IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

A PROJECT REPORT
On
Implementation of ‘IT’ in simplifying Demat Process

Submitted in partial fulfillment of the requirements of the

M.B.A Degree Course of Bangalore University

By
VIKAS MAHESHWARI
Registration. No: 05XQCM6112
2005 – 2007
Under the Guidance and Supervision of
Prof. B. SRINIVASAN

M.P.BIRLA INSTITUTE OF MANAGEMENT

Associate Bharathiya Vidya Bhavan
#43, Race Course Road
BANGALORE-560001

M. P. BIRLA INSTITUTE OF MANAGEMENT 1 REG. NO. – 05XQCM6112

 IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

DECLARATION

I hereby declare that this report on IMPLEMENTATION OF ‘IT’

IN SIMPLIFYING DEMAT PROCESS is a record of independent
work carried out by me towards partial fulfillment of requirements
of the Master of Business Administration course of Bangalore
University at M.P.Birla Institute of Management. The report has
not been submitted in part or full towards any other degree or
diploma.

Place: VIKAS MAHESHWARI

Date: Registration No.: 05XQCM6112

M. P. BIRLA INSTITUTE OF MANAGEMENT 2 REG. NO. – 05XQCM6112

 IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

PRINCIPAL’S CERTIFICATE

This is to certify that the Project Report on IMPLEMENTATION OF ‘IT’

IN SIMPLIFYING DEMAT PROCESS, has been prepared by Mr.
VIKAS MAHESHWARI bearing Regn. No. 05XQCM6112 under the
guidance and supervision of Mr. B. Srinivasan, Professor, M P Birla
Institute of Management, Bangalore.

Place: Dr. N S Mallavali

Date: (Principal)

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 IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

PROJECT GUIDE’S CERTIFICATE

This is to certify that the Project Report on IMPLEMENTATION

OF ‘IT’ IN SIMPLIFYING DEMAT PROCESS has been prepared
by Mr. VIKAS MAHESHWARI bearing Regn No. 05XQCM6112.
It is a bonafide work and has been carried out under my guidance
and supervision, during the academic year 2005-07 in partial
requirement for the award of MBA degree by Bangalore
University. To the best of my knowledge this report has not formed
the basis for the award of any other degree or diploma.

Place: Mr. B. SRINIVASAN

Date: (Professor)

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 IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

ACKNOWLEDGEMENTS

I extend a heartfelt thank you to the respondents of my

questionnaire for having taken time of their busy schedule to
provide me with valuable inputs.
I express my deep sense of gratitude to Prof. B.Srinivasan, M. P.
Birla Institute of Management (MPBIM), Associate Bharatiya
Vidya Bhavan, Bangalore, for his most valuable guidance,
inspiring supervision, periodical monitoring and sparing his
precious time in my project.
I am grateful to Dr. N. S. Malavalli, Principal, MPBIM for
providing the facilities.
I am indebted to my family and friends who encouraged me always
in my study.

Vikas Maheshwari

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 IMPLEMENTATION OF ‘IT’ IN SIMPLIFYING DEMAT APPLICATION PROCESS

Table of contents

Particulars Page No

Executive Summary 1

Overview 3

Typical procedure for opening a Demat Account 8

Problem Overview 11

Review Literature 13

Need for simplifying Demat Process 18

Loopholes in Demat Account Process 20

Various Accounts and their functions 23

Working of the Accounts 26

Possible measures to simplify Demat process 28

5 Step Process 30

Advantages of Online Application Process 34

Proposals by Income Tax Department 35

Research Design 37

Data Analysis and Interpretation 39

Conclusion 59

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Bibliography 61

Annexure 62
¾ Sample Questionnaire
¾ Sample Demat Application Form

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EXECUTIVE
SUMMARY

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INTRODUCTION

With the number of investors increasing in India day by day the equity market is
growing phenomenally. More and more people are investing in the equity market
as it is a good option to get high returns. In order to invest in the equity market
one needs to have demat account.

A demat account is held by a person so that he can keep track of his investments
and to make sure that there is no illegal trading of shares in his account. A
person can open his demat account with any stock broking firm and that firm
facilitates the person to trade in the market by taking care of his investments and
works as a broker between the person and the company. With the increase in
working population, people are opening demat account and this number is not
going to decrease, but not increase.

