Sebi group on dematerialisation to take up cost reduction for investors

Our Markets Bureau

Mumbai, Nov 20: The Securities and Exchange Board of India (Sebi)’s working group on dematerialisation is scheduled to meet on Wednesday to discuss various issues concerning investors, depository participants (DPs) and depositories.

The major decision that is expected to be taken at the group’s meeting is that on inclusion of distinctive numbers of shares in the electronic form in order to avoid possible fraud as has occurred recently in some cases such as Volga Air Technics Ltd (VATL) and Accurate Exports Ltd, Sebi sources said.

The meeting assumes significance as the group is expected to discuss various aspects regarding reducing cost of operations for investors and account maintenance charges.

The group meeting to be chaired by Sebi chairman DR Mehta, who is also the chairman of the group, is also expected to deliberate on the issue of doing away with account closure charges to be paid by investors while dissociating with the DPs.

Besides Mr Mehta, executive director in charge of depositories RM Joshi, who is the convening member of group, will also participate in the meeting along with representatives of BSE, NSE and four regional stock exchanges (SEs) and some of the leading DPs.

Sebi has received representations from the various investors’ associations to reduce the cost of operations for investors.
An MP has also written to the ministry of finance (MoF) to look in to the matter of roping in the postal services of the government as the depository participants.

Looking at the network of the Indian postal department, it could be helpful in spreading the demat culture across the country ,including the rural and remote areas of the country, added the sources.

The group is also expected to discuss the issue related to standardisation of depository instruction slips (DIS) and inclusion of MICR facility on it.

As long as issues related to the DPs are concerned, the group has on its agenda the point of standardising the advance amount to be collected from the investors for opening and running an demat account.

The group on dematerialisation is also expected to deliberate on the issue of maintaining an exclusive bank account by DPs of their financial dealings for its DP operations and reporting exclusive accountability of DP operations to the regulator.

The meeting is also expected to look into various suggestions it has received from market intermediaries to reduce the cost of DPs, so that in the ultimate process, the investors expenses gets reduced automatically, said sources familiar with the group.

The meeting of the group is also expected to review the progress made on the issue of how many companies are yet to establish connectivity with the depositories, and if the number is large, the group will also look into the reasons for the delay by these companies in establishing connectivity. Sebi has set a deadline of March 2003 for all the companies to dematerialise all their equity paper and move to 100 per cent dematerialisation by the set deadline.