Depositories to charge issuers more; incentivise participants

Sebi has decided to hike the annual issuers' fee charged by depositories and extend incentives for no-frills demat accounts opened by depository participants, as part of efforts to deepen the capital market.
The latest measures, announced by Sebi today, are mainly aimed to expand the reach of depository services to small towns and also incentivise depository participants by putting in place a revenue sharing mechanism.
Now, the leading depositories -- NSDL and CDSL -- can levy and collect the charges towards custody from the issuers, on a per folio basis at the end of a financial year.
Depository participants are those who act as intermediaries between depositories and investors.

Issuers would have to pay a minimum of Rs 11 per folio compared to the earlier rate of Rs 8 per folio. The annual custodial fee payable by an issuer to each depository has also been revised.
For securities valued up to Rs 5 crore, an issuer would have to pay custody fee of Rs 9,000 annually to each depository, for securities worth between Rs 5-10 crore, the fee would be Rs 22,500.

Besides, for securities worth Rs 10-20 crore, the fee would be Rs 45,000 and for securities valued at more than Rs 50 crore, the fee would be Rs 75,000.

The move comes after depositories made representations to Securities and Exchange Board of India (Sebi).
With an objective to promote financial inclusion, Sebi's Depository Systems Review Committee (DSRC) has recommended augmenting the revenue base of the depositories as well as incentivise the depository participants.
"Annual issuer charges may be enhanced and the incremental revenue be shared suitably by the depositories with their participants for promoting the Basic Services Demat Accounts (BSDA) and opening new accounts in tier II and tier III towns," as per the committee.
BSDA offers limited services at lower cost to investors.
The incentive scheme would be reviewed after two years and all these proposals would be effective from this fiscal.

In order to compensate depository participants with respect to the cost of opening and maintaining BSDA, the depositories would pay an incentive of Rs 100 for every such account opened in places other than the top 15 cities.
Besides, the depositories would pay Rs 2 per folio to the respective depository participant for ISIN (International Securities Identification Number) positions held in BSDA.
The incentives would be given at end of a financial year.
According to Sebi, the depositories would have to set aside 20 per cent of the incremental revenue received from the issuers to manage the incentive schemes.
Any surplus after reimbursement of depository participants could be be utilised by the depositories to incentivise the latter towards financial inclusion, among other activities.