NSDL slashes custody charges

This implies that an investor would pay a custody charge of Rs 10 on his dematerialised holding of Rs 1 lakh, for a year. In the event of the shares being held with the depository only for a week, the investor will only pay custody charge for that week.

The move has come as a shot in the arm for investors who have been hoping for the depository to bring down the charges further. The depository has on its part always maintained that it would lower custody charges as and when the custody of shares with it grows.

The past couple of months have seen a sizable rise in the value of shares dematerialised with the depository. So have the amount of transactions, which in the long runwill be the revenue driver for a depository.

The move by NSDL has further blunted the advantage which the Bombay Stock Exchange BSE promoted Central Depository Services Ltd was seeking to derive by levying no custody charge. quot;We have been committed to reducing custody charges. We have consistently brought down charges from 0.07 per cent to 0.035 per cent August 1, 1997, then to 0.02 per cent October 1, 1998 and now within six months to 0.01 per cent. We are clear that as the custody of shares and transaction grows we will lower charges,quot; said NSDL managing director CB Bhave.

The depository charges its depository participants custody charge which in turn marks up a certain higher custody charge. However, given the high levels of competition among depository participants the attempt is to keep the custody charge at the lowest level possible.

NSDL has also decided to lower the settlement fees by lowering the transaction costs. The transaction fees will now be lowered to 4 basis points from theearlier levels of 5 basis points.

The issue of custody charges has been a highly emotional one, with a number of investors contesting the need for paying a custody charge for electronic shares considering that they do not pay any charge for holding physical shares. Even though the overall cost of transacting is much lower in a demat environment, the issue of custody charge had become a sore point for a section of the market.

With Sebi making it clear that mandatory demat trading is going to be the norm, it was felt necessary to bring down custody charges lest a small investor suffer by paying a higher charge. The amount of shares dematerialised with NSDL now stands at close to Rs one lakh crore. Close to two-and-a-half lakh investor accounts have been opened with NSDL.