Sebi comes out with eligibility criteria for NSDL to act as CRA

The depository to hive off other activities within 3 years.

The Securities and Exchange Board of India (Sebi) today put several eligibility conditions for National Securities Depository Ltd (NSDL) to act as the Central Recordkeeping Agency (CRA) for pension funds, under the new pension scheme for central and state government employees.

According to the decision, taken by the Sebi board, at its meeting, NSDL could act as the CRA only through a separate strategic business unit (SBU).

Further, the depository will have to hive off other activities within three years to a separate entity without any financial and legal links with NSDL. But, financial integrity should be ensured by NSDL till then, said sources.

Another eligibility condition is that NSDL's other activity should not erode the net worth required for carrying out the NSDL's activity in securities. NSDL is required to get the approvals from its board and sponsor for carrying on other activities.

Sebi stipulations also require NSDL to get additional insurance cover for risks, if any, of other activities. The depository will also have to meet other financial conditions, if required, in the interest of beneficial owners, said sources.

They said NSDL will have to meet all these criteria and it is required to file its application before Sebi for approval.

Earlier, Sebi had expressed its reservations on NSDL acting as a recordkeeper for pension funds. The regulator had said the new responsibility will be outside the assigned role as a depository, and that the Depository Act prohibited such activities.