[Economy 4 Newbie] Infrastructure – Roads, Railways, Seaports etc

Enter your email address

Once you subscribe,
you'll get my full articles
in your email for free!
See Below
The Number of readers
I already have!

[Economy 4 Newbie] Infrastructure – Roads, Railways, Seaports etc.

Infrastructure is one of the most important topics for UPSC, because in mains-essay-interview it helps you frame better answer in almost all questions regarding India’s problems (ranging from Maoist to insurgency to poverty) this article is just to give basic highlights about infrastructure concepts, the minute fact-data you can find from any magazine.

Contents

What is infrastructure?              1

Classification              1

Why infrastructure in important?              1

Physical Infrastructure              3

Roads              3

NHAI isn't working @ its full potential because              3

Sam Pitroda has pointed out the difficulty -              3

Railways              4

CROSS SUBSIDISATION              4

Railway's earning              4

Problem for Railways              4

Seaports              5

REGULATION of sea-ports              5

‘landlord’ ports              6

Airports              6

Problems              6

Energy              6

Problems in Electricity supply              6

communication              7

Universal Service Obligations: (USO)              7

Niche Operators              7

Creating Mobile Telephone Infrastructure              7

Subsidising the Rural Household DELs              8

Banking Infrastructure              8

What does the Bank do?              8

Inter-State Difference in infrastructure              8

Social infrastructure              8

Health              8

Some Facts-              8

Education              9

Who should create infrastructure?              9

 

What is infrastructure?

·       In simple terms, things like roads, dams, power-plants,schools, etc. help you in your life and business = this is infrastructure.

·       “infrastructure” is defined in dictionary as “the underlying foundation or basic framework”

·       Broadly, infrastructure includes all public services from law and order through education and public health to transportation, communications, power and water supply, as well as irrigation and drainage systems.

Classification

 

 

 

 

What’s the use of Infrastructure?

Why infrastructure in important?

How does it help in economic Development ?

 

Infrastructure contributes to development both directly and indirectly.

 

·       When Govt. opens more polytechnique, IITs,IIMs  you'll get better trained people to work in factories and business.thus,

Quality of labour is enhanced by human capital improvements via Social infrastructure

 

 

·       Suppose you're running a cybercafe. So, the shop, the computers and internet connection is your 'capital' (=something that generates money.) But what if there is no electricity in 3 days per week?/ slow internet connection? = your business will be ruined.

·       So, When Govt. opens more powerhouses, lays more telephone cables, sends more Satellites = your cybercafe will earn more money.

Thus,

productivity of physical capital is improved by power and transportation etc economic infrastructures.  

 

 

If you're a truck driver. If the roads are bad then? Truck's tyres,engine will need more servicing.

If the roads are good then? you'll be able to drive your truck faster and make more trips.

Thus,

Infrastructure lowers the cost of producing a given level of output or, alternatively, can increase the amount of output produced by all other inputs for a given cost. 

 

•  Infrastructure enables markets to work better. Transactions are made less costly and this increases the benefits  of trade. For example, advances in transport and communications have considerably lowered storage costs by permitting producers to respond rapidly to changing consumer demands

even in international trade. (this  is referred to as “modern logistics management”).

 

If you're running a factory, and there is no electricity 3 days per week, then you'll waste lot of your money buying & running diesel generators & then you'll sell your products at higher cost, to recover that money you wasted in diesel.

Thus,

Unit costs tend to rise due to unreliable or inaccessible public infrastructure.

Both small and big firms spend a significant portion of their expenditure on buying infrastructure services and suffer when these are not available.

 

Now lets take a look @ some very important segments of infrastructure.

Physical Infrastructure

Roads

 

Roads are divided into five categories for administrative purposes.

1.    National highways,

2.    State highways,

3.    major district roads,

4.    other district roads

5.    village roads

 

·       Central  Govt. is responsible for maintaining the National Highways, other 4 types of roads are maintained by State Govt.

·       Before LPG in 1991, only Govt. could invest in making roads. but after LPG, National Highways Act was amended in 1995 to allow private sector participation.

·       NHAI (National Highways Authority of India) was created to build and upgrade national highways.

·       Funds have been made available to the NHAI for its capital base through a tax on motor spirit and cess on diesel.

but yet

NHAI isn't working @ its full potential because

1.    Frequent change of officers ( 5 chairmans in last 3 years)

2.    Environment ministry clearance (you want to chop down trees to make roads then you need permission from Forest Dept.)

