CDSL Full Form

CDSL Full form is Central Depository Services Limited. CDSL as an entity that provides ‘depository services’ to the Indian securities market. The investors or the traders are assured the safe and reliable source of depository services through CDSL. For securing the securities/shares and other tradable market instruments, CDSL serves as a protected source of provision of operating markets.

What is the Full Form of CDSL?

CDSL full form is Central Depository Services Limited and it is jointly promoted by the State Bank of India (SBI), Bank of India, Bank of Baroda (BOB), HDFC Bank, Standard Chartered Bank, Axis Bank and the Union Bank of India. After NSDL, CDSL is considered as the second most popular public sector unit in India.

What are the Features of CDSL?

The prominent feature of CDSL is to hold the securities/bond in a certificated or in uncertificated form. It helps to overcome the problem in registering the trades in the books and only transfer securities only up to 500 shares in physical form is possible through CDSL. Most of the traders have adopted the method of security holding in an electronic format for trading.

Working Process of CDSL

A CDSL operates similar to a bank and only the thing that is different from the bank is that the bank withholds the customer’s money whereas CDSL holds stocks/ shares/ bonds/securities etc. The securities of the investors are held by an administrative body in an electronic or digital format and can be interrogated by the investor through a method called as registered Depository Participant (DP).

The common focus of Central Depository Service Limited is to provide safe, reliable, effective and secured depository services from investors or traders point of view. After being granted the permission from the Securities and Exchange Board of India popularly known as SEBI since February 1999, the CDSL started its working and operation. The different services offered by CDSL includes the holding of securities, equity, bonds, commercial papers, government, certificate of deposits made by the investors etc.

What is a Depository Participant?

The sole purpose of Depository participant (DP) is to offer depository services to investors. According to the SEBI guidelines and regulations, financial institutions, banks, custodians and the stockbrokers are eligible to act as DP entities. Generally, a Depository participant is a CDSL, full form of which is Central Depository Service Limited is an authorized agent that offers a link between the account holder or commonly known as the Beneficial Owner (BO), the company issuing the depository services, Stock Exchange and various other financial aspects. The Central Depository Service Limited has been recognized as an authorized Depository Participant to provide the service across India to aid the investors in carrying out and dealing with the digitized form of securities. The investors who are using the depository services are known as the ‘Beneficial Owner’ and it becomes necessary to maintain a Demat Account to avail the functions of Central Depository Service Limited as per the laid guidelines. Through the maintenance of demat accounts, the facilities of the dematerialization and transferring of securities are also included.

What is a Demat Account?

To effectively use the services of Central Depository Service Limited, the investor must own a demat account. Normally, the normal formalities that are necessary for opening a bank account are enough and are similar to opening a Demat account. The Demat Account is not only beneficial for using the services of the CDSL but also uses its account for trading the stocks and securities in current terms.

Benefits of CDSL

The CDSL has definitely made possession and transaction processes easier and convenient. Apart from these, few more significant benefits of CDSL are:

• The main benefit of Central Depository Service Limited is that all the shares are held in the electronic or digital format so the risk of loss, theft or any damage to the share certificates in physical form has been neglected.
• In CDSL format, there is no need for stamp duty for the investors to be followed when it is transferring securities in dematerialized format.
• Through the CDSL process, the companies can directly credit their investors if there is any case of any right issue or bonus issue concerning shares.
• Through the CDLS process,the  investor can get real-time information about the listed company, its  management about the holdings and can also track the change in any detail related to that security or stock in particular.
• The Central Depository Service Limited sends the investor the statement that contains details of all the holdings of that specific period which will be helpful to the investors to make the informed decisions for their financial strategy and growth.

Drawbacks of CDSL

Alongwith certain advantage, the CDLS operation have some disadvantages which the investor should be aware of. Few of the drawbacks of CDSL are listed below:

• With the possession of a demat account, the pride of having the physical certificates at home is impossible. There lies the lack of belongingness.
• The CDSL operations have become less accessible to rural people who used to hold the physical certificates on their purchase as they are currently unaware of the system of the electronic/digital form of depository services.
• All the investments are carried out in digital format, Demat Account used for all the financial transactions and the money that is involved in it resides with the government authority.
• There are several levels of the regulatory frameworks that are involved in carrying out the various depositories act and regulations which are law binding and the depositories have to be followed by the Central Depository Service Limited holder.

Charges of CDSL

With the modern usage of technology, a huge number of people prefer trading and investing through CDSL. To avail the service, a specific fee must be paid by any intermediary/depository participant or any business entity. Moreover, trading and investment business have been used by many traders as their potential career. Thus, many investors/traders are motivated to make money in the financial and stock market.