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SEBI's demat panel moots hassle-free settlements by DPs

The working group on dematerialisation set up by the Securities and Exchange Board of India, in its meeting in Bombay today, took a series of measures to streamline and smoothen the handling of settlement process by the depository participants.

During the last two week, the market had witnessed a payment crisis.

The meeting sought to gear up the clearing and settlement process. The group members had taken a number of steps in this direction, said C B Bhave, managing director of National Securities Depository Limited.

Bhave, who attended the meeting, said that connectivity between NSDL and Stock Holding Corporation of India Limited was not an issue since all the DPs were able to submit and settle their transaction details in time.

The real problem was delay in pay-in at the stock exchanges. The clients have been sending in their settlement instructions to the DPs very late and this led to sudden increase in the processing workload at the DPs' end.

So, the working group asked SCHIL to set up an additional server in Bombay which would be operational in the next three weeks. It also insisted on setting up five other servers at various SCHIL centres in the country in the next three months. These will serve the interests of individual investors and sustain the growing workload.

The group decided that compulsory demat of 29 additional scrips would be done on April 5 as planned. With this, the total number of scrips in the retail dematerialised segment would be 64.

There are 84 DPs operational at about 700 locations across the country handling over 375,000 client accounts. The demat volume of transactions has crossed Rs 1.1 trillion (1000 million=1 billion; 1000 billion=1 trillion).

While asking the Bombay Stock Exchange to reduce the gap between pay-in and pay-out in dematerialised form, the group felt that the stock exchanges must advance the deadline for pay-in of securities to 1500 hrs on the pay-in day.

A separate window must be provided for late pay-in till 1800 hrs on the same day with payment of late fees. The depositories are expected to issue necessary instructions to their DPs.

In case of objections received from companies on account of difference in signatures, the investors will be given a one time opportunity to rectify or replace with physical shares till 90 days from the date of compulsory dematerialisation on April 5 and May 31, 1999.

It had been earlier decided that the stock exchanges will work out a scheme which will provide one-time facility for small investors to sell physical shares not exceeding 500 shares at a time or of Rs 25,000.

It was agreed today that the BSE and NSE would provide separate windows for shares upto 500 in number or of value Rs 25,000 to give an opportunity to investors who are unwilling to open DP account or not able to open such accounts on time before the compulsory dates for demat.

This facility will however be available only to registered holders of shares. The buyers of the shares will not be permitted to reintroduce the shares in the market in the physical form.

The two stock exchanges are in the process of developing necessary software. While this measure would provide an exit route to small investors, it will also help increase demat of physical shares.

The working group has asked the DPs to instruct their non-institutional clients to send in their settlement instructions to reach DPs at least 24 hours in advance or one working day prior to the pay-in date.

The institutional clients could send in their instructions to the DPs on the pay-in day not later than 10.30 am.

Settlement instructions received from any client beyond the aforementioned deadlines would be received by the DPs at clients' risk and suitable instructions should be issued by DPs to the clients.

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