3.    Land Aquisition

Sam Pitroda has pointed out the difficulty -

·       In old times (60s to 90s) when the land was cheap, Govt. didnot acquire it,

·       so now it has to buy the land and pay very  high prices per square meter + other compensation. (+ the pseudo-environmentalists)

 

Railways

·       Railways provide energy efficient form of transportation compared to roads.

·       i.e. you want to send tonnes of wheat/coal from one state to another, it'll consume more dieasel if you do it via trucks.

·       railway services are intermediate inputs to production; any reduction in these input costs raises the profitability of production.

 

CROSS SUBSIDISATION

 

·       Traditionally, railways are seen as part of essential public service

·       =railways should not be denied to even those who are unable to pay fully.

·       (=poor people should also be allowed to enjoy railways= Garib Rath / Student concession pass etc.) 

·       But it doesn't fall from sky, if someone is enjoy something then  somebody has to pay money for it, right ?

·       so, freight charges* and upper class passengers ticket prices are set high, to cover that cost.

·       this is called "Cross subsidisation"

 

Railway's earning

·       30 % from Passenge tickets

·       70 % from Freight traffic.*

·       <*when you send physical items like wheat / coal = this is 'Freight'>

 

Problem for Railways

as you saw, 70% of Railway's profit comes from Freight traffic but nowadays it's facing high compitition from other sectors. like

 

road sector the four-laning of the “Golden quadrilateral” and tnew expressway stretches.

use of pipelines for the transportation of petroleum products

coal and cement have started moving via coastal shipping.

+ Cheaper airplane tickets  so those previously moving via 1st class AC Railways, switch to Airlines when prices are low.

 

But above 4 are also 'infrastructure' (roads, pipelines,shipping ports, airports!)  so any

Development of one infrastructure may degrade the Development of other infrastructure

But, ultimately the common people benefit from it.+ Compitition lowers the prices

 

To solve the problems, Railway had taken some steps

 

·       Gauge conversion,

·       doubling of existing single lanes,

·       electrification projects,

·       allowing Private companies to make wagons and passenger coaches

·       running Duranto Expresses

·       and many more.

 

 

Seaports

·       India has coastline of 7,000+ kms and

·       12 major ports (managed by Central  Govt.| account for over 75 % of total cargo)

·       185 minor ports (managed by State Govt. |25% Cargo transported via them)

 

·       After LPG, Private companies are allowed to participate in Development of these ports.

 

·       If you want to export Wheat to S.Africa, then it'll be expensive if you do it using aeroplanes.

·       but cheaper via sea-routes.

·       But first of all you've to transport  the wheat grown in Punjab  / UP/Haryana to Mumbai's port via Railway/Trucks.

·       Thus,

·    Ports require good inland connectivity (via rails/roads)

 

so Efficiency of one infrastructure depends on other infrastructures.

 

That's why, Government is investing in improving the road connectivity to major ports through the NHDP.

 

REGULATION of sea-ports

·       as you know, there is TRAI (Telephone regulatory Authority of India) as 'judge' for telephone related matters. (otherwise BSNL will act as monopoly and pvt players like Vodaphone, Airtel won't get level playing field in spectrum allocation etc.) 

·       same way, for level playing field in sea-port operations Tariff Authority for Major Ports (TAMP) has been set up.

 

‘landlord’ ports

·       when cargo handling is done by private players, such ports are called landlord ports. (just like airport  Management given to pvt players.)

·       but in India all major ports are run by Port Trust made by central  Govt.

·       the concept of Landlord ports is not yet implemented in 'Major Ports'.

·       but A wholly private owned port of Pipavav is setup in Gujarat = this is Landlord Port.

·       port of Sika ( Gujarat) accounts for the largest cargo handling among all ports in the country. (its connected to Reliance Refinery @ Jamnagar.)

 

Airports

·       Airports are under the management of Airports Authority of India.

·       Private investments are to be drafted for the upgradation of the four major airports (Delhi – Mumbai – Kolkata and Chennai).

·       ‘greenfield’ airports under private ownership are coming up at Bangalore

·       and Hyderabad. 

·       new airport promoted by Kerala State Government has come up in Kochi with private investor participation.

 

Problems

·       Tax on Aviation fuel = air-tickets costly.

·       Big burden on tax payers, known as Air-India.