In this world of technology the process of filling application form for demats
account is still not very user friendly. It is very time consuming and tedious.

The project has been undertaken to find a simple way of filling up the application
form with the aid of IT implementation.

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OVERVIEW

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Introduction to Demat account

What is a demat account?

Demat refers to a dematerialized account.

Just as one opens a bank account to save money, make cheque payments etc,
one needs to open a demat account to buy or sell stocks. So it is just like a bank
account where actual money is replaced by shares.

One has to approach the Depository Participants – DP’s (they are like bank
branches), to open a demat account.

If there is a portfolio of shares: 40 of Infosys, 25 of Wipro, 45 of HLL and 100 of

ACC.

All these will show in the demat account. So, one need not possess any physical
certificates showing the ownership of these shares. They are all held
electronically in the demat account. As one buys and sells shares, they are
adjusted in the demat account.

Just like a bank passbook or statement, the DP will provide the demat account
holder with periodic statements of holdings and transactions.

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BANK – DEPOSITORY: AN ANALOGY

BANK DEPOSITORY

Holds funds in an account Hold securities in an account

Transfers funds between Transfers securities between

accounts on the accounts on the instruction of
instruction of the account the account holder
holder

Facilitates transfer Facilitates transfer of

without having to handle ownership without having to
money handle securities

Facilitates safekeeping of Facilitates safekeeping of

money securities

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Is opening a demat account compulsory?

These days, practically all trades have to be settled in dematerialized form.

Although the market regulator, the Securities and Exchange Board of

India (SEBI), has allowed trades of up to 500 shares to be settled in physical
form, nobody wants physical shares any more.

So a demat account is a must for trading and investing.

How can one apply for a demat account?

Look for a DP with whom you want to open an account.

Most banks are also DP participants, as are many brokers. One may choose
their very own DP.

A broker is separate from a DP. A broker is a member of the stock exchange,

who buys and sells shares on his behalf and on behalf of his clients.

A DP will just give an account to hold those shares.

One need not have to take the same DP that the broker takes. One may make
his own choice.

But many brokers offer special incentives in the form of lower charges for
opening demat accounts with their DPs.

Get documents in place

The DP will guide his client through the formalities of opening an account.

Fill up the account opening form and sign an agreement with the DP.

The DP will ask for some documents as proof of identity and address. Some may
accept a driver's license, others may not.

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Here is a broad list (all may not be required):

¾ PAN card
¾ Voter's ID
¾ Passport
¾ Ration card
¾ Driver's license
¾ Photo credit card
¾ Employee ID card
¾ Bank attestation
¾ IT returns
¾ Electricity/ Landline phone bill

Only photocopies of the documents are asked, however the originals will be
needed for verification.

A passport size photograph with the account holders signature across, also
needs to be submitted.

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TYPICAL
PROCEDURE FOR
OPENING A DEMAT
ACCOUNT

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A typical procedure for opening a demat account is as follows:

Step1:

An applicant goes to a DP and applies for a demat account. The DP provides him
a form, which needs to be filled and submitted along with the various documents
required.

A PAN card is mandatory among all other documents to apply for a demat
account and one also needs to provide address proof and bank statement to link
their demat account with the bank account. The applicant also needs to give a
cheque for the requisite amount in order to open a demat account.

Step2:

Next is the process of filling the application. The process of filling the form is very
cumbersome as one has to provide about 50 signatures, fill in details which are
not required and many a times give details repeatedly which are not so
mandatory.

Step3:

After filling the form the applicant submits it to the DP. The DP verifies all the
documents and further sends it to SEBI (Securities and Exchange Board of India).
SEBI is the governing body who protects the interests of investors in securities
and promotes the development of the securities market through appropriate
regulations. SEBI check the form and the documents provided by the DP on
behalf of the applicant and permits him to open a demat account. Once it gives
approval to the DP only then can the DP allot an account with it to the customer.

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Step4:

After getting approval from SEBI, the DP allots the customer a unique account
number in order to facilitate future transactions. Also it gives a userid and
password to the customer to facilitate him with the online trading. The customer
receives these documents by courier.

Step5:

Once the customer receives all these documents, he has to activate his account
by going to DP. And from hereon he can trade online.

