MOVE TO BROADEN HOLDING STRUCTURE IN DEPOSITORY

BSE scouts for PSU bank to divest 10 per cent in CDSL

Sharad Mistry & Sujoy Manna

Mumbai, Jan 3: In its move to broaden the equity holding structure in Central Depository Services (India) Pvt Ltd (CDSL), The Stock Exchange, Mumbai (BSE) is scouting for a public sector bank (PSB) to divest around ten per cent equity. The BSE-sponsored Rs 100-cr CDSL went operational in mid-1999.

“BSE is scouting for a nationalised bank to pick up around 10 per cent equity in CDSL,” said a top source. “After selling around nine per cent stake in CDSL recently to Global Trust Bank (GTB), we have now zeroed in on a couple of nationalised banks to divest an additional 10 per cent stake in CDSL.” No names of the banks were available.

BSE plans to reduce its current 36 per cent holding in CDSL further, said a top BSE source. Following the divestment of around 10 per cent stake to a nationalised bank, BSE’s holding is expected to go down to around 26 per cent.

“After broadbasing the equity holding, BSE is likely to maintain its stake in CDSL at 26 per cent,” the source added.

Among the other banks that hold equity in CDSL are State Bank of India, Bank of India, Bank of Baroda, HDFC Bank and Centurion Bank. All these banks hold around 64 per cent of CDSL’s equity.

Along with the move to divest BSE’s stake to bare minimum, CDSL has resorted to “silent marketing” mode and creating awareness among investors and depository participants of the second available option in depository business.

CDSL’s main competitor, National Securities Depository Ltd (NSDL), sponsored by National Stock Exchange (NSE), has around 200 depository clients while CDSL has around 165 depository participants, many of which may be identical.

According to sources, investors get two major advantages at CDSL: First, its centralised database system and, secondly, the unique full eight digit client identification number.

While both these facilities help clients faster access to their demat accounts, the access is error-free as all demat accounts are linked to CDSL’s centralised system.

On the other hand, the NSDL system is a two-tier one wherein the depository participants upload the changes in client’s accounts to the main system. Also, at NSDL the client identification of eight digit is split into two — the first four digit represents the depository participaants while the other four digits are for the client identification.

Under this system, while the uploading activity may take a little time which may delay the access of accounts by the concerned clients or the actual transfer of deals in the demat account may sometimes be mixed up because of the split eight digit account system.

“Our aim is to market the professionalism at CDSL to the investor who may have his or her demat accounts with NSDL, but surely can look for an additional demat account. The shift of accounts from a DP member of one depository to the DP of the other adds costs to the investor, which can be avoided. Instead, investors surely can think of having an additonal demat account with better benefits at his dispossal,” the source said.