NISM-Series-VI: Depository Operations · Introduction to Depository

Indian Depositories: NSDL and CDSL Explained

Updated 11 October 2026 · Fact-checked

India has two depositories: NSDL (National Securities Depository Limited), set up first, and CDSL (Central Depository Services (India) Limited). Both hold securities in electronic form and work through depository participants. Exam questions test who promoted each, which came first, and how they are regulated under SEBI.

Understand Indian Depositories: NSDL and CDSL

A depository holds your securities in electronic form, like a bank holds money. In India, two depositories are registered with SEBI and operate: NSDL and CDSL. Both work under the Depositories Act, 1996 and SEBI regulations.

NSDL was the first depository in India. It started operations in 1996. It was promoted by institutions such as IDBI (now IDBI Bank), UTI (now Axis Bank) and the National Stock Exchange of India Limited (NSE). NSDL is closely linked with NSE, though you can use it to settle trades from any exchange.

CDSL started operations in 1999. It was promoted by the Bombay Stock Exchange (BSE) together with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank and Standard Chartered Bank. CDSL is linked with BSE in the same way NSDL is linked with NSE.

You, the investor, do not deal with a depository directly. You open a demat account with a depository participant (DP), which is the agent of the depository. The DP can be a bank, broker or other SEBI-registered entity. Each DP is registered with one depository for a given account, and you can hold accounts with both depositories if you wish.

Both depositories offer the same core services: dematerialisation, rematerialisation, transfer of securities, pledge, and corporate action credits. They are also regulated by the same rules. So exam questions focus on history, promoters and linkages rather than on different functions.

Key formulas to remember

Number of depositories: Depositories operating in India = 2 (NSDL and CDSL); Both are registered with SEBI under the Depositories Act, 1996.
Order of commencement: NSDL (1996) → CDSL (1999); NSDL is the first depository in India. CDSL is the second.
Exchange link: NSDL ↔ NSE; CDSL ↔ BSE; Promoter association only. Investors can trade on any exchange with an account at either depository.
Investor access: Investor → DP → Depository; You deal with a DP, not directly with NSDL or CDSL.

How to solve Indian Depositories: NSDL and CDSL questions

Use this method for any question on Indian depositories.

1Read the question and mark the key word: first, second, promoter, exchange link, or number of depositories.
2Recall the anchor: NSDL is first (1996) and linked with NSE; CDSL is second (1999) and linked with BSE.
3If the question asks about promoters, match banks and institutions to each depository. Remember IDBI, UTI and NSE for NSDL, and BSE with large banks for CDSL.
4If the question asks about functions, remember both offer the same services under the same law.
5If it asks about the investor's link, choose the DP as the agent of the depository.
6Eliminate options that say a depository is limited to one exchange or that the investor must deal directly with it.
7Pick the option that fits all conditions in the statement.

Quickest way: The 1-2 anchor

When to use it: Use this when you have under a minute for a question on history or promoters.

Say it as a pair: NSDL = 1st = NSE; CDSL = 2nd = BSE.
Match the option to that pair.
Reject any option that assigns different functions or legal status to the two.
Confirm that the option agrees with the DP being the investor's point of contact.

Common mistakes in Indian Depositories: NSDL and CDSL

Saying CDSL was the first depository in India.
CDSL is linked to BSE, the older exchange, so students assume it came first.
Fix: Remember that the age of the exchange does not matter. NSDL began in 1996 and CDSL in 1999.
Believing you can use NSDL only for NSE trades and CDSL only for BSE trades.
The promoter link is mistaken for a restriction.
Fix: Both depositories settle trades from any exchange. The link is only about who promoted them.
Thinking investors open accounts directly with NSDL or CDSL.
Students treat the depository like a bank branch.
Fix: The account is opened with a DP. The DP is the agent of the depository.
Mixing up the promoters of the two depositories.
Both were promoted by banks and institutions, so names blur.
Fix: Tie IDBI, UTI and NSE to NSDL. Tie BSE and a group of banks to CDSL.
Assuming the two depositories follow different laws.
They have different owners and names.
Fix: Both are governed by the Depositories Act, 1996 and SEBI regulations. The rules for DPs and investors are the same.

Worked examples

Example 1

Which of the following is correct about the depositories in India?
A) CDSL began operations before NSDL
B) NSDL was the first depository, promoted by institutions including IDBI, UTI and NSE
C) NSDL can settle only NSE trades
D) CDSL was promoted solely by NSE

Show the solution

Check A: NSDL began in 1996 and CDSL in 1999. So A is wrong.
Check B: NSDL is the first depository and its promoters include IDBI, UTI and NSE. This matches.
Check C: NSDL is not limited to NSE trades. C is wrong.
Check D: CDSL was promoted by BSE along with banks, not by NSE. D is wrong.

Answer: B

Example 2

An investor wants to hold shares in demat form. With whom does she open the demat account?
A) Directly with SEBI
B) Directly with the stock exchange
C) A depository participant registered with a depository
D) The issuing company only

Show the solution

A depository does not deal with investors directly. It works through DPs.
SEBI is the regulator and does not open accounts. So A is wrong.
Exchanges are trading platforms, not account providers. So B is wrong.
The issuer does not open demat accounts for investors. So D is wrong.
The DP, registered with NSDL or CDSL, opens the account.

Answer: C

Exam tips

Memorise the pair: NSDL first, 1996, NSE link; CDSL second, 1999, BSE link.
Watch for options that call the exchange link a restriction. They are traps.
If a question says two depositories operate in India, it is correct. Do not be misled by older references to other bodies.
Questions on functions usually treat both depositories as the same. Do not pick an option that gives one of them extra legal powers.
Negative marking is 25% of the question's marks, so skip a promoter question only if you cannot narrow down to two options.

Practice questions from Introduction to Depository

Indian Depositories: NSDL and CDSL: frequently asked questions

How many depositories are there in India?

There are two depositories operating in India: NSDL and CDSL. Both are registered with SEBI under the Depositories Act, 1996.

What is the difference between NSDL and CDSL?

NSDL started first, in 1996, and is associated with NSE. CDSL started in 1999 and is associated with BSE. Their core services and legal framework are the same.

Who promoted NSDL and CDSL?

NSDL was promoted by institutions such as IDBI, UTI and NSE. CDSL was promoted by BSE along with leading banks. Learn these links as they are commonly tested.

Can I hold demat accounts with both NSDL and CDSL?

Yes. You can open accounts through DPs registered with either depository. Each account sits with one depository, and you operate it through your DP.