Demat Accounts: What are NSDL and CDSL and what is the difference between the two? MintGenie explains

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demat accounts? Unlike physical shares, which were a thing of the past, all shares are now received and held in electronic form. But who ensures the safety of these electronic shares? This responsibility falls upon depositories like NSDL and CDSL. In this article, let's look at the role of a depositories and their functions.

We'll also address common questions, such as the differences between CDSL and NSDL and whether investors can directly open a demat account with them. A depository is an organisation that holds securities (like shares, debentures, bonds, government securities, mutual fund units, etc.) of investors in electronic form at the request of the investors through a registered depository participant. It also provides services related to transactions in securities.

Also Read: Demat Account: What are the tax implications of transactions? The function of depositories is similar to that of banks, as they hold securities in an account akin to how banks hold funds in an account. Depositories also facilitate the transfer of securities between accounts at the instruction of the demat account holder, similar to how banks transfer funds between accounts at the instruction of the account holder. Furthermore, they enable the transfer of ownership without physically handling securities, similar to how banks facilitate transfers without physically handling money.

Also Read: Can I link multiple bank accounts to my demat account? A broker or a depository participant (DP) cannot offer you a demat account unless they are registered with depositories. It's important to note that the broker acts as a bridge between you and various agencies. They must be registered with a depository to provide you with a demat account and also