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PROBLEM
OVERVIEW

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In the world of technology where everything is getting transferred into electronic

form, this is one process where even after tremendous implementation of internet
in the form of trading online and settling transaction over the internet, the process
of applying for demat account is still following traditional methods.

The process of filling up a demat form is so cumbersome and redundant that a

customer gets frustrated in filling up the form and many a times commits
mistakes in filling up of the form. The rejection rate of demat application in DP’s
is phenomenal as very rarely it happens that a customer fills the form and gets
his id and password in single instance. Several times the form gets rejected and
the customer has to provide the documents repeatedly.

The question then arises – What is the need to fill the demat form manually when
everything is available online right from trading of shares to transfer of money
and settling of accounts? Can’t the demat application process be made available
online?

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REVIEW OF
LITERATURE

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Purpose of the review

A review of various literatures available would help in providing me with a better

understanding of the various nuances involved in the process of opening a
Demat Account.

Source: Rediff.com, Authored by: Devangshu Datta

Title: Why is demat a pain?

A virtual queue is an apparent oxymoron. But Indian systemic inefficiency has

turned it into reality. The dematerialization process for paperless trading of
shares has created a virtual queue, which will take months, if not years, to
process. It has also highlighted several inefficiencies in the new system and
thrown up an important new tax issue.

Demat ought to take care of many inefficiencies. The tedious process of

physically transferring ownership of shares is shortened. Instead of several
months, ownership is supposed to change hands instantly. The chance of a bad
transfer because a signature doesn't match is reduced to zero. So are the
opportunities of thievery in the mail or forged share certificates. The twin
problems of odd lots and jumbo lots both disappear since it is possible to trade
either a single demat share or lakhs at a shot.

So demat solves various familiar problems that plague every stock market that
operates with physical paper. No wonder when SEBI initiated the process of
demat it was welcomed wholeheartedly by most investors.

Some insecure company managements dislike rapid, unsupervised transfer of

ownership. The odd unscrupulous investor who deliberately messed up his
signature and gave bad delivery in order to obtain interest-free cash also dislikes
demat. But the vast majority welcomed it. One instantly beneficial effect was the
easing of brokerage rates. Another was a vast increase in institutional volumes.

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But then problems started surfacing. First of all, the demand for demat services
was severely under-estimated. According to estimates, there are now 9 million
pending individual applications for demat accounts. The system has been
overloaded and reached a breaking point. As a result, somebody opening a
demat account can expect to spend several months waiting for the paperwork to
be completed.

Meanwhile, a physical trading route does exist for the individual investor who
needs to raise cash in a hurry. But while a physical sale is possible, all transfers
(in the shares of designated companies) now involve a compulsory demat. Since
the buyer of physical securities must factor in a long waiting period, there is a
wide differential between paper trade quotes and demat quotes. The discount on
physical paper is now around 15 percent, or more.

The amount of paperwork involved in the demat process is also seriously painful.
Some of it is absurd. For example, if Mr and Mrs Haridoss Paul hold some
shares in the name of Mr & Mrs Haridoss Paul and a second batch in the name
of Mrs & Mr Haridoss Paul, they will need to open two demat joint accounts with
their names reversed! There are other niggling little details.

Brokers and banks are therefore quite reluctant to initiate the process for their
clients. Some refuse outright. Others disregard the SEBI directives and insist that
demat clients open low-interest or zero-interest accounts as a sort of extra fee. At
a minimum deposit of Rs 1,000 per demat account and 9 million individual
accounts, the amount already blocked in these low-interest or zero-interest
accounts adds up to around Rs 900 crore. Assuming this trend continues, and
given that there are more than 23 million individual investors, the eventual cost of
demat would include sub-optimal returns on about Rs 2,300 crore. That is a large
and unforeseen opportunity cost for any new system.

There are further problems. The simple fraud of stealing a share certificate out of
the mail and selling it in the kerb is no longer possible with a demat account. But

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the only proof of ownership for demat shares is a receipt. Trades and transfers
are carried out on the basis of that piece of paper. Anybody who has the account
number and knows the details can order a transfer of shares from one account to
the other very easily.

Forgery is actually easier. The receipt itself isn't too difficult to duplicate either.
Frauds of this nature haven't started happening yet at least on a large enough
scale to draw attention. But it is something that gives the investor pause for
serious thought. It's bound to occur sooner or later. And given the lack of a paper
trail, it will be difficult to establish the fraud, let alone prosecute and offer relief to
victims.

