NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement

Inter-Depository Transfers and Settlement Instructions Explained

Updated 11 October 2026 · Fact-checked

An inter-depository transfer (IDT) moves securities between a demat account at NSDL and one at CDSL. The delivering client gives an instruction to its DP, who processes it with the right settlement ID and execution date. Securities stay in electronic form. In an exchange trade, securities instead move through the clearing corporation pool account.

Understand Inter-Depository Transfers and Settlement Instructions

India has two depositories, NSDL and CDSL. Each client's demat account sits with one of them, through a Depository Participant (DP). Trading and settlement on the exchanges is common to both. So a buyer's account may be at CDSL while the seller's is at NSDL.

In an exchange trade, the seller's DP delivers the securities to the clearing member's pool account at the seller's depository. This is pay-in. Clearing corporations use depository-wise pool accounts and inter-depository settlement arrangements to handle the leg between the depositories. Pay-out goes to the buyer's account at the buyer's depository. The seller does not move securities directly to the buyer.

The term inter-depository transfer (IDT) is used for a transfer of securities from an account at one depository to an account at the other, such as an off-market transfer from an NSDL account to a CDSL account. The client's DP sends the instruction. The two depositories then use their inter-depository interface to debit the delivering account and credit the receiving account. Securities stay in electronic form. A security admitted to both depositories carries the same ISIN in both, so it can be held with either. Not every security is available in both.

Every delivery instruction needs identifying details. The settlement ID (made up of a settlement type and a settlement number) tells the depository which settlement the transfer belongs to. The execution date is the date on which the instruction is to be executed. For market trades, this is the pay-in date of the settlement. Off-market transfers have their own execution date.

The DP is the client's only gateway. It must accept instructions only in the prescribed form (a signed delivery instruction slip, or a valid electronic instruction), check them, enter them accurately so they can be executed on the execution date, and not process a defective one. The DP is responsible for what it enters. The exam tests who does what, and which details must match.

For the exam, remember the flow for an account-to-account transfer: client instruction, DP verification, entry in the depository system, then debit and credit in the respective accounts. Do not memorise precise numbers of days unless your NISM workbook gives them.

Key formulas to remember

IDT flow: Client instruction → client's DP verifies and enters it in the depository system → depositories use their inter-depository interface → delivering account debited, receiving account credited; This is for off-market account-to-account transfers between depositories. In an exchange trade, the seller's DP delivers to the clearing member's pool account at the seller's depository (pay-in), and pay-out goes to the buyer's account at the buyer's depository.
Instruction essentials: ISIN + quantity + target account (DP ID + client ID) + settlement ID + execution date; These details must be correct. A mismatch can cause the instruction to fail.
Settlement ID meaning: Settlement ID = settlement type + settlement number; It links the instruction to the right settlement; do not confuse it with the client ID or the ISIN.
Execution date: Execution date = date on which the instruction is to be executed; For market trades, it is the pay-in date of the settlement.
DP duty: Process only valid, authorised instructions, accurately and so that they can be executed on the execution date; The DP must check the signatures against the account records and does not alter client instructions.

How to solve Inter-Depository Transfers and Settlement Instructions questions

Use this method on any question about IDT or settlement instructions.

1Identify what is being asked: the transfer route, an instruction detail, or the DP's duty.
2Check which depositories the two accounts are with. For an account-to-account transfer, different depositories mean an IDT; the same depository means an intra-depository transfer. Exchange trades go through the clearing corporation, not a direct transfer.
3Identify whether it is a market transfer (linked to a settlement) or an off-market transfer.
4Pick out the detail in question: settlement ID, execution date, ISIN, quantity or target account.
5Apply the rule that the DP acts only on a valid, verified instruction from the client.
6Remove options that confuse the settlement ID with the client ID, the ISIN or the exchange.
7Choose the option that matches the workbook's wording.

Quickest way: Three-question check

When to use it: Use when time is short and the options look alike.

Is it an account-to-account transfer between different depositories? If yes, it is an IDT.
Does the option use the right term: settlement ID for the settlement, execution date for when it is to be executed?
Does the DP act only on a valid client instruction? Reject options where it acts on its own.

