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Depository Services | November 20
What is the Admission Criteria to become an NSDL business partner?

NSDL carries out its activities through below mentioned functionaries known as “Business partners”

·         Depository Participants (DP)

·         Issuer Companies

·         Registrar and Share Transfer Agents

·         Clearing corporations / Houses of the stock exchanges

These entities need to be amalgamated into NSDL’s depository system in order to provide services to the clearing members & investors.

Depository Participants (DP)

To obtain depository services via Depository Participant of NSDL, an investor needs to open a depository account which is similar to opening a bank account to avail banking services. DPs, as per SEBI guidelines could be organisations which are into providing financial services like banks, custodians, financial institutions, brokers etc. The admission of DPs involves a comprehensive assessment by NSDL and a further evaluation and approval by SEBI.

As per SEBI (Depositories & Participants) Regulations, following are the categories that are eligible to become DPs -

 ·         A public financial institution as defined in section 4A of the Companies Act, 1956 (1 of 1956)

·         A bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934)

·         A foreign bank operating in India with Reserve Bank of India approval

·         A state financial corporation established under the provisions of section 3 of the State Financial Corporations Act, 1951 (63 of 1951)

·         An institution engaged in providing financial services, promoted by any of the institutions mentioned above jointly or severally

·         A custodian of securities who has been granted a certificate of registration by the Board under sub-section (1A) of section 12 of the Act

·         A clearing corporation or a clearing house of a stock exchange

·         A stock broker who has been granted certificate of registration by the Board under sub-section (1) of section 12 of the Act.

·         A non-banking finance company, having a net worth of not less than rupees fifty lakhs

·         A registrar to an issue or share transfer agent who has a minimum net worth of rupees ten crores and who has been granted a certificate of registration by the board under sub-section (1) of section 12 of the Act.

NSDL as empowered by Regulations is allowed to set its own selection criteria in the Bye Laws. Therefore, the applicants must also adhere to the following admission criteria stated in NSDL Bye Laws

·         Applicants in the category of stock broker should possess a minimum Net-worth of Rs. Three crore. In case of an NBFC and a registrar to an issue or share transfer agent, minimum net-worth as specified in the SEBI Regulations will apply.

·         The applicant should not have been found guilty in any of the five years immediately prior to the filing of the application in any manner involving embezzlement of funds & securities, fraudulent conversion or forgery.

·         The applicant should not have been expelled, declared ineligible or disqualified by SEBI, self-regulatory organisation or any stock exchange. Provided however that, if a period of three years or more has passed since such punishment was levied, the Depository may consider such application.

·         The applicant shall be required to provide information and details of his business history including the background and experience of directors and promoters of the applicant.

Issuer Companies

An issuer offers demat facility to its stakeholders by admitting the securities in NSDL. Issuer need to obtain electronic connectivity with the existing Registrar & Transfer Agent (R&T Agent) or by having In-House connectivity with NSDL.

Who can apply?

Practicing professionals who are registered member of ICAI, ICSI and ICWAI can register on Issuer Portal to provide the facility of Issuer Admission in NSDL to their client companies.

SEBI Registered R&T Agents who have established electronic connectivity with NSDL can register on Issuer Portal and provide the facility of Issuer Admission in NSDL to their clients.

An issuer needs to submit the required documents which include letter of intent & financial documents to NSDL for the past two years.

Thereafter, Tripartite Agreement needs to be executed between Issuer, R&T and NSDL

Registrar and Share Transfer Agents.

Admission Criteria:

The applicant shall be SEBI registered & conduct activities as a registrar to an issue & share transfer agent or should be carrying on activity as a registrar to an issue or as a share transfer agent.

The above criterion is not applicable in case he intends to carry out electronic share registry operations in-house.

  Clearing Corporation

Clearing Corporation of stock exchange shall be accepted as business partners on the basis of below criteria.

·         Clearing Corporation should be capable & should operate in accordance with settling payments against deliveries or guarantees.

·         It should be capable of providing services related to clearing & settlement of transactions related to securities which are submitted in dematerialized form to Depositories.

·         In respect to its operation in relation to the Depository, CC should co-operate at all times in grievance redressal of Clients & Participants.

·         The software & hardware systems CC possesses should be adequate to interact with the Depository as specified in the Business Rules.

The below stock exchanges have linked up with NSDL to aid trading and settlement of dematerialised securities:

BSE Limited

Metropolitan Stock Exchange of India Limited

National Stock Exchange of India Limited (NSE)

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