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Depository companies declare tariff war

Central Depository Services (India) Limited, promoted by the Bombay Stock Exchange and a few large banks, will charge lower tariffs from depository participants or DPs than those of National Securities Depository Limited.

CDSL's gambit seems to be to target the small investor, who may ultimately benefit as the two depositories of the country are likely to openly compete against each other to capture a major share of demat business.

For starters, CDSL has announced that it would not levy custody charge on its DPs and charge no fees for dematerialising or rematerialising shares. NSDL, which currently charges 0.02 per cent of the transaction value as custody fees, is bringing it further down to 0.01 per cent from April 1.

NSDL, like CDSL, levies no charge for demat but has a nominal 0.01 per cent charge for rematerialisation.

The country's first depository has completely waived account maintenance charges for both retail and institutional investors. CDSL, on the other hand, has a tariff of Rs 50 for retail and Rs 500 for beneficial owners or BOs. The depository has waived the account mainteinance charges for individuals till March 31, 2000 and for BOs till March 31 this year.

The transaction charges for CDSL is 0.02 per cent of the transaction value for on-market trading in demat shares, as against 0.05 per cent charged by NSDL.

Like NSDL, the DPs of CDSL are free to have their own schedule of charges. ''The DPs of CDSL would charge the investors to the level that would enable them to recover the costs. However, since most of our DPs will be brokers, they would endeavour to absorb the demat fees in their brokerages and make it a sound business proposition,'' said a CDSL source.

The set-up cost proposed to be charged by CDSLl from its DPs appears to be competitive. The hardware cost is lower than NSDL, while software is being provided free of cost.

The harware set-up cost for a single user network is Rs 824,000 and in case of BSE members, who have subscribed to the CDSl's Rs 1.01 billion share capital, it is Rs 600,000. CDSL would, however, levy Rs 20,000 every year as recurring charges for maintenance of software.

An additional charge of Rs 5,000 would be levied for software at an additional location. The entry fee for DPs at CDSL is Rs 20,000 as against Rs 25,000 charged by NSDL.

The insurance cover provided by CDSL is Rs 500 million per incident with unlimited reinstatements and insurance premium to be charged is Rs 30,000 per annum. In the case of NSDL, the cover is for Rs 200 million, while premium is Rs 36,550 per annum. And Rs 180 for every Rs 10 million of demat securities.

UNI

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