 

Energy

 

estimated 80,000 villages yet to be electrified,

Problems in Electricity supply

·       Uneconomic tariffs charged from the priority sectors,

·       Factories have to pay higher bills per unit of electricity so that Govt. can give free/cheaper electricity to farmers. (again cross subsidisation)

·       High transmission and distribution losses (T&D losses) because of bad equipements.

·       Electricty theft.

·       Financial constraints to undertake systems improvement schemes

·       = since you're supplying electrictity  @

 

communication

·       New Telecom Policy (NTP) was introduced in 1999.

·       its aim is to provide connectivity to all rural, hill villages & remote parts.

·       + level playing field for pvt players.(against BSnL)

 

·       over 2,00,000 villages were unconnected’  (as of June 2002) 

·       Many rural / hill areas don't get adequate telephone/mobile connectivity because they're "high cost service areas "

·       =mobile companies don't earn enough revenues (income) to  cover costs of operating in that area.

·       Thus it falls on Govt's shoulders to do that work. (that's why Govt. PSU BSNL exists.) --> this is one of the arguments in favor of public sector undertakings

·       = to serve the people where pvt players are not interested to work in. anyways, back to the topic:-

 

Universal Service Obligations: (USO)

·       in short Govt. says it'll try to give phone connectivity to rural areas.

·       for this they created a fund called USO fund. so when pvt players do something in rural areas, they'll get money from it.

·       Govt. is trying to increase the teledensity in rural areas via 3 strategies

 

Niche Operators

 

It is assessed by TRAI that despite the USO support, existing big service

providers would not be interested to serve about 50 per cent of the villages. To

address this issue, TRAI in its Unified Licensing recommendations envisaged

that the Short Distance Charging Areas with teledensity less than 1 per cent be

notified as telecom-wise-backward areas. In these areas, niche operators,

defined as ‘the telecom service providers whose services are restricted to these

backward areas only’ will be inducted. These operators are entitled for

concessions of zero entry fees, lower license fees and funds. The scheme is aimed to promote local entrepreneurs who have the technical competence to provide communication solutions but cannot compete on equal footing with large operators. 

 

Creating Mobile Telephone Infrastructure 

means if you're setting up mobile tower / need land in backward area then Govt. will give you subsidy. but after 1 year you'll have to share that tower with other players by taking some fees from them.

 

 

Subsidising the Rural Household DELs

in short it means if you're the Tata/ Airtel/Vodafone and if setup phone lines in rural areas then Govt. gives you subsidy for that work.

 

Banking Infrastructure

What does the Bank do?

it saves your money, give you interest on it and it'll give that money as loan to someone else to buy home/start business.thus,

Banks transfers the savings into productive investment.

But its not just the banks- but share market as well that transfers savings into investment.

 

Inter-State Difference in infrastructure

In Bihar only 10% of households have access to electricity, While in Andhra its 67%  (2001 Census )

 

(we’ll have to go to Development administration, polity ,centre –state relations, history etc things to understand this inter-state difference in infrastrucutre.) so not writing much on that here.

 

until now we talked of Physical infra. now lets see the

Social infrastructure

 

Health

Human Develpoement index has 3 components

·       Income

·       Knowledge

·       Health.

Some Facts-

·       10th  Plan talked about  effectively using traditional Indian  medicine system consisting of  ayurveda, yoga, unani and  siddha.

·       These combined with homeopathy is named as AYUSH (was asked in mains 2009.)

·       Generally Govt. funds are mostly spent on preventing the of communicable diseases.(AIDS, Cholera,Polio etc) + family planning schemes.

·       But in 10th plan they talked about National Mental Health Programme (for 'mentally challanged')

·       India has 1/6th of humans living in this world.

·       By 2050 we'll be the country  with largest population on earth.

·       large population has its problem- drinking water, food etc.

 

Total Sanitation Campaign

= making toilets in the rural areas = sanitation

= people don't fall ill in water-bourne disease

= their productivity increases (since they're not in bed and doing work (=earing money)+ their savings saved from being wasted in medicines.)

 

Education

In today’s speech, Obama said

“the best poverty removal program is world class education”

 

You can find the data regarding Sarva-Siksha Abhiyaan + Mid day meal from yearbook or similar books/magazines. So I’m not writing much on it here.

 

Now the last part for this article

 

Who should create infrastructure?

