Central Depositories Services India (CDSL)

NOV 24

Preliminary   > Economic Development   >   Indian Economy and Issues   >   Financial market

Why in news?

  • Certain services at Central Depositories Services India Ltd (CDSL) were disrupted due to a suspected cyber-attack.

About Central Depositories Services India (CDSL):

  • CDSL or Central Depositories Services India Ltd was founded in 1999.
  • It is a government-registered share depository alongside its other state-owned counterpart National Securities Depository Ltd (NSDL).
  • It is a Market Infrastructure Institution or MII that is deemed as a crucial part of the capital market structure, providing services to all market participants including exchanges, clearing corporations, depository participants, issuers and investors.

About Depository:

  • A depository is an organization which 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.

Depository v/s Bank:

Bank

Depository

  • Holds Funds in an account
  • Transfer funds between accounts on the instruction of account holder.
  • Facilitates transfer without having to handle money
  • Facilitates safe keeping of money

 

  • Holds securities in an account
  • Transfer securities between accounts on the instruction of the BO account holder
  • Facilitates transfer of ownership without having to handles securities
  • Facilitates safekeeping of securities

What are Market Infrastructure Institutions (MIIs)? 

  • Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions.
  • They constitute a key part of the nation's vital economic infrastructure.

Institutions in India that qualify as MIIs:

  • SEBI lists seven stock exchanges (including BSE and NSE), two depositories (Central Depository Services Ltd. and the National Securities Depository Ltd.) and seven clearing houses as MIIs.

 

PRACTICE QUESTION:

Consider the following statements:

1.In India, it is the central bank that lists an institution as Market Infrastructure Institutions (MIIs)

2. Only stock exchanges are qualified to be listed as MIIs

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer