Demat equities are allowed as “good delivery” in the physical trading from
April 6. An Investor purchasing shares in the physical segment may get delivery
In Demat shares and such shares will be good delivery.
In order to boost trading volume in the Demat segment, SEBI has made it
compulsory for Institutional Investors to trade in Demat form in respect of 110
scrips from October 15, 1998. Starting December 15, 1998 trades by Institutional
Investors in 235 scrip’s have to be settled compulsorily in Demat form.
To rope in small Investors SEBI has come up with a list of 12 companies in which
retail Investors have to compulsorily settle trades in Shares in Demat form from
January 4, 1999. With effect from February 15, 1999 nineteen Companies have
been added to the list of securities in which trading in Demat form is compulsory
for all Investors. From April 5, 1999 another 29 companies have to be traded in
Demat form compulsorily by all investors. So from April 5, 1999 investors would
have to deal in Demat form in 60 scrips compulsorily. This will cover all scrips
of BSE Sensex and CNX Nifty indices.
Depository participants are offering a number of special incentives like Waiver of
Account Opening Charges, Security Deposit, Maintenance charges and reduction
in transaction cost, etc., to woo the prospective clients.
NSDL intends to facilitate in the near future stock lending and borrowing of
Securities held in Demat form, stock lending and borrowing schemes would give
a major fillip to trading volumes in the Demat shares.
The measures taken so far indicate the eagerness of the regulatory authorities to
promote Demat trading. Since retail Investors have the key to lucidity, there is a
concerted move to reach out to small Investors by offering them various sops.
CONCLUSIONSetting up o depository is a bold step and a beginning is made towards
integrating Indian capital market with the rest of the International Markets. While
depository system by itself may not be a panacea for the antiquated forms of
trading and methods of record keeping which are manual, cumbersome and time
consuming it may definitely improve the capital market operations.
REFERENCESSanjiv Agarwal and Pawan Kumar Vijay, “Depositories: Law Practice and
Procedure”, Mashbra Industries (P) Ltd.,
Depository Act, 1996.
SEBI Guidelines.
Rajendra Kumar Garg, “Depository Services for Growth of Capital Markets in
India”, Journal of Accounting and Finance, August 1996.
Chartered Secretary, August 1998.
Charted Financial Analyst,, September 1998.
Management Accountant, May 1996.
Economic Times.