In India, it is mandatory to have a Demat account to invest in the stock market. Currently, only two entities, known as depositories, offer Demat account facilities in the country — National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Although their services are very similar, there are a few differences between NSDL and CDSL. In this article, we explore what they are and look at the various features that they offer.
What is NSDL
Established in 1996, the National Securities Depository Limited is the first-ever entity to offer depository services in India. The depository was founded by the National Stock Exchange (NSE), along with a consortium of financial institutions, including IDBI Bank, Unit Trust of India, State Bank of India, and HDFC Bank, among others. As of February 29, 2024, the total number of active Demat accounts opened with NSDL was more than 3.54 crore.
What is CDSL
The Central Depository Services Limited was founded in 1999 by the Bombay Stock Exchange (BSE), along with a consortium of banks, such as the Bank of India, State Bank of India, HDFC Bank, Bank of Baroda, Union Bank of India, and Standard Chartered Bank. The CDSL was the first-ever depository in India to cross 5 crore active Demat accounts in 2021. As of February 29, 2024, the total number of active Demat accounts in the depository was more than 11.27 crore.
Features of NSDL and CDSL
Before we proceed to compare NSDL vs CDSL, let us quickly look at some of the key features and services that these depositories offer.
- Dematerialisation of physical securities
- Rematerialisation of electronic securities
- Electronic transfer of securities from one Demat account to another
- E-voting services to enable shareholders to vote at their respective company’s general meetings
- Electronic pledging of securities as collateral for loans, leverage, and other facilities
Differences between the NSDL and CDSL
If you wish to open a Demat account and are unsure of which depository to choose, a tabulated comparison of NSDL vs. CDSL outlining the differences between the two may be of help. Here are some of the key factors that explain how the depositories differ from each other.
Particulars |
NSDL |
CDSL |
Established in |
1996 |
1999 |
| Meaning | First and largest depository in India, facilitating the holding and transfer of securities electronically. | Second-largest depository in India, also facilitating electronic holding and transfer of securities. |
Size |
With just around 3.5 crore active Demat accounts, the NSDL is not as large as the CDSL |
The largest depository in India with more than 11 crore active Demat accounts |
Partner exchange |
National Stock Exchange |
Bombay Stock Exchange |
| Market share | Higher market share, due to early establishment and larger size. | Lower market share compared to NSDL. |
Major shareholders |
National Stock Exchange (NSE), IDBI Bank, Unit Trust of India, State Bank of India and HDFC Bank, among others |
Bombay Stock Exchange, Bank of India, State Bank of India, HDFC Bank, Bank of Baroda, Union Bank of India, Standard Chartered Bank and Life Insurance Corporation of India |
Demat account number |
A 14-digit number prefixed by ‘IN’ |
A 16-digit number, created by combining an 8-digit DP ID and an 8-digit client ID |
Services offered by NSDL and CDSL
Both National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) provide essential services to the Indian securities market, with a focus on enhancing efficiency, security, and transparency. While they operate independently, their core services are similar and can be collectively discussed as follows:
- Dematerialisation and Rematerialisation
- Dematerialisation: Conversion of physical securities (like share certificates) into electronic form. This process eliminates the risks and inconveniences associated with handling physical certificates.
- Rematerialisation: Conversion of electronic securities back into physical form if required by the investor.
- Account services
- Demat accounts: Facilitation of opening and maintaining Demat (dematerialised) accounts for investors, where their electronic securities are held.
- Account statements: Provision of periodic statements of holdings and transactions to account holders, ensuring transparency and ease of tracking investments.
- Settlement of trades
- Trade settlement: Ensuring the smooth and efficient electronic transfer of securities from the seller's Demat account to the buyer's Demat account post-trade, thus streamlining the settlement process.
- Corporate actions
- Management of corporate actions: Handling activities such as dividends, bonus issues, rights issues, stock splits, and other corporate actions. Both depositories ensure that these benefits are accurately credited to the investors’ accounts.
- Pledge and hypothecation
- Securities pledging: Enabling investors to pledge their securities as collateral for loans. Both NSDL and CDSL manage the recording and maintenance of pledged securities, facilitating secured lending and borrowing.
- Electronic voting (e-Voting)
- e-Voting services: Providing electronic voting platforms that allow shareholders to participate in corporate decision-making processes remotely, ensuring broader and more secure participation.
Additional services
Let us now understand additional services offered by these depositories:
National Securities Depository Limited (NSDL)
- National Academic Depository (NAD): Digitally stores academic credentials, such as certificates and degrees, facilitating easy access and verification for educational institutions and students.
- Tax Information Network (TIN): NSDL operates the TIN, which manages tax-related information, including Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
Central Depository Services Limited (CDSL)
- Commodity repository: Provides repository services for commodities, including the management of electronic warehouse receipts.
- e-Locker: Offers a secure digital locker service for storing important documents and securities.
- KYC services: Through its subsidiary CDSL Ventures Limited (CVL), CDSL facilitates the Know Your Customer (KYC) process for investors, ensuring compliance with regulatory requirements.
NSDL vs CDSL - Which is better
Now that you have seen the differences between NSDL and CDSL, you are probably wondering which of the two is the better option for you.
Both NSDL and CDSL are regulated by SEBI and provide similar trading and investing services. The key difference lies in their primary operating markets: NSDL with the National Stock Exchange (NSE) and CDSL with the Bombay Stock Exchange (BSE). Investors can choose between them based on personal preferences for opening a Demat account.
That said, make sure to do a detailed comparison of CDSL vs. NSDL charges before you decide on a depository. This can help make your decision-making process easier.
Conclusion
The National Securities Depository Limited and the Central Depository Services Limited play a crucial role in the Indian financial markets. Without their services, securities trading as we know it today would not be possible. Now, if you are unsure of the choice of depository, remember that it is just a matter of personal preference, considering that both the NSDL and the CDSL offer the same set of services.
