NSE).
Although they share some similarities, both these depositories do have some differences as well. In this blog, Fintra will highlight the following points that will compare CDSL vs NSDL:
- What Are CDSL And NSDL?
- The Key Difference between NSDL and CDSL
- How Do Depositories Function?
What are CDSL and NSDL?
As described earlier, CDSL and NSDL are the two well-known national share depositories incorporated by the Securities and Exchange Board of India (SEBI), the markets regulator. Briefly describing both the depositories, NSDL or National Securities Depository Limited was founded to maintain investors' shares in dematerialised form. In fact, NSDL is currently one of the largest depository institutions in the world. On the other hand, CDSL or Central Depository Services (India) Limited, which is the second depository institution in India, is a Market Infrastructure Institution (MII) that acts as the mediator between the exchanges, clearinghouses, DPs, issuers, and investors. CDSL fosters a safe storage of securities that are held by investors in dematerialised form, and it even enables the smooth processing of securities purchases and sales. Even CDSL holds various securities such as shares, bonds, and more in an electronic form. On 30 June 2017, CDSL was listed on NSE, becoming the first depository to be listed in the Asia - Pacific Region.
To know more about CDSL, please click here, and for more information about NSDL, please click here.
Both NSDL and CDSL not only enables you to store shares in dematerialized form but also offer other financial instruments such as Debentures, Bonds, Exchange-traded Funds (ETFs), Mutual Funds, Government Securities (GSecs), Treasury Bills (T-bills) etc.
The following is the list of services provided by CDSL and NSDL:
Dematerialisation and Rematerialisation
Maintenance of Demat Accounts
Trade Settlement
Share Transfers
Off-market and Market Transfers
Distribution of non-cash corporate actions
Nomination/Transmission
Account Opening
Account Statement
Changing Account Details
The Key Difference between NSDL and CDSL
Although they appear to be similar, the following are the key differences between NSDL and CDSL:
- Partner Stock Exchange: As we know, NSDL and CDSL maintains an investor's Demat account, but there are differences between the exchanges each depository institution works with. For example, NSDL usually keeps the bonds, stocks, and ETFs traded on the National Stock Exchange (NSE). In contrast, CDSL usually keeps the bonds, stocks, and ETFs traded on the Bombay Stock Exchange (BSE). Therefore, the purview of NSDL is the NSE, and the purview of CDSL is the BSE. However, both the exchanges may use either of the two depositories for settlement and trading of securities.
- Establishment Period: NSDL is known to be the first and the oldest depository institution in India that was established in 1996. In contrast, CDSL was established in 1999, and it is the second oldest depository in the nation.
- Shareholders: One another key differences between the two depositories are their promoters. Although NSDL's primary promoter is the National Stock Exchange of India, along with NSE, the shares of NSDL are held by the following companies and entities:
- Kotak Mahindra Life Insurance Company Limited
- Canara Bank
- Union Bank of India
- Standard Chartered Bank
- Citibank
- The Hongkong and Shanghai Banking Corporation Limited
- Deutsche Bank A.G.
- State Bank of India
- HDFC Bank Limited
- The administrator of the Specified Undertaking of the Unit Trust of India- Unit Scheme 1964
- IDBI Bank Limited
- IAPE Fund II that is the India Alternatives Private Equity Trust
- IIFL Special Opportunities Fund
Conversely, though CDSL's primary promoter is the Bombay Stock Exchange, along with BSE, the shares of CDSL are held by the following companies and entities:
- State Bank of India
- Standard Chartered Bank
- HDFC Bank Limited
- Canara Bank
- Bank of Baroda
- Bank of India
- Investor Accounts: In spite of NSDL being the oldest depository institution in India, CDSL is known to be the more popular depository institution among investors. During quick research on the total number of investor accounts opened by both the institutions did reveal a wide difference between NSDL and CDSL. As per the data which was released by NSDL and CDSL, it showed that NSDL manages over 2.5 crore investor accounts, and CDSL manages more than 3.96 to 5.5. crore.
- Format of Demat Account Number: There is a vital difference between the format of CDSL and NSDL Demat account numbers. For example, CDSL Demat accounts have 16 numeric digits in them, and NSDL Demat accounts have two alphanumeric digits- ‘IN’ and 14 numeric digits.
- Number of Depository Participants Registered: It's predicted that CDSL has nearly 599 DPs registered with itself, and on the system of NSDL, it has around 278 DPs registered.
How Do Depositories Function?
The most basic requirement to do trading in stocks is to open a Demat account. A Demat account is similar to what a depository does. For example, when purchasing shares, they get credited to an investor's Demat account, and when selling the shares, they get debited from the investor's Demat account. So you might be wondering how did a depository account come into the picture now? Well, the Demat account is simply an intermediary, and actually, it's the CDSL and NSDL that holds an investor's shares. Thus, when opening a Demat account to purchase shares, the shares are held by the depositories.
One another vital function that a depository performs is when the companies have to distribute dividends to the shareholders. Since the firms require information on the shareholders, here is where share depositories come to their aid. Earlier when investors bought shares from someone else or sold the shares to someone, they had to transfer share certificates. Now, with the innovation of new technology, it is simply just an account transfer between two Demat accounts.
Conclusion
In conclusion, from the above information, we can note that NSDL and CDSL have minor distinctions like their names, promoters, establishment years, and account number formats. On the whole, the essence of both the depositories is the same. For example, they provide similar services, their strategy is the same, and work the same ways. As an investor, one can avail CDSL and NSDL services through a depository participant, which can be a broker, a financial institution, a custodian, or a bank. With any DP one can open a Demat account, and all depository participants are required to provide all the shareholders with a statement of account of the securities held and traded at the depositories.
