 "Your dividends may soon be distributed by your depository")
The capital markets regulator, Securities and Exchange Board of India (Sebi), is working on creating a single-point distribution system for all securities market benefits.
This means all the cash that you receive from your security market activities — dividends, interest income from securities, redemption proceeds — will all be distributed by the same agency.
A consultation paper on allowing depositories to act as the single-point of contact for these benefits is likely to be issued soon, according to the minutes of the regulator's March 22 board meeting.
“World over, in most developed markets and several emerging markets, depositories usually distribute cash benefits to their account holders...It is proposed to have a detailed consultation process with market participants on the issue of considering a mechanism wherein all securities-related benefits can be distributed at a single point,” it said.
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At present, depositories only distribute non-cash benefits, including bonus and rights issues, by which shares are credited to an investor’s account. Cash benefits are currently distributed through Registrar and Share Transfer Agents (RTAs such as Karvy or CAMS). Issuers also distribute cash benefits themselves by making arrangements after getting information from the depositories. Global depositories often hold a restricted banking licence, to process cash benefits directly.
“Globally, distribution of dividends is by depositories, unlike in India. The result here is that the investor has to approach individual companies if he has a query or grievance about a payment he has not received,” said G V Nageswara Rao, managing director and chief executive officer of National Securities Depository Ltd. “Globally, distributors use all models, including operating it through their own institutions if they have banking arms or through the use of third-party banks.”
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NSDL has applied to Reserve Bank of India for a payments bank licence. Such a bank can accept deposits up to Rs 1 lakh and offer current and savings accounts. They can be used for transfer of money, can issue debit cards and offer internet banking. They are, however, barred from lending capital or issuing credit cards.
P S Reddy, managing director & chief executive of Central Depositories Services Ltd (CDSL) said depositories were well equipped to deal with the additional responsibility.
There were 387 instances of complaints regarding non-receipt of dividends during the financial year ending in March 2015, according to data on the BSE website.
However, some note that dividend issues also have to do with lack of uptodate information about investors’ bank accounts.
This means all the cash that you receive from your security market activities — dividends, interest income from securities, redemption proceeds — will all be distributed by the same agency.
A consultation paper on allowing depositories to act as the single-point of contact for these benefits is likely to be issued soon, according to the minutes of the regulator's March 22 board meeting.
“World over, in most developed markets and several emerging markets, depositories usually distribute cash benefits to their account holders...It is proposed to have a detailed consultation process with market participants on the issue of considering a mechanism wherein all securities-related benefits can be distributed at a single point,” it said.
| CASH BENEFITS FROM DEPOSITORIES |
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ALSO READ: Tech M, NSE arms among niche bank applicants
At present, depositories only distribute non-cash benefits, including bonus and rights issues, by which shares are credited to an investor’s account. Cash benefits are currently distributed through Registrar and Share Transfer Agents (RTAs such as Karvy or CAMS). Issuers also distribute cash benefits themselves by making arrangements after getting information from the depositories. Global depositories often hold a restricted banking licence, to process cash benefits directly.
“Globally, distribution of dividends is by depositories, unlike in India. The result here is that the investor has to approach individual companies if he has a query or grievance about a payment he has not received,” said G V Nageswara Rao, managing director and chief executive officer of National Securities Depository Ltd. “Globally, distributors use all models, including operating it through their own institutions if they have banking arms or through the use of third-party banks.”
ALSO READ: Govt slashes dividend payment estimates from banks, FIs for FY15
NSDL has applied to Reserve Bank of India for a payments bank licence. Such a bank can accept deposits up to Rs 1 lakh and offer current and savings accounts. They can be used for transfer of money, can issue debit cards and offer internet banking. They are, however, barred from lending capital or issuing credit cards.
P S Reddy, managing director & chief executive of Central Depositories Services Ltd (CDSL) said depositories were well equipped to deal with the additional responsibility.
There were 387 instances of complaints regarding non-receipt of dividends during the financial year ending in March 2015, according to data on the BSE website.
However, some note that dividend issues also have to do with lack of uptodate information about investors’ bank accounts.
“The problem of complaints regarding dividends is also on account of incomplete information regarding investors’ financial details. A significant number of investors are yet to fully update their bank account details. This will have to be addressed for the problems associated with dividend distribution to be solved with finality,” said Ganapathy Subramanian, advisor to RTA Karvy Computershare.
“So far as the systems are simplified, it is a good measure. Investors don’t have to write to multiple entities if there is a problem,” said Prakash Shah, secretary of Investor Education and Welfare Association.