Another problem lies in the tax treatment of demat shares. With dated physical
transfer certificates, it is fairly easy to calculate Capital Gains Tax (CGT) liability.
Suppose the investor has two lots of shares of the same company. One lot was
bought several years ago and is hence, liable only to long-term capital gains tax,
in case of a sale. This is levied at 10 per cent flat or an inflation-indexed at 22 per
cent whichever is lower. The second lot was, however, bought within the last
fiscal. This is liable to 33 per cent short-term CGT in the event of a sale.

If you sold a physical lot, presumably you would deliver the older set to minimise
the payout. But in case of a demat, there is an extremely grey area about which
CGT rate should be levied. The Central Board of Direct Taxes hasn't worked out
a clear procedure for distinguishing the earlier lot from the later lot. You could
find yourself locked in a dispute and facing a demand for short-term capital gains
tax. This is obviously of major significance.

There are several more niggling problems. In theory, the demat is supposed to
be within 24 hours. However, PSU bank timings don't conveniently overlap
trading times. Banking hours close at 2 pm while trading continues till 4.30 pm.
On average, a transfer will take 48 hours or more. On occasion, the demat
account may be temporarily credited with shares pending confirmation of a

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transfer. An unwary investor who sells without ensuring that he has actually
received a confirmed transfer is open to everything starting from severe
embarrassment and ending with charges of fraud.

None of these problems are insurmountable. But it will require a coordinated

effort from various agencies to sort them out. SEBI and RBI have to come up
with a way of streamlining the demat process and regularising the status of
deposits accepted, if any. The NSDL and CSDL will have to speed up their
registration procedures and devise a more foolproof system of receipt and
transfer. Banks and stock exchanges will have to coordinate working hours and
the use of temporary entries. The CBDT will have to come up with clear tax
guidelines.

None of these are processes, which needed to be ratified or mandated by

Parliament. So the excuse of political instability cannot be trotted out for delays.
Demat has already been in progress for a year.

How much longer will it take to clear up the virtual queue? Your guess is as good
as mine.

Opinion: Dematerialization process has definitely removed much inefficiency

such as physical transfer of shares, change of ownership, etc. but industry could
not estimate the demand of Demat accounts. There are some nine million
applications pending for the Demat account. Paper work involved in the Demat is
very painful and hence a pressing need to simplify the process.

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NEED FOR
SIMPLIFYING
DEMAT PROCESS

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The latent need to simplifying demat process is due to various reasons

1. Awareness among people to invest

People today are investing more and more in equity market. With the
rising income and expenditures scenario in India people are looking at
other options to earn quick money and for that equity market is one of the
best options where one can get high returns in short period of time, not
forgetting the risk involved in it.

2. PAN Card - a mandatory document.

Since SEBI has made it mandatory to give PAN card details with every
demat account, people are applying for PAN card in large number.
According to the tax department, every month 5 lakh PAN cards are
issued in India. Keeping in mind the working population of India, this
number is very small. Also, the number of people adding up to this
population is phenomenal as more and more jobs are coming to India.

3. Increasing use of Internet for trading purpose.

With the increasing use of Internet, people are avoiding the traditional
methods of trading i.e. going to the broker and asking him to trade on his
behalf. Now a person can sit at home and trade according to his
convenience. He does not have to rely on the broker and wait for his
approval for buying or selling of shares. This has facilitated more and
more people to start trading and hence more and more people are taking
interest in it.

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LOOPHOLES IN
DEMAT ACCOUNT
PROCESS

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1. Form for Demat Account

Today when the organizations such as Banks and Airlines are stressing to
reduce the unnecessary paperwork in order to cut costs, the form for opening
the demat account still follows a traditional approach - that of a booklet
containing some 50 to 55 pages. A customer maybe put off at the first instance
as soon as he sees the booklet. It is difficult to understand its complicacies. The
process of filling up the form is very cumbersome and redundant. One has to
provide about 50 to 55 signatures in the form. A customer also has to provide
all the details repeatedly. For example; customer has to write his name in the
form about 10 to 15 times. There is no real need to do so, when the form is only
for a single applicant.