Common mistakes in Inter-Depository Transfers and Settlement Instructions

Treating the settlement ID as the client ID or DP ID.
All are numeric codes in the instruction form.
Fix: Remember that the settlement ID identifies the settlement. DP ID and client ID identify the account.
Thinking an IDT needs the securities to be rematerialised first.
Students link a change of depository with physical movement.
Fix: Securities stay in electronic form. The transfer is carried out electronically through the depositories' interface, so no physical certificate is involved.
Assuming the DP can modify instructions to correct apparent errors.
It seems helpful.
Fix: The DP processes what the client authorised. A defective instruction goes back to the client.
Confusing execution date with the date of trade.
Both are dates connected with a transaction.
Fix: The execution date is when the instruction is to be carried out, not when the trade was done.
Believing different ISINs apply in NSDL and CDSL.
Two systems suggest two identifiers.
Fix: A security admitted to both depositories carries the same ISIN in both. Not every security is available in both.

Worked examples

Example 1

A client's demat account is with a DP registered with NSDL. The client sells shares on an exchange, and the buyer's account is with a DP of CDSL. How does the delivery reach the buyer, and who initiates the delivery instruction for the seller?

Show the solution

The seller's account is in NSDL and the buyer's is in CDSL.
An exchange trade settles through the clearing corporation. It is not a direct account-to-account transfer between the seller and the buyer.
The seller's delivery instruction goes through the seller's own DP.
The DP verifies it and enters it into the NSDL system. The instruction gives delivery to the clearing member's pool account at NSDL against the settlement ID, with the execution date linked to the pay-in.
The clearing corporation uses its depository-wise pool accounts and inter-depository settlement arrangements to handle the leg between the two depositories.
On pay-out, the securities are credited to the buyer's account at CDSL, the buyer's depository.
A transfer between accounts at different depositories using an inter-depository transfer instruction applies to an off-market transfer, not to this exchange trade.

Answer: The trade settles through the clearing corporation. The seller's own DP at NSDL delivers to the clearing member's pool account at NSDL against the settlement ID (pay-in), and on pay-out the buyer's account at CDSL is credited.

Example 2

Which of the following best describes the settlement ID in a delivery instruction? (a) The unique number of the client's demat account (b) The identifier of the settlement to which the transfer relates (c) The code that identifies the security (d) The number of the DP's registration with SEBI

Show the solution

The client's account number is the client ID, so (a) is wrong.
The security is identified by the ISIN, so (c) is wrong.
The DP's registration number is a SEBI registration number, so (d) is wrong.
The settlement ID identifies the settlement the transfer belongs to, which is (b).

Answer: (b) The identifier of the settlement to which the transfer relates.

Exam tips

Link IDT with 'account-to-account between different depositories' and settlement ID with 'which settlement'.
Expect option sets that mix ISIN, client ID, DP ID and settlement ID. Match each one to its meaning.
Where a question says the DP acts on its own, it is almost always the wrong option.
Check the negative marking rules of the series you are sitting. Series VI carries 25% negative marking, so eliminate options before guessing.
Use the workbook's exact terms for execution date and settlement details.

Practice questions from Functions of Depository Participant - Trading and Settlement

Inter-Depository Transfers and Settlement Instructions: frequently asked questions

What is an inter-depository transfer?

It is a transfer of securities from a demat account at one depository to an account at the other, for example NSDL to CDSL, usually done off-market. The client's DP sends the instruction, and the two depositories use their inter-depository interface to debit the delivering account and credit the receiving account. It is different from an exchange trade, where the seller's DP delivers to the clearing member's pool account at the seller's depository.

What is a settlement ID in a demat transaction?

It identifies the settlement to which a delivery instruction relates and is made up of a settlement type and a settlement number. It is not the same as the client ID or the ISIN. It must be correct for the transfer to be linked properly.

Do securities need to be converted to physical form to move between NSDL and CDSL?

No. They stay in electronic form and are moved electronically between the accounts.

Who gives the instruction for an IDT?

The client, through their own DP. The DP checks the instruction and enters it into the depository system.