Highly placed NSDL sources told The Financial Express that about ten days back the systems of SISL failed. To top it all, it was found that the DP had no adequate back-up facility in place. NSDL took strong exception to this and is believed to have told the DP to shape up or ship out. The official version, however, is that the DP requested NSDL to allow it to stop its operations as its systems hardware had crashed.

NSDL chief CB Bhave declined to comment on this aspect. Top officials, however, said that the depository is now planning to crackdown harder on DPs failing to meet adequate safety standards. Bhave said that the depository has therecords of all the holdings of investors and the settlement obligations would be met as the DP has provided it with the details. "The DP has agreed to compensate the clients for any losses incurred by them on account of its inability to continue depository operations. The clients of the DP will be given an option to transfer their holdings to other DPs or to rematerialise their holdings. NSDL will not levy any charges for either transfer of holdings or rematerialisation", said Bhave. "We will also request other DPs not to charge any fee from clients of SISL", he added.This is the first instance of a DP folding up operations since the inception of the depository. NSDL has close to 140 DPs (including R&T agents and clearing houses).

Only recently, NSDL was rocked with a connectivity failure with a leading DP, at Stock Holding Corporation of India Ltd's end. The reason for the connectivity failure, which had threatened to disrupt the settlement process, is still being investigated.

Several new procedureswere put in place after this crisis by both Sebi and NSDL and it is felt that the current development is also bound to throw up certain stricter norms for the DPs.