The total number of dematerialised scrips increased from 1763 million on end March 1998 to 6970 million on end March 1999. The huge increase in number of demated scrips reflects institutionalisation of trading in equities. There was corresponding increase in the demat value from Rs.227 billion as on end March 1998 to Rs.1106 billion as on end March 1999 showing a five-fold growth. However, the market capitalisation of demated scrips which stood at Rs.2883 billion as on end March 1998 increased to Rs.4006 billion at end March 1999.

The Working Group on Dematerialisation set up by the SEBI discussed the issues arising in the last two weeks due to some delay in pay-in the process and its impact, if any on the progress of dematerialisation. The Working Group felt that while such delays could be on account of several reasons, one among them being a tendency on the part of the clients to send in their settlement instructions to the DPs very late. The Working Group, however, noted that although there were delays in the pay-in process, the sanctity of the pay-out was retained. It was further noted that in the last week i.e. in the week following the week in which the problem had occurred the systems were able to handle higher volumes of demat delivery over Rs 1300 crore.

The Working Group took the following decisions to streamline and smoothen the handling of the settlement process :

1. DPs shall instruct their non-institutional clients to send in their settlement instructions to reach DPs office at least 24 hours i.e. one working day prior to the pay-in date.

 

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

 

3. 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.

 

4. The stock exchanges will advance the deadline for pay-in of securities to 3.00 p.m. on the pay-in day and a separate window will be provided for late pay-in till 6.00p.m. on the same day with payment of late fees. The depositories will issue necessary instructions to their DPs immediately.

In case of objections received from companies on account of difference in signatures, the investors will be given an one time opportunity to rectify or replace with physical shares till 90 days from the date of compulsory dematerialisation on April 5^th and May 31^st, 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 by number or Rs 25,000 by amount. 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 however not be permitted to reintroduce the shares in the market in the physical form. The two stock exchanges were 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 Group also noted that the Stockholding Corporation of India, which has the largest number of beneficiary accounts and clearing members, was taking steps to further increase their existing infrastructure. An additional server would be set up in Mumbai, which would be operational in the next three weeks, SCHIL also planned to set up 5 other servers at various centres in the country within the next three months to serve the interest of individual investors.

The Group was also informed that following increased delivery in dematerialised form, the BSE has taken the initiative to reduce the gap between pay-in and pay-out.

After assessing the present situation, the consensus of the Group was that compulsory dematerialisation of 29 scrips on 5^th April 1999 would be on schedule.

According to information available from NSDL, the dematerialisation volume has crossed Rs 110,000 crore. There are 84 DPs operational as on date which are providing services at about 700 locations in 165 cities/towns in India. Over 375,000 clients have opened accounts with these DPs. There are 363 corporates who have signed agreements with NSDL of which securities of 355 corporates are available for dematerialisation.