What is the Difference between CDSL and NSDL – Difference between India’s Top Depository Services

In this article, you will find detailed comparison of CDSL vs NSDL. These two are India’s Top Depository services.

Investors use depositories as a form of security added to transactions while buying or selling an asset.

These assist in the trading of securities and provide accountable safe-keeping of all trades. One can also look for safekeeping of stocks and bonds, mutual funds and so on.

India follows a Multi-depository system that grants the provision of security to investors. It can be a government institution or an individual holding shares or bonds in the share market.

This multi-depository system consists of NSDL and CDSL.

CDSL vs NSDL – Compare 2 Best Depository Services

Here we go with CDSL vs NSDL comparison.

While NSDL is an acronym for National Securities Depositories Limited, they deal with National Stock Exchange.

CDSL, on the other hand, is a Central Depositories Security Limited that operates on the Bombay Stock Exchange.

Both the depositories are government-sanctioned and have been working since 1996 and 1999, respectively.

They are both situated in Mumbai and provide services to clients all over India. They both provide security to stocks, shares, capital, and so on.

There aren’t any significant differences, and it is not possible to find one difference in the functioning and facility factors in both the depositories.

They establish a dematerialized form of service, rather than physical. It means the value, cash, or asset held by an investor or trader is available in an electronic medium.

While CDSL works for BSE and NSDL works for NSE, during an exchange, the use of both for trading and settlement of securities is possible.

Along with the mentioned area of coverage, CSDL services expand by offering services to government securities and certificates of deposits.

The promoters of NSDL are IDBI Bank and UTI whereas those of CDSL are HDFC, SBI, BOI, BOB. The dematerialization by both is termed Demat and has a different account number format.

That is, CDSL Demat accounts are 16 digits numeric in nature whereas, the NSDL Demat account numbers consist of two alpha-numeric entries, ‘IN’ that represent India.

The recent statistics on the number of participants registered on NSDL are 278, and that on CDSL is 599.

Similarly, the investor accounts stand by 1.95 crores on NSDL and 2.11 crores in CDSL. These numbers were as of March 2020. The current situation may have changed on the similar lines.

Open Demat Account Now! – Brokerage Free on Equity Delivery

Comparison continues between CDSL & NSDL

The differences in NSDL and CDSL are only specific to the names, promoters, and account number formats.

Both provide the same services, including maintenance, dematerialization, rematerialization, trade settlement, share transfer, and so on.

Both are national share depositories consolidated by the markets regulator – Securities and Exchange Board of India.

A client registered with SEBI promotes, communicates, and ensures to act as a medium to provide security to Depository Participants.

NSDL was the earliest and largest electronic securities depository in India. CDSL is the second-largest securities depository in India and provides account transfer.

It all depends on the charges of NSDL and CDSL while creating an account. As they keep changing, investors can create their accounts based on which depositories are providing cheap charges at that time.

Similarly, both depositories charge a settlement fee for debit instructions for the investors. Another difference is the operating market of NSDL and CDSL.

While NSDL operates on the National level of the stock exchange, CDSL has the Bombay Stock Exchange as its primary market.

CDSL has comparatively more promoters including, the Union Bank of India, Housing Development Finance Corporation, Standard Chartered Bank, so on.

Learn about Share Market & make More Money

Compare working of NSDL and CDSL

Depositories work just like banks, but cashless. They do not support physical money and hold investors’ assets in an electronic or dematerialized form. It reduces the pressure on the system regarding the storage and management of cash.

It also ensures the safety of all records of transactions by providing security. Besides, it works on shares, stocks, and other valuable assets that investors hold.

When one creates a Demat account, they can credit it by buying shares and likewise debit by selling those shares.

This Demat account acts as an intermediate to control the NSDL and CDSL activities on the stock market. So by creating a Demat account, investors automatically own the shares held by depositories.

But, they cannot choose which depository they want to open their account. It depends on their depository participant or broker.

They decide based on various factors, including the economic capability of the investor’s account.

In case the market conditions are not stable and suitable for the continuation of the shares, these brokers or depository participants have a valid power of attorney to debit or credit securities in the depositories.

It also performs the distribution of dividends by companies to its stakeholders. For instance, without a Demat account, post buying, or selling a share, investors had to transfer share certificates.

But now, it is just an account transfer between Demat accounts. Similarly, companies distribute dividends on these Demat accounts via their account number.

It features flexibility that allows the interchangeability of similar assets in the trade and exchange process, assuming they are of the same class.

NSDL vs CDSL – Compare Regulations

As it is a part of SEBI, it regulates the stock exchange and capital market and prohibits unfair trade. So, investors can safely indulge in the activity of trading shares using depositories.

While NSDL is a pioneer for the electronic depository of securities, CSDL promotes the book-entry transfer of securities.

It provides limitation of physical transfer and complies with global standards, enhances the liquidity in the stock market, and ensures transparency in the allotment of shares.

NSDL and CDSL act as centralized systems in security dealings. These are the registered owners while liabilities and ownership rights remain with the beneficial owner.

Learn about Share Market & make More Money

NSDL and CDSL – List of Services provided

The services offered by NSDL and CDSL are the same. The difference lies in their establishment date, account number format, and promoters.

After creating a Demat account, investors can become a depository participant and indulge in the services provided by NSDL and CDSL.

A depository participant, on the other hand, can be a banker, broker, financial institution, or custodian.

They need to provide all the shareholders involved in their transaction with a statement of security grant and traded at the depositories.

The lists of services these depositories provide are as follows:

• Maintenance of Demat accounts
• Trade settlement
• Account/share nomination/transmission
• Opening of accounts
• Account statement
• Account modification
• Share transfers
• Distribution of non-cash corporate actions
• Market and Off-market transfers
• Rematerialization
• Dematerialization
• Enables withdrawal and surrender from securities with great ease and attracts foreign investors as it complies with global standards.
• They also provide off-market and inter-depository transfers, contract securities, allow stock lending, and many more services.

CDSL vs NSDL – Conclusion

When choosing between the types of depositories, the investors should contact the broker for a better understanding of the market situation.

They involve participation with the depositories that provide cheap rates and continue to invest in the same. This way, the investors can own, buy, or sell shares conveniently.

There is no such difference in these depositories as they provide the same services. The difference lies in the primary market that concerns investors. But, rank wise, both are on the same branch of a tree.

So, any institutions that hold securities can opt for any depositories as it eliminates the risks of delays, thefts, and bad delivery.

It promotes a safe and convenient way to hold securities along with no stamp duty on their transfer.

So, here we have compared CDSL vs NSDL.

Open Demat Account Now! – Brokerage Free on Equity Delivery

Learn about Share Market & Make more Money