Differences Between NSDL and CDSL

When you purchase or sell securities in the Indian stock market, you must safeguard your securities. When investing or trading in India, two major organisations, NSDL and CDSL, store your securities safely in dematerialised format in your Demat account.

You can consider them as your savings bank account where you keep your money. NSDL and CDSL play a similar role, but instead of storing cash, they store your securities. If you are curious about the difference between NSDL and CDSL, read this blog for more details.

Understanding the Functions of NSDL

The National Securities Depository Limited (NSDL) was founded in 1996 to help you keep your securities in digital format and is the first-ever depository in India.

The National Stock Exchange (NSE) promotes this depository, allowing investors to dematerialise, rematerialise, make electronic transfers, etc. Other major financial institutions, like Unit Trust of India (UTI), IDBI Bank, SBI, etc., back NSDL’s operations.

Understanding the Functions of CDSL

The Central Depository Services Limited (CDSL) was founded back in 1999, and the Bombay Stock Exchange (BSE) is the promoter of this depository. Similar to the functions of NSDL, this depository helps you to store physical security certificates in digital formats.

A few other major financial organisations promote or back this depository to provide a seamless investment experience for investors. Such institutions are the State Bank of India, Bank of Baroda, HDFC Bank, etc.

What are the Key Features of NSDL and CDSL?

Breaking down key features of these two institutions will help you to learn the difference between NSDL and CDSL better:

1. Features of NSDL

   As per the SEBI mandate, NSDL has made it easy for investors like you to convert and store your securities digitally, along with the following features:

   • NSDL offers you features of Dematerialisation and rematerialisation, to convert your physical security to digital and vice versa. However, the latter is less in practice.
   • It also has the feature of helping with corporate actions, like stock splits, dividend management, bond issuance, etc.
   • NSDL also helps you to transfer shares or other securities electronically between Demat accounts.
   • As a shareholder, NSDL allows you to participate in e-voting during company meetings and decision-making.

2. Features of CDSL

   Take a look at the following features of CDSL that help you with your investment and trading activities, sharing similarities with NSDL:

   • It comes with an e-locker facility, which is a secure digital locker for your investment documents.
   • CDSL has a commodity repository as one of its features, a digital warehouse to store commodity receipts.
   • It lets you pledge your securities as collateral against loans when you need emergency funds.
   • CDSL Ventures Limited (CVL) manages the KYC verification process for investor identification.

Key Differences Between NSDL and CDSL

Now that you have a basic idea about the two depositories, let us delve into the difference between NSDL vs CDSL:

Which is Better Between the NSDL and CDSL?

If you are confused about which one is better, the NSDL or CDSL, you should know that the SEBI regulates both depositories, making them safer institutions for your securities. Also, both depositories provide similar investment services for seamless investment.

One key difference lies in their markets in which they operate, such as NSDL operates in NSE, and CDSL operates in BSE. To choose between these two, you should analyse your investment preference and select a DP accordingly.

Also, you should compare the different charges that NSDL and CDSL impose, align them with your expenses and select one that matches your requirements.

Conclusion

One main difference between NSDL and CDSL lies in the market in which they operate. The NSDL operates on the NSE, while the CDSL operates with the BSE. If you are a retail investor, the option of CDSL might be good for you. In case you are interested in institutional investments, NSDL is a go-to option for you. Except for key differences, the objectives of the two are similar and provide investors with a seamless investment experience.

FAQ’s

1. What makes NSDL and CDSL in terms of ownership?

The NSE operates the NSDL, and major banks, like UTI, IDBI Bank, HDFC, the SBI, etc., are its major shareholders. On the other hand, BSE operates the CDSL and institutions like Bank of Baroda, Union Bank, HDFC, etc., are its shareholders.

2. Which depository is older between the NSDL and CDSL?

The NSE promoted or backed the foundation of NSDL in 1996, making it the first digital depository for securities in India. BSE backed the foundation of CDSL. It was established in 1999, with similar functionalities to the NSDL.

3. What is the primary function of NSDL and CDSL?

The primary function of the NSDL is to hold securities that are traded in the NSE in a dematerialised format in a Demat account. CDSL holds securities like bonds, stocks, ETFs, etc., in dematerialised formats that are traded in the BSE.

4. Can a Demat account be transferred between NSDL and CDSL?

There are online and offline mediums to transfer shares held in a Demat account between the depositories. You can use the “Speed-e facility” of NSDL or “easi/easiest” by the CDSL for an online transfer. You can do it offline with a physical Delivery Instructions Slip (DIS).