·       Govt. made a huge bridge on sea in Mumbai called Warli-Bandra sea link.

·       Now every car passing from it has to pay about 25-50 Rs.

·       But Govt. spent crores of rupees making the bridge + they’ve to maintain staff to collect those fees from cars , and pay that staff the salary.

·       So it’ll take almost 100 Years to ‘recover’ the money Govt. invested it.

 

Second case

·       We get water from Narmada dam, every morning for 2 hours. For that we’ve to pay about 450 Rs. A year. Again- as the same reason given above-- So it’ll take almost 100 Years to ‘recover’ the money Govt. invested it making the dam.

 

·       But we cannot deny the fact the bridges and dams are important.

·       But private players won’t be interested in making them because it takes long time to recover the money invested = long gestation time.

·       That’s why the physical infrastructure like heavy industries, dams, roads, bridges etc. is considered to be responsibility of the Govt.

 

·       Problem when Govt. starts doing something = red tape, inefficiency, corruption. + nowadays Govt. doesn’t have lot money to make new project.

·       That’s why they talk about keeping the private players

·       So we get PPP = public pvt partnership project.

·       Then we’ve BOT= build operate transfer type of project. I’ll talk about this two (PPP/BOT) in detail in another article.

 

 

 

 

 

 

[Economy 4 Newbie] SEBI & Stock Exchange (The Beginning)

Enter your email address

Once you subscribe,
you'll get my full articles
in your email for free!
See Below
The Number of readers
I already have!

[Economy 4 Newbie] SEBI & Stock Exchange -BSE,NSE (The beginning)

 

This is the first article regarding how and why SEBI came to existence and how things were running in Stock markets in old times. The more about how they calculate SENSEX etc. will be dealt in upcoming articles later on.

As usual, my articles are politically and technically not 100% correct.

 

To understand this article better.--Make sure you read my previous article about Securities, Derivatives & Financial Market.

 

Contents

What is SEBI?              1

Why did the government create SEBI?              1

The problems in Primary market before SEBI came              1

The problems in secondary market before SEBI came              1

problems of Stock markets before SEBI came              2

Specific problems in Share market before 1992              2

“open outcry” system              2

The settlement system              3

“bad delivery” of Shares              3

Reasons for inaccurate signature              3

NSE (National stock exchange)              3

NSE came with 4 innovations              4

Computerized trading              4

Satellite communication              4

Professional managers              4

Weekly settlement              5

Result-BSE Is busted              5

All this, lead to 5 good things Stock markets              5

Improved Transparency:              5

Anonymity= no cartels              5

More brokers = competition =good for clients              6

No more bad delivery              6

Investors outside Mumbai can earn money              6

National Securities Clearing Corporation Limited (NSCCL)              6

Demat account              6

 

 

What is SEBI?

 

·       Securities and Exchange Board of India = SEBI

·       It regulates both the primary and secondary markets. (explained in my previous article)

·       It protects the interests of the investors in securities

·       It promotes the development of the securities market.

·       SEBI was established in 1988 but was given statutory powers in 1992, and started working effectively since 1993.

Why did the government create SEBI?

As you know that in India, the Government won’t do any major reform or action unless the things get messed up really bad. The same was the case why SEBI was given the power to control both primary and secondary market because they were in complete mess. So lets first see, what was the problems in primary and secondary markets before SEBI came in picture.

 

The problems in Primary market before SEBI came

·       primary market was extremely restrictive regulations on the issuers enforced by the Controller of Capital Issues (CCI)

Now lets assume I'm the big businessman.

·       Primary market is where i issue my security for the first time.

·       I can't fix the prices of my shares, as I like, because i've to follow the rules made by CCI.

·       but that dude always underprice my issues.

·       When I put my equity shares for the first time in Primary market = this is IPO (initial public offering)

·       but now as you know that I can't fix high prices for my IPO due to CCI dude.

·       so my IPO is very cheap.

·       so lots of people will send application to buy it because its cheap  (= over subscription) 

·       so i'll have to give the IPO shares via lottery only to a few people.

·       but those who get my cheap IPO via lottery will immediately go to secondary market and sell it at higher price.

·       = I lost money (that I could have made if CCI dude allowed me to sell my IPO @ higer price.)

·       and those lucky dudes who won the lottery made money without really doing anything.

·       As you can see, all this is not good for industrial Development.

 

The problems in secondary market before SEBI came

 

Secondary market = where you trade the securities that you purchased from primary market.

