As an investor, it is very important to learn everything about the shares you’re investing in. If you’re new to the stock market, CDSL and NSDL are two of the most common words you might have come across. If you’re planning to invest particularly in CDSL shares, then this guide is for you. In this article, you will learn about some important things about CDSL shares including the working mechanism, CDSL share price, etc. to make an informed decision. Let’s get started!
CDSL stands for Central Depository Services Limited, which is a reputed government registered depository institution in India. Established in 1999, CDSL holds multiple securities such as bonds and shares in an electronic format. Know that the institution works for BSE (Bombay Stock Exchange), and is promoted by reputed national banks including the State Bank of India, HDFC Bank, Axis Bank, Union Bank, Bank of Baroda, Standard Chartered Bank, etc.
Further, more than 600 stockbrokers work with CDSL and the main goal of this organization is to provide reliable and secure depository services to the customers.
Before investing in Central Depository Services Ltd Share, it is very important to know its working mechanism. Interestingly, the working of CDSL is very similar to a bank. The two financial institutions differ from each other in the fact that banks hold the money of the depositors, whereas CDSL holds investors’ securities in an electronic format.
Another point of difference between a bank and CDSL is, you can not open an account in CDSL directly. Instead, you need to take help from a depository participant, commonly known as DP. But who is a DP? Let’s find out!
A depository participant acts as an intermediary between an investor and CDSL. In simple words, a depository participant is a registered CDSL agent who helps you to connect with the issuing company as well as the stock exchange. The one who uses the services of a DP is known as a beneficial owner, which is you, if you’re planning to deal with CDSL.
As per SEBI (Securities and Exchange Board of India) regulations, financial institutions, stockbrokers, and banks can become a DP.
Knowing the advantages and disadvantages of CDSL will help you make the right investment decision. So, check these out:
- No risk. Because the shares and other securities are kept in an electronic format, there is no risk of loss or theft. CDSL offers a higher level of security to the investors.
- Investors don’t need to worry about the legitimacy of securities they purchase. This eliminates the issue of bad delivery.
- As soon as you make payment to the company, the shares are transferred to your DEMAT account. This means you don’t have to deal with the registration process.
- Quick transfers. CDSL shares offer a settlement cycle of T+2 days, which ensures higher liquidity of securities.
- No need to pay hefty stamp duty for transferring the shares in electronic format.
- Easy operations. You can update all the details with companies you’ve invested in, with a single instruction.
- CDSL sends statements of holdings that allow you to keep your CSDL share price in check.
CDSL has a few downsides, you need to be aware of :
- You need to follow numerous regulatory frameworks, which can be a daunting task.
- Securities are still vulnerable to cyber crimes such as hacking, phishing, etc.
The good thing is, CDSL disadvantages are rare and limited as compared to the benefits of investing in CDSL shares. This makes it a safe and sound investment.