Difference between NSDL and CDSL

Introduction

NSDL and CDSL are the two most popular depository institutions in India. Their primary function is to store the dematerialised shares and bonds purchased by investors through stock exchanges like BSE and NSE. All stock and bond market investors need two types of accounts to buy shares and bonds - a Demat account with NSDL or CDSL and a trading account with a registered Depository Participant (DP) like 5Paisa.

The following sections elaborate on the top differences between NSDL and CDSL. 

NSDL Vs CDSL - A Primer

NSDL or National Securities Depository Limited was established in 1996 to maintain the shares held by investors in dematerialised form. It is presently one of the largest depository institutions in the world, managing more than 2.5 crore investor accounts through 36,184 DP service centres across India. As of December 31, 2021, it manages assets of over US$4050 billion. 

CDSL or Central Depository Services (India) Limited was established in 1999 and is the second depository institution in India. CDSL is a Market Infrastructure Institution (MII) and acts as the intermediary between exchanges, clearinghouses, DPs, issuers, and investors. It facilitates the safe storage of securities held by investors in dematerialised form and enables the smooth processing of securities purchases and sales. As of December 31, 2021, CDSL manages over 5.55 crore investor accounts and offers its services through 592 DPs. The securities held in CDSL’s custody value exceeds INR 3.69 crore.

Now that you know the scope of NSDL and CDSL, let us understand the top differences between NSDL and CDSL in the following section. 

NSDL Vs CDSL - The Top-4 Differences

Here are the top 4 differences between NSDL and CDSL:

1. Partner Stock Exchange

While NSDL and CDSL maintain investors’ Demat accounts, there are differences between the exchanges each depository institution works with. The NSDL generally keeps the stocks, bonds, and ETFs traded on the National Stock Exchange (NSE). In contrast, the CDSL generally keeps the stocks, bonds, and ETFs traded on the Bombay Stock Exchange (BSE). Hence, while the purview of NSDL is the NSE, the purview of CDSL is the BSE.

2. Status

NSDL is the oldest depository institution in India. It was established in 1996 after the enactment and promulgation of the Depositories Act in August 1996. In contrast, CDSL is the second oldest depository in the country. It was established in 1999. 

3. Shareholders

The primary promoter of NSDL is the National Stock Exchange of India. Besides NSE, the shares of NSDL are held by the following companies/ entities:
•    Kotak Mahindra Life Insurance Company Limited.
•    Canara Bank.
•    Union Bank of India. 
•    Standard Chartered Bank.
•    Citibank.
•    The Hongkong and Shanghai Banking Corporation Limited.
•    Deutsche Bank A.G. 
•    State Bank of India.
•    HDFC Bank Limited.
•    The administrator of the Specified Undertaking of the Unit Trust of India- Unit Scheme 1964.
•    IDBI Bank Limited.
•    India Alternatives Private Equity Trust – IAPE Fund II.
•    IIFL Special Opportunities Fund.

Conversely, the primary promoter of CDSL is the Bombay Stock Exchange. Besides BSE, the shares of CDSL are held by the following companies/ entities: 

•    State Bank of India.
•    Standard Chartered Bank.
•    HDFC Bank Limited.
•    Canara Bank.
•    Bank of Baroda.
•    Bank of India.

4. Investor Accounts

Despite NSDL being the oldest depository institution in India, CDSL is more popular among investors. A quick scan of the total number of investor accounts opened by both institutions shows a wide difference between NSDL and CDSL. As per data released by NSDL and CDSL, it is seen that while NSDL manages over 2.5 crore investor accounts, CDSL manages more than 5.5. crore.

CDSL Vs NSDL - Which is Better?

There are many differences between CDSL and NSDL, including promoter status, founding date, the scope of operation, and investor accounts. However, what makes them similar is what they do. Both serve as depository institutions maintaining investors’ stocks, bonds, ETFs, mutual fund units, etc. Also, both institutions are registered and approved by the Indian government. Moreover, both institutions are regulated by the SEBI or Securities and Exchange Board of India. Additionally, all Indian brokers can transact with any of these institutions.  

It hardly matters which institution they open their account with for an investor. Generally, if you trade in NSE, it is wise to open an account with NSDL, and if you trade in BSE stocks, you may open an account with CDSL. 

In India, investors usually do not choose the depository institution. The depository participants like 5Paisa oversee the account opening process. Generally, the DP looks at the charges and service quality of NSDL and CDSL before opening investor accounts. Brokers can access NSDL and CDSL to transfer shares, bonds, ETFs, etc., to the Demat account from the trading account.

NSDL Vs CDSL - The Conclusion

In essence, neither NSDL nor CDSL matters when you want to invest in the capital market - what matters is your broker. Choosing the right broker is essential to profit from the stock market. The best broker charges lower-than-average fees and maximises your profits. So, get ready to open a Demat account with 5Paisa and experience next-gen broking services.