Sebi weighs cash benefit distribution via depositories

In an effort to improve investor experience, capital market watchdog Sebi is considering a proposal to distribute cash benefits through depositories.

"Sebi is considering a proposal for distributing cash benefits through depositories," the markets watchdog said in its annual report for 2016-17.

A consultation paper in this regard was placed for public comments in April this year. The regulator had sought views of all stakeholders till May 5.

The move will help in bringing Indian markets at par with most developed markets where depositories usually distribute cash benefits to investors.

Currently, depositories only handle non-cash benefits like bonus and rights shares issued by companies while cash benefits are handled outside the depository system.

Depositories provide details of shareholders and bondholders, including name, address and bank details, to the respective issuer companies which, in turn, arrange distribution of cash benefits.

This leads to some delay as the issuer companies distribute such benefits only after obtaining information from the depositories.

Just like banks hold funds for their depositors, the depositories hold securities of investors in an account. There are two depositories registered with Sebi — National Securities Depository Ltd (NSDL) and Central Depository Services India Ltd (CDSL).

The regulator believes that there is further scope for improvement in areas related to efficient tracking of payments, having a consolidated view of all benefits received, non-payment and delayed payments, updating investor bank details and disclosure of unpaid cash benefits.