GENERAL MANAGER

Market Regulation Department

MRD/DoP/Dep/Cir-22 /05

November 09, 2005

1. The Managing Director, NSDL

2. The Executive Director, CDSL

Dear Sir/s,

Sub: Review of Dematerialisation Charges

1. After detailed deliberations, as a first step, SEBI vide circular No.MRD/DoP/SE/Dep/Cir-4/2005 dated 28th January, 2005 rationalized the tariff structure with regard to account opening charges, custody charges and transaction charges towards the credit of securities.

2. Pursuant to the representations from the investor community and in order to encourage more investors to hold securities in demat mode, SEBI vide aforesaid circular made entry into the demat environment free except from applicable statutory charges.

3. It is observed that Depositories and Depository Participants (DPs) have been levying transaction charges for the transfer of securities from one DP to another DP although no account closure charges are levied by the depositories or depository participants. This implies that an investor, who is not satisfied with the services of a DP, can move his BO account to another DP, only at a cost. It is desirable that investors are freed of this cost.

4. In view of the above, it has been decided that with effect from January 09, 2006 (Monday), no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

5. The depositories/DPs are advised to put in place necessary systems and procedures to differentiate between an account closure transaction and a normal debit transaction on or before January 08, 2006 so as to avoid any problems in the live environment and ensure smooth implementation of the aforesaid decision.

6. The Depositories are advised to:-

a) make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately, as may be applicable/necessary ;

b) bring the provisions of this circular to the notice of the DPs of the Depositories and also to disseminate the same on the website; and

c) Communicate to SEBI the status of the implementation of the provisions of this circular in the Monthly Development Report.

7. This circular is being issued in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.

Yours faithfully,

V S SUNDARESAN

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