Merits and Demerits of Direct and Indirect account methods Presentation by National Securities Depository Limited (NSDL), INDIA

Direct vs. Indirect Account Method Direct Account Direct Account Participant Account Participant Account Beneficiary Account Beneficiary Account Indirect Account Indirect Account Participant Account Participant Account

Legal Framework  Depositories Act 1996  Dematerialization of securities  Option to hold securities in dematerialized/physical form  Depositories to maintain accounts at Clients level as well as at Participants level  Beneficial ownership remains with the Client  Corporate decisions in terms of voting etc., exercised by the Clients directly

Challenges of Direct Account Method Large IT infrastructure requirement Large IT infrastructure requirement - Processing of large number of - Processing of large number of instructions instructions -Large database -Large database -Demand for a higher bandwidth -Demand for a higher bandwidth Reconciliation Reconciliation -Participant Level -Participant Level -Beneficiary Level -Beneficiary Level Backoffice Reconciliation for participants Backoffice Reconciliation for participants

Benefits of Direct Account method Ability to provide the shareholder information to the issuers Ability to provide the shareholder information to the issuers Efficient distribution of corporate benefits Efficient distribution of corporate benefits Investors can verify their account information from the depository Investors can verify their account information from the depository Ease in implementation of STP Ease in implementation of STP Ease in implementation of statutory requirements Ease in implementation of statutory requirements More Safety for investors More Safety for investors

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