NSDL, CDSL plan to meet Sebi on rates review

In February this year, NSDL announced revisions in its fee structure "" changing from ad valorem to a flat rate. Shortly afterwards, CDSL also announced a similar structure in the fees charged to the depository participants. The new rates were supposed to have been effective from April 1, 2002. However, small investors made representations to Sebi that the new rates would be detrimental to them while being favourable for the large investors.

Depository sources however said the rates were meant for depository participants (DPs). "It is upto the DPs whether they want to absorb the costs or to pass it on to the customers," NSDL sources said. B G Daga, managing director of CDSL, said: "There is no increase in our depository charges. Earlier, we used to charge 50 basis points for credits and debits. Under our new tariff, the credits are free but we proposed a tariff of 0.01 per cent per debit, subject to a minimum of Rs 5 and maximum of Rs 12. Moreover, we have also started a special scheme "" Low Tariff Unlimited Services "" for small investors."

The boards of both the depositories will be meeting separately to review the matter. In the meantime, officials from both the depositories will also meet Sebi to discuss the issue. "It was not meant to be a reduction in rates, just a rationalisation of the rate structure and the way it is levied," sources said.

Sources said, in the current system of levying fees, which is on an ad valorem basis, the lower the value of transaction, the lower would be the fees. So retail investors would naturally benefit from this situation. Under the proposed flat rate system, the fees are related to the number of transactions in respect of settlement fee and number of account positions as far as custody fee is concerned "" here the obvious beneficiary is the institutional investor who would be paying a flat fee irrespective of the size of their transactions.

According to industry circles, investors cannot shift one depository to another because NSDL charges a transfer fee of two paise per Rs 100, which deters investors from shifting.

Ironically, it was Sebi which had called a meeting of the depositories last November in order to discuss lowering of transaction costs for investors through rationalisation of the rate structure.