What Is The Difference Between CDSL and NSDL?
NSDL & CDSL are depositories that store ownership records of financial securities. Let’s understand the differences between them.
Understanding Depositories: NSDL and CDSL
If you want to buy or sell shares on the stock market in India, you need to know the basics about depositories. In financial terms, a depository refers to an entity that holds your financial securities like shares and bonds in a dematerialised form. Moreover, these depositories also enable and support trading shares on the stock market. There are two depositories in India; the Central Securities Depository Ltd (CDSL) and the National Securities Depository Ltd (NSDL). These depositories store records of your financial securities when you purchase shares and trade on the stock market. When you start trading on the stock market, the securities are recorded and held in the depositories. Moreover, companies get information about the shareholders through depositories for purposes such as stock splits, distribution of dividends, etc.
The depositories (NSDL and CDSL) are linked to Depository Participants (DP), also known as stockbrokers. These DPs are essentially intermediary agents between the depository and security buyers/traders. You also need access to a demat account and a trading account with a reliable stockbroker(DP) in order to buy shares. Stockbrokers may also offer other services such as providing a trading platform for users to buy or sell shares, marketing reports, etc. Most stockbroking firms are registered with either the NSDL or the CDSL.
What Is NSDL?
The National Securities Depository Ltd is the largest depository in India and was the first ever depository to provide trading services electronically. The NSDL started its operation in 1996 in Mumbai and is also the oldest depository in the country. As per the NSDL, they have more than 2.88 crore active investor accounts as of August 31, 2022. There are 278 DPs registered with NSDL and more than 57,000 DP service centres across all of India. The NSDL keeps electronic records of the following financial securities: stocks, mutual funds, bonds, debentures, and commercial funds. The NSDL also provides a swath of services, such as:
Dematerialisation services
Off-market transfer services
Lending of securities
Rematerialisation services
Collateral and mortgage of securities
What Is CDSL?
The CDSL started its operation in Mumbai in 1999. After the NSDL, the CDSL is the second largest depository in the country. The CDSL also provides all the same services that the NSDL offers, such as dematerialisation services, lending of securities, off-market transfers and more. Moreover, the CDSL also keeps a record of all the financial securities that the NSDL does; stocks, mutual funds, bonds, debentures, and commercial funds. As of August 31, 2022, the CDSL has more than 7.16 crore active investor accounts. There are 583 DPs registered with CDSL and more than 21,000 DP service centres across all of India.
What Is The Difference Between NSDL And CDSL?
The main difference between NSDL and CDSL is that NSDL has the National Stock exchange as its primary operating market, whereas the CDSL’s primary operating market is the Bombay Stock exchange. As mentioned above, the number of DPs registered with NSDL and CDSL also differs, as does the number of DP service centres. Moreover, there is a small difference when it comes to the Demat account format. Demat accounts held on the CDSL have 16 numerical digits. On the other hand, Demat accounts held on the NSDL have 2 alphanumeric digits, ‘IN’ and 14 numerical digits. Apart from these differences, the purpose and functions of both the NSDL and CDSL are essentially the same. As an investor, you can choose to open a Demat account with a stockbroker that is registered with either the NSDL or the CDSL, as they are both highly trustworthy depositories. Most importantly, you must ensure that you pick a reliable and trusted stockbroker with whom you open your Demat account.