Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	No. The boards of NSDL and CDSL are answerable only to the capital market regulator, i.e. the Securities and Exchange Board of India (SEBI). The Indian stock markets are guided in absolute terms by SEBI which in turn reports directly to the Ministry of Finance.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	Yes. India operates under a multiple depository set-up. Current ownership levels at the National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CDSL) are as follows: NSDL: 30.00% 27.80% 15.62% 5.00% 3.13% 3.13% 3.13% 3.13% 3.13% 3.13% 1.55% 1.25% Industrial Development Bank of India Unit Trust of India National Stock Exchange of India State Bank of India HDFC Bank HongKong Bank Citibank NA Deutsche Bank Global Trust Bank Standard Chartered Bank Dena Bank Canara Bank CSDL: 65.00% 10.00% 10.00% 10.00% 5.00% The Stock Exchange Mumbai (BSE) Bank of India State Bank of India Bank of Baroda HDFC Bank Ltd.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	No. Fees charged by the depositories to participants are standard for the various services offered by the depository and do not differentiate between local and foreign account holders. The dematerialisation and transaction costs have reduced over a period of time since compulsory dematerialisation was introduced (starting with select scrips which were later increased from time to time) for institutional investors in 1998 and for retail investors in January 1999. Today almost 99% of settlements take place in the dematerialised form. What started with dematerialisation and settlement of trades has now expanded to distribution of corporate benefits in electronic form, pledging and hypothecation, stock lending and borrowing, etc. Expansion of the scope of services has enabled the depositories to pass on the benefit of increase in volumes to the market.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	Any new policy or features to be introduced in the capital market are mainly addressed by committees formed by SEBI. Recommendations given by these SEBI committees need to be accepted by the SEBI board, before being implemented by any of the depositories. Both the CDSL and NSDL are subject to the Companies Act of 1956. Under company law, they are subject to annual financial and operational audits.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	The depositories maintain websites and distribute circulars and newsletters to stakeholders and depository participants by conventional mail and e-mail.