Operations demat CDSL NSDL depository participant Depositories Act 1996

Demat accounts and depository participants in India

From WebNotes, a public knowledge base. Last updated 18 May 2026. Reading time ~14 min.

A demat account is the electronic equivalent of a physical share certificate, holding ownership of listed equity, debt, mutual fund units, government securities, and other dematerialised instruments in a single beneficial-owner account at one of India’s two depositories. The Indian depository regime was established under the Depositories Act 1996 , creating a statutory foundation for dematerialisation that allowed the Indian securities market to transition away from paper-based settlement to fully electronic clearing.

The two depositories operating in India are Central Depository Services (India) Limited (CDSL) , promoted by BSE and others in 1999, and the National Securities Depository Limited (NSDL) , promoted by NSE, IDBI Bank, and UTI in 1996. As of 2025, CDSL holds the larger share of retail demat accounts by count (approximately 100 million of the industry’s combined 150 million accounts), while NSDL holds the larger share by asset value because of its dominant institutional and HNI footprint. Both depositories are regulated by SEBI under the Depositories Act and the SEBI (Depositories and Participants) Regulations 2018.

This article serves as an editorial hub on the Indian demat and depository ecosystem, organised by the structural questions a retail or institutional investor needs answered: how the depository system works, what a depository participant does, how to open a demat account, what charges apply, how pledge works after the September 2020 reforms, and how corporate actions and transmission flow through the system. Per-DP details, per-product operational flows, and broker-specific how-to guides live on the linked spoke articles.

The legal framework

The Indian dematerialisation regime rests on the Depositories Act 1996 which authorised SEBI to register depositories and recognised dematerialised securities as fungible negotiable instruments equivalent to their physical counterparts. The Act and subsequent SEBI regulations established:

The depository-participant (DP) model in which depositories serve banks, brokers and other intermediaries who in turn serve end investors.
The beneficial owner principle: the investor remains the beneficial owner of securities held in their demat account, with the depository acting as the safekeeping infrastructure.
The fungibility principle: dematerialised securities of the same ISIN are interchangeable, eliminating the lot-specific identification that physical certificates required.
The single-window settlement model under which all equity and debt settle through the depository.

Prior to dematerialisation, Indian listed equity settled physically with paper share certificates and signed transfer deeds, a process that was slow, error-prone, and exposed to forgery. The transition to demat was phased through the late 1990s and early 2000s, with SEBI eventually mandating compulsory demat-only settlement for listed equity from 1999 onwards. The framework has since been extended to mutual fund units (via dematerialisation of mutual fund units ), G-secs and SDLs through the GoBids platform, sovereign gold bonds, and corporate bonds.

CDSL and NSDL: the two depositories

CDSL

CDSL was incorporated in 1999 with the BSE as the principal promoter. It went public in 2017 and is listed on the NSE (ticker: CDSL). CDSL holds the larger share of retail demat accounts, primarily because discount brokers (Zerodha, Groww, Upstox, 5paisa, Dhan) chose CDSL as their primary depository when they launched. CDSL operates the TPIN authentication system that powers margin pledge and eDIS (electronic delivery instruction slip) after the September 2020 reforms.

NSDL

NSDL was incorporated in 1996 as the older of the two depositories. It holds the larger share by asset value because of its dominant footprint among traditional banks and institutional investors. NSDL operates the SPEED-e platform that is the institutional and HNI-focused authentication infrastructure for pledge and corporate actions.

Differences in practice

For a retail investor, the choice of depository is implicit in the choice of depository participant. Major retail discount brokers (Zerodha, Groww, Upstox, 5paisa, Dhan, Paytm Money) use CDSL. Traditional bank-affiliated brokers (ICICI Direct, HDFC Securities, Kotak Securities, SBI Securities) use NSDL or operate accounts on both. The user-facing experience is similar across both depositories; the operational differences are at the back-office level.

Holding statements

Both depositories publish periodic holding statements. The CAS (Consolidated Account Statement) consolidates holdings across both CDSL and NSDL accounts under a single PAN, providing investors with a unified view. The CDSL and NSDL CAS versions cover the format and reconciliation differences.

Depository participants

A depository participant (DP) is the registered intermediary between the depository and the end investor. Most retail demat accounts in India are opened with one of three DP categories:

Bank DPs

Banks operate as DPs through their broking and depository subsidiaries. ICICI Bank Securities, HDFC Securities, Kotak Securities, SBI Securities and Axis Direct are bank-aligned DPs operating primarily on NSDL. Bank DPs traditionally serve customers who prefer integrated banking-and-broking relationships.

Broker DPs

Discount brokers operate as DPs through their broking entity registered with SEBI. Zerodha operates as a CDSL DP (DP ID 12081600), with its DP code identifying it within the CDSL system. Groww , Upstox , 5paisa , Dhan , and Paytm Money all operate as CDSL DPs.

Specialist DPs

Some DPs operate primarily for institutional or HNI clients and offer fewer retail services. These include certain custodian banks and specialist depository service providers.