2. The Verification process

Verification of documents is done in 2 stages. First the DP verifies the

documents provided and then sends the same to SEBI. SEBI in turn verifies the
documents. If they find any mistakes or inconsistencies in the documents they
reject the form and the customer has to fill in the form again right from the
beginning. This results in phenomenal wastage of paper which results in not
only higher costs but also wastage of time for all parties concerned. The
rejection rate of demat forms is very high. It rarely happens that form is
approved by SEBI at the first instance.

3. Allotting DP id and passwords to the customer

Once the form gets approved, the customer gets his DP id, username and
password. After that the customer has nothing to do with SEBI. He has to
conduct all his future transactions and conversations with his DP.

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There is no paper work after that. Right from trading of shares to transfer of
money to settling of account is done electronically.

4. Changing Passwords every fifteen days

One important rule given by SEBI to all its DP and their customers is that they
have to change the password of their online demat account every 15 days. This
is to make sure that nobody misuses the demat account. The password is given
at two stages. At the initial stage of logging in to the account. And then when
the customer has to conduct transactions.

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VARIOUS
ACCOUNTS AND
THEIR FUNCTIONS

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Demat Trading
A/C A/C

Saving
A/C

Demat A/C

This is an account where all the shares are kept in electronic form. Demat
account is kept with the respective DP who keeps the record of shares in a
customer account. A demat account is a universal account which is given to a
customer once and after that the customer can keep this account with any DP.
If a person wants to change his DP client he can do so without opening a new
demat account. All he has to do is give an application to the SEBI and they will
change the DP id without changing the demat account number.

Trading A/C

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Trading account is where a person keeps the money in electronic form and
does the trading of shares. Trading account is kept with the DP. It keeps the
money used for trading purpose and facilitates the customer to use this money
when he is trading online. Also whatever charges are there for deduction in
terms of brokerage, service charge, or dividends paid, are charged to the
trading account only.

Savings A/C

Savings account is where the person keeps his money in the physical form.
The account is kept with a bank and the demat account holder can transfer
money from bank account to trading account and vice-a-versa. Generally it
takes a day’s time or two to transfer the money within the accounts. The DP
does not deduct any amount for transferring money.

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WORKING OF THE
ACCOUNTS

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The three accounts work in synchronization with each other:

The customer transfers money from his bank’s savings account to the trading
account. The procedure takes 2 days and the money gets transferred.

Once money is credited to the trading account, the customer can start online
trading. He can buy or sell shares and the money gets debited or credited to
his account. Trading account is kept with the DP so the DP takes charge for
facilitating the customer in terms of brokerage. This brokerage gets deducted
from the customer’s account while settling of accounts takes place.

When a customer buys the shares of a certain company these shares are kept
in the demat account in the electronic form. These shares are non
transferable and customer cannot trade these shares without the help of a DP
or any broker. If a customer wants to transfer the shares to any other DP he
can do that by requesting the DP to transfer the shares to other DP.

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POSSIBLE
MEASURES TO
SIMPLIFY THE
DEMAT PROCESS

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Looking at the process of filling up a demat application form, it is very much

required to simplify the whole process to make it more user friendly. Keeping in
mind that the customer base includes people from working class to businessman
to common man who don’t want to miss the chance to try his hand in equity
market, the demat form should be as simple as opening an account in a bank.

The most important documents required for opening a Demat Account are:

1. PAN Card
2. Address Proof
3. Bank A/c Proof

PAN card has been made mandatory by the government of India for all the
demat account holders because it keeps track of all the transactions and profit
made by the customers. A customer has to give his PAN card details if he is
opening a Demat account. Those who are already having a Demat account have
to give the PAN card details, failing which their account will be terminated.

Address Proof is taken by the DP for future correspondence and for sending
transaction details and statements, and to ensure authenticity of the applicant.

The main aim of this research is to remove the paper work and convert the
process of filling up the demat form into electronic form i.e. online application and
filling up of demat form so that customer does not have to wait so long for the
demat account.

The process is not so simple so DP’s have to help the customer in filling up the
form.

A customer can apply for the form by going to a DP and ask him for the Demat
Account.

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5 STEP PROCESS

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The whole process can be improvised and converted into a simple 5 step
process:

Step1:

The customer who desires to open a Demat account selects the DP, goes to him
and applies for the same. DP asks for the required documents and the customer
provides them.

