Implementation of the single demat account (for all asset classes) has been delayed though the Centre announced it more than two years ago. Central Depository Services Ltd (CDSL) would be a major beneficiary if the single demat account comes about, says PS Reddy, its MD &CEO.
In a one-to-one interaction with BusinessLine , Reddy also speaks about the issues related to its insurance repository business, new initiatives and use of Aadhaar. Excerpts:
What are the challenges facing the single demat account?
The assets fall under different regulators (RBI, SEBI, IRDA and PFRDA). All regulators should come together and then work out a solution and then rollout map for the single demat account. The task has been given to FSDC (Financial Stability Development Council) and somewhere it is stuck there.
Is there any particular issue that needs to be rectified?
One is that under the depository regulations, the other assets (insurance policies, pension accounts) regulated by other regulators has to be notified as eligible securities to be held in demat form.
Then the other regulators (RBI, IRDA and PFRDA) have to frame their own guidelines as to how these assets can be held in demat, what are the operational guidelines to be given to depositories and investors, etc.
What is the update on CDSL’s IPO application to SEBI?
Our board and shareholders have given their approval for the IPO and we have already made an application to SEBI. In January, SEBI came out with norms for listing market infrastructure institutions (stock exchanges and depositories). Our application is pending and we hope to get some information from SEBI on the IPO.
How has Aadhaar changed the way you work?
It is a very important institutional intervention for us in this market. e-KYC has been started and is slowly picking up. PAN card is still mandatory and is provided by most investors as proof of identity.
Aadhaar is one of the many alternatives for proof of residence given that other details are also furnished.
It is yet to pick up and in my view it will.
How is your insurance repository business doing?
It is not doing well as we thought it would do as the largest insurance player LIC is not participating in the insurance repository business.
At the same time, the issuance of insurance policies in demat form has not been made mandatory. If you draw a parallel, SEBI has mandated delivery of securities on exchanges in demat form. That is how the dematerialisation of securities was given a fillip. Unless such a thing is proposed by IRDA it may not pick up.
Any new initiatives that CDSL has brought in recently?
We have introduced m-voting for investors where they can use our app to cast their vote in company resolutions and participate in decision making on the go.
Our e-locker is a precursor to the single demat account. Investors can scan all their financial instruments and store them in the e-locker after entering data on instrument details such as maturity date, redemption date or interest rate and the like. Just before the due date, an SMS/email alert is sent to the investor so that he can get it renewed or redeem the instrument. Once single demat comes, probably these records would have no meaning as the details will be merged into the account statement.
What is the kind of growth do you see in your business once single demat comes in?
The growth will be exponential as we will be catering to insurance, banking and pensions sectors as well.
For instance, authentic data on company fixed deposits are not available — that is data on who has issued FDs, who has paid interest principal on time and who has not can be easily captured if FDs are dematerialised.
We will be able to generate a good MIS for the concerned authorities.
Investors would not have to inform change in demographic details or KYC to each and every entity that they have an account — that is, their banker, their insurer, their broker or their pension fund manager.
Once they inform the depository about the changes, all concerned issuers will be informed automatically.