For general understanding-  the stock markets = secondary market = where you sell/buy shares.

So lets see the

problems of Stock markets before SEBI came

 

·       first organized stock exchange was established in 1875 in Bombay (now Mumbai)

·       there were almost 20 regional stock exchanges in 1992,

·       but  trading was concentrated in Bombay Stock Exchange and it enjoyed a monopoly

·       Users from outside Bombay found it extremely difficult to trade in BSE due to poor technology and high cost of telecommunications. (they didn’t have internet or cellphones with free incoming calls in 1992!)

·       BSE imposed a high entry barrier, so that competition among brokers was absent.

·       That’s why  services provided by the brokers were, thus, extremely inefficient and costly. (its same like Indian railway’s stinking toilets- you can’t complain because railway don’t have much competition.)

Specific problems in Share market before 1992

“open outcry” system

·       means trading used to take place in trading ring where non-brokers were not allowed in.

·       These traders will shout the prices like we've in vegetable markets.

·       There wasn't any mechanism to verify the prices at which trading actually took place.

·       So, brokers used to charge prices to the investors (buyers and sellers of securities) that were usually different from the actual prices

·       =brokers used to report higher than actual prices for buy orders and lower than actual prices for sell orders).

·       If investors (buyers or sellers) demanded a more accurate price, orders often got cancelled (for example, the broker could simply claim that such a favourable price was not obtained in the market).

The settlement system

·       payment of money and delivery of securities after trade by the brokers to both parties (buyer and seller of shares)

·       it favored the brokers and was to the disadvantage of the investors.

·       the settlement was “futures-style” and was on a fortnightly basis.

·       means that trading done during a fortnight would be settled at the end of the fortnight.

·       system of badla =enabled the brokers to carry forward their liability (of money or securities) to next settlement.

·       so, brokers could postpone settlement almost indefinitely, if the prices were not favorable to them.

·       This led to a high degree of risks. Large-scale problems arising out of failure to make payment or deliver shares, would lead to closure of BSE for days together,

·       this  used to recur at the rate of almost once every other year.

 

“bad delivery” of Shares

·       Even after you buy the shares and get the paper in your hands- you had to send the shares to the registrar of the company to register the ownership of that share in your name.

·       At this stage, the problem of bad delivery arose due to a number of problems

·       if the signature of the seller did not match with the one maintained with the registrar, the shares were sent back.

Reasons for inaccurate signature

·       The seller of the shares, who probably purchased the shares years back, might unwillingly sign in a different manner.

·       But in many cases, manipulations by unscrupulous operators were responsible.

·       counterfeit shares (wherein any signature were put by the counterfeiter),

·       Engineering bad deliveries by selling party’s brokers or by the companies themselves to delay settlement in order to support price manipulation.

·       The time lag between buying shares and getting it registered in the name of the buyer used to take anything between 1-3 months if everything was alright.

·       The time lag normally went up to six months on an average in case of bad delivery.

 

Anyways so above were the problems with primary + secondary market so Govt. made a law to give powers to SEBI to control them both. And so CCI was abolished.

 

NSE (National stock exchange) was established to end the monopoly of Bombay Stock Exchange.

 

NSE (National stock exchange)

·       NSE was a new exchange promoted and owned by public sector financial institutions (like IDBI, UTI, LIC, GIC, IFCI, etc.) and banks.

·       NSE is  professionally-managed (as opposed to the other exchanges that are managed by brokers or members still today)

 

You saw the problems of BSE ago, and to curb them,

NSE came with 4 innovations

 

Computerized trading

·       First, physical, floor-based, brokers-dominated trading outside the eyes of the investors was replaced by anonymous, computerized order matching system

·       where trading is done in front of the investors.

·       The order-matching system is characterized by strict price-time priority,

·       wherein an order is executed according to the price parameters set by the investors.

·       The OTCEI, which was set up in 1992, was the first computerised exchange in India.

·       NSE started operations in 1994 with electronic trading, while all other exchanges introduced electronic trading subsequently.

·       By March 31, 1999, all the 23 stock exchanges in the country had computerised on-line screen based trading.

Satellite communication

·       to spread the reach of the exchange to all over the country was attempted successfully, for the first time, by NSE.

·       This was in stark contrast to the other exchanges which till then had the reach limited to their cities of operation for over a century. 

