Central Depository System, generally known as a CDS, is an electronic book entry system to record and transfer securities electronically without having any physical movement or endorsement of certificates. CDBL was incorporated as a public limited company on 20th August 2000.

What is depository?
A depository can be compared to a bank. A depository holds security of investors in electronic form. Besides holding securities a depository also provides services related to transaction in security.

Depository participant (DP)
Depository interfaces with investor’s trough its agents called depository participants (DP). Stock broker/dealer of the stock exchanges, financial institutions, banks, insurance companies, approved Clearing Corporation, clearing house of stock exchange can become DP.  If an investor wants to enjoy the services offered by a depository, the investor has to open an account with a DP.

Benefit of Depository

• Immediate transfer of share
• Elimination of risk associated with physical certificate such as loss, theft, mutilation, forger etc.
• Reduction in handling large volume of papers.
• No bad deliveries.

Services

• Dematerialization—a process by which physical certificates of investors are converted to an equivalent number of securities in electronic form and credited to investor’s account with his/her DP.
• Rematerialization----is the term used for converting electronic holdings back into physical certificates.

Transfer & Transmission

• Transfer means moving Securities from one Account to another within a single CDBL Participant or to another CDBL Participant. An account holder must fill in a Transfer Request Form to transfer their securities, and then submit the form to their CDBL Participant.
• Transmission means the Transfer of all Account Balances of an Account Holder to another Account. In order for the Account Holder to perform a Transmission, they must first fill in a Transfer Request Form and then submit it to their CDBL Participant.

Settlement of trade (in case of purchase):

• Investors purchase shares in any of the stock exchange connected to depository trough a broker of his choice and make payment to his broker.
• Broker arranges payment to clearing house.
• Broker receives credit on his clearing account on pay-out  day.
• Client’s gives instruction to his DP for receiving credit.
• Broker gives instruction to his DP to debit his clearing account  and credit his client’s account.
• If the instructions match investors account with his DP is credited.

Settlement of trade (in case of sale):

• Investor sells shares in any of the stock exchange connected to depository trough a broker of his choice and make payment to his broker.
• Client’s gives instruction to his DP for debit of his account and credit of his broker’s clearing account.
• On the pay-in day client’s broker gives instruction to his DP to for delivery to clearing house of the relevant stock exchange
• Broker receives payment from the clearing house
• Client’s receives payment from the broker for the sale in the same manner he would receive payment for sale in physical mode

Off Market Settlement

• An Account Holder who wishes to transfer Securities through the mechanism of a matched transaction shall give a completed Off Market Transfer Request Form 15 to his Participant.
• An investor who wishes to transfer Securities through the mechanism of a matched transaction shall give a completed Off Market Transfer Request Form.
• On receipt of an Off Market Transfer Request Form 15 for either receipt or delivery of Securities, the Participant shall enter the Transaction into the CDBL system in accordance with the User Manu

Pledging

• Account Holders may use the shares in their depository accounts as collateral against a loan without the need to rematerialise the securities (provided the pledge agrees to take collateral in this form).
• The pledge must be a participant or an depository account holder. The shares are then ‘frozen’ in the account of the pledgor and cannot be moved until instructions are received from the pledgee.
• As the shares remain in the account of the pledgor (although frozen),the pledgor will receive all benefits(e.g.dividends and bonus issues) and will still be able to vote.

Freeze and Suspension

• Every Account Holder shall have an option to freeze or suspend his/her Account with the CDBL. The CDBL Participant shall then suspend the Account of an Account Holder maintained with it on written instructions received by the CDBL Participant from the Account Holder.
• Alternately the Account Holder may wish to permanently close of their account, in which case they must fill in an Account Closure Request Form.

Process of account opening with CDBL
You are just three steps behind before opening an account with depository. By following those steps you can be an account holder of DP.

• Approach a Depository participant
• Fill up an account opening form with some service charges
• Sign a standard agreement