CDSL vs NSDL: Key Differences

In India, there are two prominent depositories, namely, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Both of them are registered with the Government of India, and are authorized to provide electronic services for holding, transferring, and trading securities. The Securities and Exchange Board of India (SEBI) regulates NSDL and CDSL. Are you curious about how CDSL vs NSDL differ from each other? If so, then check out this blog post titled ‘CDSL vs NSDL: Key Differences’ where we explain to you all the major differences between these two depositories.  

About CDSL

In case you’re wondering what the full form of CDSL is, it is ‘Central Depository Services Limited’. It was the first Indian depository institution to be listed on the stock exchange. 

The incorporation of CDSL took place on 12th December, 1997. On 8th February, this institution began its operations as a depository under SEBI (Depositories and Participants) Regulations, 1996. In 2017, the CDSL was listed on the National Stock Exchange by introducing the CDSL IPO. According to SEBI data, this depository has 605 registered depository participants (as of 25th September, 2024.)

As of March 2024, CDSL has more than 11.56 crore demat accounts. The depository has a strong infrastructure system consisting of multiple backup levels. CDSL offers instant transfer of securities held in electronic form. BSE Limited, Standard Chartered Bank, PPFAS Mutual Fund, HDFC Bank, and LIC are some of the top shareholders of this depository institution.

About NSDL

The full form of NSDL is National Securities Depository Limited. It is the largest depository in India. It was founded in August 1996, and is the oldest depository in India to provide trading services in electronic format. 

NSDL has an innovative and flexible technology system, offering support to investors and brokers. State Bank of India (SBI), HDFC Bank, Dena Bank, Oriental Bank of Commerce, Axis Bank Limited, Canara Bank, Deutsche Bank, HSBC, Citibank and Standard Chartered Bank are among the top shareholders of NSDL. 

Compared to CDSL, NSDL has a larger market share and offers different services like e-voting and electronic security pledges. As of 25th September, according to the SEBI portal, NSDL has 293 registered depository participants.

Now that you know what CDSL and NSDL are, let us understand the key differences between NSDL vs CDSL in the following section.

NSDL vs CDSL: Top Differences

Looking at the table below will allow you to learn about the difference between National Securities Depository and Central Depository Services. 

Services Provided by Depository Institutions

The role played by the depositories is essential for the securities market. They provide safe, secure and efficient means for holding and trading stocks, bonds, etc. Let’s take a look at the wide range of services offered by CDSL and NSDL. 

• Dematerialisation: Dematerialisation, often abbreviated as demat, refers to the process of converting physical securities into electronic form. Both CDSL and NSDL offer dematerialisation.

• Electronic Holding/Transfer of Securities: NSDL and CDSL enable secure storage and electronic transfer of securities between demat accounts.

• Corporate Actions Processing: Deposities enable automation of processes pertaining to dividends, bonus issues and other corporate actions.

• E-Voting: Depositories offer integration of e-voting systems which allow shareholders to participate in corporate decisions.

• Risk Mitigation: Depositories implement risk mitigation measures which help to enhance the security and reliability of their systems.

• Account Statements: Regular statements detailing the assets and transactions in demat accounts are provided by CDSL and NSDL.

• Transaction Statements: A comprehensive record of all purchases and sales, detailing every transaction.

• Timely & Accurate Trades’ Settlement: Depository institutions facilitate timely and precise settlement of trades.

• Pledging: Facilities for investors to pledge their securities for several purposes are offered by depository institutions.

• Secure Storage and Record Maintenance: Both CDSL and NSDL offer secure storage and maintenance of electronic records of securities holdings.

• Compliance with KYC norms: They ensure compliance of demat account holders with Know Your Customer (KYC) regulations.

• Securities lending and borrowing: Facilities for lending and borrowing securities to and from the market are provided by depository institutions.

• Issuer Services: Assistance for issuers to efficiently issue, redeem, and manage securities.

• Investor Education and Services: Depositories educate investors on the operation of the depository system by spreading information and providing educational materials.

• Custodial Services for Investors: Institutional investors are provided with custodial services for the storage of securities by depositories.

CDSL vs NSDL: Which Depository Should An Investor Go For?

For an investor, choosing between NSDL and CDSL isn’t of much significance. Both are equally safe and offer similar services. Both of them are regulated and supervised by SEBI. 

The selection generally depends on who the depository participant of your choice has registered with. Regardless of the depository institution, you should focus on factors like the reputation of depository participants, service charges and functionalities of the trading app or platform.  

Conclusion

Both NSDL and CDSL are reputed depository institutions in India. Millions of demat accounts are registered with them. Both the depository institutions are regulated by the Securities and Exchange Board of India (SEBI) and have to take stringent security measures to ensure the investments in demat accounts are safe and secure.

By understanding the difference between CDSL vs NSDL, you can make informed investment decisions. They’re only slightly different in certain aspects. NSDL is older than CDSL and has a larger investor base. However, CDSL has more depository participants registered with it. 

If you want to become an Investment Advisor, connect with Registrationwala. We’ll help you to obtain the Registered Investment Advisor (RIA) License from SEBI in a smooth and hassle-free manner.

FAQs about CDSL and NSDL

Q1. How many depository institutions exist in India?

A. Currently, there are only two depository institutions in India: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). 

Q2. Is it possible to open a demat account with CDSL or NSDL without a depository participant?

A. No, you cannot open a demat account with NSDL or CDSL directly. You must open it through a depository participant.

Q3. How can I know whether my demat account is opened with CDSL or NSDL?

A. If your account number begins with ‘IN’ and contains 14 numeric digits, it is opened with NSDL. If there are 16 numeric digits and no alphabets in your account number, then it’s opened with CDSL.

Q4. Can depository participants be registered with both NSDL and CDSL?

A. Yes, many depository participants are registered with both NSDL and CDSL. Some examples are IIFL, Kotak Securities and Motilal Oswal.

Q5. How were securities held before NSDL was established?

A. Before the establishment of the oldest Indian depository National Securities Depository Limited, securities were held in physical form. 

Q6. Which Act regulates depositories in India?

A. The Depositories Act, 1996 regulates the Indian depositories. 

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.