 

Professional managers

·       the traditional exchanges were and still are managed by the member brokers.

·       This gave rise to many malpractices, a conflict of interest being the most important one. Since the brokers themselves were in charge of enforcement of rules and regulations, they never took a decision in favour of the investors that went against their interest.

·       This gave rise to a conflict of interest between the members as brokers and members as responsible for enforcement of rules and regulations.

·       NSE avoided this problem right from beginning because it was set up as a limited liability company with brokers as franchisees.

·       This led to a situation where brokers were not held responsible for enforcement of rules and regulations, and

·       those who were entrusted with enforcement (professional managers) were not brokers.

·       As a result, NSE’s staff is free of pressures from brokers and is better able to perform regulatory and enforcement functions.

 

Weekly settlement

·       If you buy shares from me, you’ve to give me the money in  1 week and I’ve to give you the shares in the same 1 week.

·       the traditional practice of fortnightly settlement cycle + system of  badla that allowed extension of even this fortnightly cycle was replaced by a strict weekly settlement cycle without badla. 

 

Result-BSE Is busted

·       Equity trading at NSE commenced in November 1994.

·       Within one year of operation, NSE surpassed the BSE in terms of turnover.

·       BSE was working since 1875, with monopoly now it had to face competition with N.S.E

·       So in March 1995, BSE also adopted similar innovation to keep up in the race.

 

All this, lead to 5 good things Stock markets

Improved Transparency:

Investors can see with their own eyes the prices that are currently being quoted in the market, and choose to trade or not. 

Anonymity= no cartels

·       The electronic trading platform makes trading completely anonymous.

·       Traditionally,  lack of anonymity in trading in the floor-based system

·       gave rise to cartels (of brokers) and made price manipulation easy. NSE

·       was a break from this tradition as well and removed much of the scope for

·       price manipulation. 

More brokers = competition =good for clients

·       NSE throws open the business of stock broking to all and everyone (subject to fulfillment of certain criteria).

·       In contrast, BSE restricted new entry into the brokerage business until NSE came into picture.

·       Now More than a thousand brokers entered the market with the NSE leading to steep increase in competition and the consequent fall in the brokerages* by a very substantial amount.

·       This led to a drastic fall in transaction costs.  (*the broker’s Commission)

No more bad delivery

Automation of the trading system eliminated all the problems associated with manual trading (e.g., bad delivery/ signature etc.)

Investors outside Mumbai can earn money

·       Investors from all over the country have got access to an exchange on same terms and conditions as investors within Mumbai for the first time.

·       Earlier, Bombay stock exchange was the pre-dominant one in the country,

·       but investors outside the city found it extremely difficult and costly to do business in the exchange. (no cellphones with free incoming!)

·       Thus, true to its name, NSE turned out to be the first national stock exchange.

·       This benefited the investors from outside Mumbai more than perhaps the investors within the city.

 

 

National Securities Clearing Corporation Limited (NSCCL)

·       It’s a subsidiary of N.S.E, to prevent the counter party risk. (established in August 1995)

·       counter-party risk means the risk that one of the two parties in a transaction may fail to honour their commitment to pay cash [buyer] or stock [seller] on the scheduled settlement date

·       For every trade (buy or sell) done on the NSE, NSCCL becomes the counter-party.

·       means, the seller sells the securities to the NSCCL, and the buyer buys from the

·       NSCCL.

·       Even if a brokerage firm fails to make payment (or deliver securities), NSCCL makes the payment (or deliver securities).

·       This has almost eliminated counter-party risk and contained the recurrence of payment crises that characterised Indian stock markets for almost a century. 

Demat account

 

·       You read above, how the ‘bad delivery of shares’ was engineering by the brokers.+ the menace of counterfeit shares. And the fear of theft of shares.

·       To curb this problem, SEBI came up with the novel idea that is ‘Dematerialization of share holding’

·       This means, you’ve to get a Demat account in the bank and

·       when you buy shares, you don’t get a ‘piece of paper’. That share gets automatically credited to your demat account.

·       In November 1996, the National Securities Depository Ltd. (NSDL), the first depository in India, was established For this purpose.

·       SEBI played an active role in gradual shifting from physical certificates to dematerialised holding by introducing a mandatory element in the process.

·       Currently almost cent percent trading and settlement are done in a dematerialised environment.

·       But things are not that safe and sweet, thanks to IPO scam-Demat Queen Roopal Panchal