Main Difference between NSDL and CDSL

What is NSDL and CDSL?

The NSDL and CDSL are both central share depositories that electronically store the shares of millions of stock market investors. The first and the largest depository in operation in India is the National Securities Depository Limited which was established in the year 1996. NSDL was introduced to encompass a large scale of trading taking place in the Indian share market.

Central Depository Services Limited (CDSL), which was set up in 1999, is the second depository in India. The strategic plans for CDSL include the provision of efficient and diversified depository services concerning investors in India. Both operate under the regulatory authority of the Securities Exchange Board of India (SEBI).

 

Functioning of Depositories

Depositories help in the digital custody of securities and also help in the change of ownership through the use of electronic means. This does away with the probability of the physical certificates being traded, forged, or damaged.

Thus, when an investor purchases securities, they are credited to an investor's demat or dematerialized account. When an investor sells securities, the same is debited from the account.

 

Difference between NSDL and CDSL

Here are the main differences between NSDL and CDSL you must know as an investor:

 

1. Establishment and Market Share

• NSDL: NSDL was set up in 1996 and it has more market share compared to CDSL. It has a large clientele in the Indian market since it was the first depository in the country.
• CDSL: CDSL was incorporated in 1999 and has expanded extensively and has emerged as a great contender to NSDL.

 

2. Promoters

• NSDL: Supported by NSE and most of the leading banks of the country, such as SBI, HDFC Bank, and others.
• CDSL: Supported by the Bombay Stock Exchange (BSE) and other major banks and financial organizations.

3. Market Presence

• NSDL: Has a broader network of dealers and, therefore, has a wider circulation among investors.
• CDSL: It is slightly smaller and nevertheless, CDSL is growing its network and engaging in the market actively.

 

Parameters	NSDL	CDSL
Stock Exchange	Works for NSE	Works for BSE
Promoters	IDBI Bank Limited, UTI, and NSE	BSE
Establishment	1996	1999
Features	Dematerialization Electronic Transfer E-Voting Electronic Access to Information Electronic Pledge and Hypothecation	Dematerialization Electronic Transfer Easi (Electronic Access to Securities Information) E-Locker Facility Pledge and Hypothecation Services

 

CDSL vs NSDL - Which is Better?

Deciding between NSDL and CDSL largely depends on the depositor and the facilities offered by the depository participants.  Both of them are under the regulation of SEBI and provide similar services towards the secure and effective transaction process.

 

However, one can be chosen over the other depending on its accessibility and the kind of services that its DPs provide to investors. For example, if an investor has a broker or bank registered with the NSDL they would utilize their services. On the other hand, if they are registered with CDSL they would do so through CDSL services.

 

How do Depositories Work in India?

Depositories entail the conversion of physical certificates into electronic form referred to as dematerialisation process. Once securities have been dematerialized, they only exist in electronic form and are credited to the depository’s account.

• Account Opening: An investor approaches a DP to open a demat account that must be registered with NSDL or CDSL.
• Dematerialization: The physical certificates are handed over to the DP, who then transfers them to the particular depository to be dematerialized.
• Trading: When an investor trades, the DP guarantees that the securities are moved from the seller’s account to the buyer’s account through an electronic system.
• Settlement: After the trade, the responsibility of settlement is vested with the depository by debiting the demat account of the seller and crediting the demat account of the buyer.

Conclusion

Both NSDL and CDSL perform tasks that are critical for the functioning of the share market. In general, choosing between two NSDL demat account and CDSL demat account depends on the investor’s requirements and the services offered by their respective depository participants. However, both the depositories are more or less important to increase the efficiency, security, and credibility of the Indian stock market.