Benefits Of the Demat: In the depository system the ownership and transfer of securities takes place by means of electronic

book entries. At the outset, the system rids the capital market of the dangers relatedto the handling of paper.Several direct and indirect Benefits of Demat are: Elimination of bad deliveries: I n t h e d e p o s i t o r y e n v i r o n m e n t o n c e h o l d i n g s o f investor are dematerialized, the question of bad delivery does not arise i.e. they cannot b e h e l d u n d e r o b j e c t i o n . S t a t i s t i c a l l y , i n p h y s i c a l e n v i r o n m e n t a b o u t 2 0 % o f t h e delivered stock constitutes bad deliveries. Of these, about 1 % are ultimately absorbed by the system as the bad delivery cost. Rectification of objection usually involvesextensive follow up by the investor. Also the investor cannot sell the securities till theyare registered.This means that in the physical environment, every fifth person taking delivery of stocks gets securities till they are registered. Elimination of all risks associated with physical securities: Dealing in physicalsecurities have associated security risks of theft of stocks, mutilation of certificates,loss of certificates during movements through duplicate certificates and advertisementsetc. This problem does not arise in depository environment. No stamp duty required: There is no stamp duty for transfer of equity instrumentsand units of mutual funds in the depository. In case of physical shares stamp duty of 0.5% is payable on transfer of shares. Immediate transfer and registration of securities: In the depository environment,once the securities are credited to the investors account on the payout, he becomes thelegal owner of the securities. There is no need to send it to the company's registrar or registration. Having purchased securities in the physical environment, the investor hasto send it to the company's registrar so that change of ownership can be registered. The process usually take's around three to four months and is rarely completed within thestatutory framework of two months thus exposing the investor to opportunity cost of delay in transfer and to risk of loss in transit. To overcome this normally accepted p r a c t i c e i s t o h o l d t h e s e c u r i t i e s i n s t r e e t n a m e s i . e . n o t t o r e g i s t e r t h e c h a n g e o f ownership. However, if an investor misses a book closure the securities are not goodfor delivery and the investor would also stand to lose his corporate entitlements. Faster settlement cycle: The exclusive Demat segment follow rolling settlement cycleof t+2 that is the settlement of trades will be on the 3rd working day. This will enablefaster turnover stock and more liquidity with the investor. Faster disbursement of the non-cash corporate bonus etc:

NSDL provides for d i r e c t c r e d i t o f n o n c a s h c o r p o r a t e e n t i t l e m e n t s t o a n i n v e s t o r a c c o u n t , t h e r e b y ensuring faster disbursement and avoiding of risk of certificate in transit. Reduction in rate of interest of loans granted: Some banks provide this benefitagainst pledge of dematerialized securities a dematerialized securities eliminate thefollowing hassles/risks: getting securities registered in their name at the time of book c l o s u r e a n d r i s k s o f s t o c k s c o m i n g u n d e r o b j e c t i o n s w h e n t h e y a r e s e n t t o t h e companies registrar for the registration if the pledgee defaults in payment. Periodic status report: T h i s i s p r o v i d e d t o i n v e s t o r s o n t h e i r h o l d i n g s a n d transactions, leading to better controls.Dematerialized securities can be delivered in the dematerialized or physical segment fromApril 1998 at those stock exchanges where trading in dematerialized securities is allowed.But physical securities are not allowed to be delivered in dematerialized segment held withthe investors more liquid that physical stocks the process of conversion of secu rities fromelectronic to physical form. Safety in Demat: There are various checks and balances in the depository design to ensure of the investor holdings. This includes: A depository can be operational only after registration of SEBI, which is based on ther e c o m m e n d a t i o n s f r o m N S D L a n d t h e i r o w n i n d e p e n d e n t e v a l u a t i o n . S E B I h a s prescribed criteria for becoming a DP in the regulations. Depository accounts are allowed to aff ect any debit or credit to an account on the basis of valid instruction from the client. Every day there is a system driven mandatory reconciliation between participants. There are periodic inspections into the activities of both DP and a RT agent by NSDL.This also includes records based on which debits and credits are affected. The data interchange between NSDL and its business partners is protected by standard protection measures. All the investors have right to receive an account statement periodically from the DP Every month NSDL forwards statement of account to a random sample of investors asa counter check.