NSDL and CDSL are share depositories that hold the shares of millions of stock market investors in an electronic form. NSDL or National Securities Depositories Limited and CDSL or Central Depositories Services Limited are share depositories registered with the government and incorporated by the market regulator SEBI.
Both these depositories handle the business coming from the two marquee stock exchanges in India, the NSE and the BSE, that is the National Stock Exchange and the Bombay Stock Exchange.
NSDL is the share depository for NSE while CDSL is the share depository for BSE. While the two depositories work for two different exchanges, the exchanges are at the liberty to use any of the depositories for trading and settlement of shares and other assets.
The two depositories work in the same manner that banks work for cash and fixed deposits. Just like an individual invests his cash at a saving account in a bank instead of stuffing it in a safe back home, in the same manner, your shares are held in a dematerialised form with the depositories.
The demat account used by investors is only an intermediary to help facilitate everyday trading for retail investors. Otherwise, it is the depositories NSDL and CDSL that actually hold the shares for investors.
Additionally, CDSL and NSDL come into the picture when companies are looking to distribute dividends to their investors. Companies can remit the dividend to their shareholders only when they have all the information concerning them. This is where the depositories play a strategic role. In the earlier days, when shares were sold or purchased, the share certificates had to be transferred. Now with procedures being digitised share selling or purchasing is electronically recorded and a transfer is effected between two demat accounts.
Demat account format: Demat accounts with CDSL have 16 numerical digits in them whereas demat accounts with NSDL have 14 numeric digits and start with ‘IN’.
NSDL was incorporated in 1996 whereas CDSL was incorporated in 1999. NSDL is promoted by IDBI Bank and NSE whereas CDSL is promoted by the BSE.
It is clear that the NSDL and CDSL difference is not that stark.
1. There are no costs levied by the depository CDSL when you open a demat account with a depository participant.
2. CDSL’s easi or electronic access to securities information has been kickstarted by the depository to help investors secure access to their demat holdings in an electronic format anytime, anywhere. Investors and other clearing members can also use the easi portal to check their transactions from the CDSL website itself.
3. One can also keep an eye on multiple demat accounts from the CDSL website itself.
4. One can also continue to monitor corporate announcements pertaining to the shares and securities held by them.
The final word
It is quite easy to find out if your demat account is with CDSL or NSDL by simply looking at your demat account number format. Irrespective of whether you want to trade with CDSL or NSDL, it is not possible to trade in stocks without having a demat account. Open a demat account with Motilal Oswal to enjoy trading and investing with their competitive trading plans.