{"id":206875,"date":"2022-09-20T19:56:08","date_gmt":"2022-09-20T14:26:08","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=206875"},"modified":"2022-09-20T19:56:08","modified_gmt":"2022-09-20T14:26:08","slug":"dematerialisation-a-digital-revolution-in-indian-finance","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/dematerialisation-a-digital-revolution-in-indian-finance\/","title":{"rendered":"Dematerialisation: A digital revolution in Indian finance"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article\u00a0\u201c<\/strong>Dematerialisation: A digital revolution in Indian finance\u201d <\/strong>published in\u00a0The Business Standard<\/strong>\u00a0on\u00a020th<\/sup> September 2022<\/strong>.<\/p>\n

Syllabus: GS 3 \u2013 Indian Economy – <\/strong><\/p>\n

Relevance:\u00a0<\/strong>evolution of the securities market in india<\/strong><\/p>\n

News: <\/strong>\u00a0The number of dematerialized accounts in India recently crossed 100 million. There is a need to look at the evolution of the system. <\/strong><\/p>\n

History of Dematerialization<\/strong><\/h5>\n

1993:<\/strong> The foreign institutional investor (FII) started increasing. However, the system of physical shares resulted in the harassment of domestic investors by bad deliveries and fake certificates.<\/p>\n

Due to these issues the Stock Holding Corporation of India proposed for building a depository by immobilising share certificates.<\/p>\n

Later NSE proposed to eliminate the physical share certificates with dematerialisation which was about one-sixth the cost of the physical certificates.<\/p>\n

This type of depository was first introduced within NSE and it was named as National Securities Depository Ltd (NSDL).<\/p>\n

1995:<\/strong> The digital depository required legal reforms which were brought by the Depositories Ordinance in September 1995. The word demat was first introduced in this ordinance.<\/p>\n

Later, other reforms were also brought to solve various other issues associated with stocks of the companies, stamp duty, securities, income tax, etc.<\/p>\n

What were the transformations brought by the Indian government?<\/strong><\/h5>\n

According to the Stamp Act<\/strong>, the revenues from the duty levied on securities are assigned to states.<\/p>\n

The stamp duty rates for select instruments are to be decided by the Government of India (GoI) and the balance instruments by states.<\/p>\n

Different states have their own stamp duty legislation<\/strong> because of the subject mentioned in the Concurrent List.<\/p>\n

This led to differential rate structures on the same instruments across states which required uniformity.<\/p>\n

This problem of uniformity of rates was solved in 2019 by amending Ordinance Act of 1995.<\/p>\n

How the institutional set-up of securities markets changed in India?<\/strong><\/h5>\n

The transformation of the Indian securities markets was led by setting up new institutions.<\/p>\n

National Stock Exchange (NSE), National Securities Clearing Corporation (NSCC) and then\u00a0National Securities Depository Limited (NSDL) came up in the securities market of India.<\/p>\n

National Securities Depository Limited is an Indian central securities depository, based in Mumbai. It was established in August 1996 as the first electronic securities depository in India with national coverage.<\/p>\n

Moreover, the government has expected the problems of monopoly of a single depository (NSDL).<\/p>\n

Therefore, BSE build a competitor to NSDL which was called the Central Depository Services Ltd (CDSL). Today, CDSL has more accounts than\u00a0NSDL.<\/p>\n

These institutions proved to be beneficial for India in many ways.<\/p>\n

What were the benefits of these institutions?<\/strong><\/h5>\n

These institutions <\/strong>have helped in cutting operational prices with the increase in output volumes.<\/p>\n

NSDL <\/strong>helped in designing of the New Pension System.<\/p>\n

A Central Recordkeeping Agency <\/strong>was created that stored facts about each pension system participant for decades and supported frictionless transfers from one pension fund manager to another.<\/p>\n

NSDL was also the institutional foundation for building the Tax Information Network for the income tax system.<\/p>\n

NSDL and CSDL <\/strong>also have various other benefits also such as it can easily store government bonds and securities for issuers (either private or governments) overseas.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article\u00a0\u201cDematerialisation: A digital revolution in Indian finance\u201d published in\u00a0The Business Standard\u00a0on\u00a020th September 2022. Syllabus: GS 3 \u2013 Indian Economy – Relevance:\u00a0evolution of the securities market in india News: \u00a0The number of dematerialized accounts in India recently crossed 100 million. There is a need to look at the evolution… Continue reading Dematerialisation: A digital revolution in Indian finance<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[10503,216],"class_list":["post-206875","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-business-standard","tag-gs-paper-3","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1701043788},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/206875","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=206875"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/206875\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=206875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=206875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=206875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}