Account opening

Documents required

A demat account at any DP requires the same baseline documents:

PAN card.
Aadhaar card for OTP-based e-KYC (or video-KYC where Aadhaar is unavailable).
Bank account verification (cancelled cheque, passbook, or penny-drop verification).
Signature scan.
Photograph.
Income proof (for derivatives segment activation).

KYC and onboarding flow

The full demat account opening process follows the discount-broker flow documented in discount brokers in India :

Online registration with PAN.
Aadhaar e-KYC through OTP.
Bank-account verification.
Signature and photo upload.
DDPI authorisation (the post-Karvy replacement for the old Power of Attorney).
TPIN generation at CDSL or SPEED-e setup at NSDL.
Demat account activation (typically 1-3 business days).

Joint demat holders

Demat accounts can be held jointly with up to three holders. The Zerodha joint demat holders process and how to add a joint holder to a Zerodha demat cover the operational steps. Note that mutual fund folios held in dematerialised form follow the same joint-holder rules as cash holdings.

Demat account charges

The principal charges on a demat account are:

Account opening: typically zero at discount brokers, though some bank DPs still charge Rs 200-500.
Annual maintenance charge (AMC): Rs 0 to Rs 750 per year depending on DP. Zerodha charges Rs 300 per year billed quarterly; Groww’s first-year AMC is zero, then Rs 50 per month.
DP charges on sell-side transactions: Rs 13.5 to Rs 20 per scrip on sell, regardless of quantity. The Zerodha DP charges page documents the breakdown.
Pledge and unpledge charges: typically Rs 20 to Rs 30 per ISIN per pledge or unpledge transaction.
Off-market transfer charges: Rs 25 to Rs 50 per ISIN for off-market deliveries.
Conversion of physical to demat: Rs 30 to Rs 100 per request. See how to convert physical shares to demat .

Pledge and margin

The SEBI margin pledge framework of September 2020 replaced the old Power of Attorney regime with a depository-level pledge mechanism requiring per-transaction TPIN and OTP authorisation. The shift was driven by the Karvy Stock Broking pledge-misuse case of 2019 which exposed how the PoA mechanism could be abused.

Under the current framework:

Securities used as derivatives margin remain in the investor’s own demat account.
The investor authorises each pledge through a TPIN (CDSL) or SPEED-e OTP (NSDL).
The broker re-pledges to the clearing corporation only after the investor authorisation is complete.
Unpledging follows the same per-transaction authorisation flow.

The Zerodha margin pledge mechanics details the operational flow for Zerodha clients specifically.

Corporate actions and transmission

Corporate actions on dematerialised securities (bonus, splits, dividends, rights, mergers) are credited directly to the demat account based on the record date. The depository performs the action across all affected ISIN holdings overnight. The Console Corporate Actions workflow on Zerodha covers the broker-level reporting and reconciliation.

Transmission of demat holdings on the death of a holder follows the SEBI transmission framework (operationally similar to mutual fund transmission). The legal heir submits a transmission request to the DP along with the death certificate and identity documents. The how to do a transmission of shares at Zerodha walks through the broker-specific flow.

Sell-side authentication: TPIN and eDIS

Selling demat-held equity requires authentication that the seller is the beneficial owner. Pre-September 2020 this was handled via PoA. Post the reforms, every sell uses:

TPIN for CDSL accounts: a six-digit PIN set by the investor that authenticates each sell.
eDIS (electronic delivery instruction slip) as the formal authorisation generated on the CDSL portal.
SPEED-e for NSDL accounts: equivalent mechanism with OTP authentication.

The how to fix DP sell rejection on Zerodha covers the common operational failures on the eDIS / TPIN flow.

Merging demat accounts and account closure

Investors often end up with multiple demat accounts across different DPs and may want to consolidate. The how to merge demat accounts at Zerodha describes the off-market transfer flow to consolidate into one account.

Account closure follows a documented process: transfer all holdings out to another demat account or sell them, clear the AMC and any other outstanding charges, and submit a written closure request. Most DPs do not charge for closure but may retain AMC for the partial year.

Dematerialisation of mutual fund units

While mutual fund folios at AMCs are not technically demat accounts, the dematerialisation of mutual fund units framework allows investors to hold MF units in their demat account for portfolio consolidation. The how to dematerialise mutual fund units from SOA covers the conversion process from statement-of-account form to demat form.

External references

References

Depositories Act 1996, indiacode.nic.in.
SEBI (Depositories and Participants) Regulations 2018 and subsequent amendments, sebi.gov.in.
CDSL operational disclosures and TPIN framework, cdslindia.com, accessed May 2026.
NSDL operational disclosures and SPEED-e framework, nsdl.co.in.
SEBI margin pledge framework circular dated 25 February 2020 and subsequent operationalisation circulars.
CDSL and NSDL public disclosures of registered DPs and demat-account statistics.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 18 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.