Step2:

The whole form can be generated electronically by the DP’s and an expert
provided by the DP can fill the form on behalf of the customer. The various fields
in the application which are repeatedly asked can be reduced in the electronic
form as once a field is filled, other fields can take the entry from that field, hence
reducing the work.

Step3:

PAN card details can be checked from the PAN card website of India. DP can
pay a certain amount to the Government of India for allowing them access to the
customer database which they can include in the account opening fees.

The PAN details can now be confirmed i.e. customer credibility is proved that he
is a resident of India who pays taxes on time and it also gives his permanent
address details which may differ from his present address but are credible. Also it
gives correct details of his Father’s name and his date of birth which are required
in the demat form.

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Step4:

Address proof is the second important document required for the opening of
demat account. It is required to send the statements, transaction receipts and
other important documents which are generated during the trading process.
Customer can provide the details and the DP can enter the address immediately.
The documents sent to the customer are not so important so there is no need for
the DP to go and verify the address of the customer.

Also, if a customer does not wish to receive the statements in the physical form
he can always intimate the DP about the same. All the transaction details and
statements are available online in the trading account. The customer can always
refer to the online version.

Step5:

Bank details are the next and last document required by the DP to verify
customer’s credibility. Customer can give bank statements along with the cheque
of requisite amount for opening of demat account. The credibility of the bank
details can be proved by the cheque submitted in the bank. If there is no cash in
the account, the cheque will bounce. So there is no need for the DP to verify it.

Signatures

A very important field of the form is signatures of the customers. The DP can
take a proper signature of the customer and they can scan these signatures and
keep it in their database. All the banks are following the same procedure to check
or match a customer’s signature.

This is a convenient way of keeping customer’s signature. Also while trading

shares the physical signatures are not required so there is no need to cross
check the different signatures.

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Photographs

Photographs of a person can be taken instantly by digital cameras and can be

transferred directly to the form field. This facilitates the DP’s to provide the latest
photo of a person to SEBI for identification purposes. This also checks the factor
of authenticity as the applicant cannot forge any photograph and furnish incorrect
information.

As soon as all these formalities are done a customer can get his username and
password and he can activate the demat account immediately with the DP. Also
he can get a demonstration on operating the account and trading of shares.

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Advantages of Online Application Process

1. User friendly

A customer will find the online demat application process more user
friendly. The redundancies can be reduced by not repeating the fields.

2. Time saving

It saves time of a customer as well as of DP by preventing duplication,

redundancies and rejections.

3. Safe and convenient

The process of online demat application, would be more safe and

convenient to fill than offline. One can have a look at all the options and
choose the fields accordingly. Also changes or alterations if any can be
made conveniently.

4. Immediate account

Customer can get his online demat account almost immediately. He does
not have to wait for the DP to send him his username, password and other
details by courier. Also the risk of courier being lost or misplaced is
eliminated as every detail is available on the internet.

5. Reduction in paperwork

Paper work is reduced drastically which firstly saves the stationery costs
and secondly reduces the verification job for SEBI.

6. Cost Saving

It also saves money as the whole process is electronically done and there
are significant cost savings on stationery, courier, verification, etc.

M. P. BIRLA INSTITUTE OF MANAGEMENT 41 REG. NO. – 05XQCM6112

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PROPOSAL BY
INCOME TAX
DEPARTMENT

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The Income-Tax Department proposes to use biometric features such as

fingerprints and retina images in permanent account number (PAN) cards to
ensure the uniqueness of such numbers and prevent the allotment of more than
one PAN to a person.

For this purpose, the Department has sought inputs from organizations engaged
in providing biometric solutions. Such entities have been asked to submit a
synopsis of their expertise in this area by.

The Department is keen to have a biometric solution that would be cost-effective

and one that does not lead to long queues of applicants at the front offices.

The Department uses the PANs to identify its taxpayers. Till date, about 4.6 crore
PANs have been issued. About five lakh new PANs are allotted every month.

Currently, NSDL and UTI Technology Services manage the interface with PAN
applicants.

These two service providers operate about 2,000 front offices for PAN services
across the country.

But this will take time as changing 4.6 crore pan cards and is not an easy task
and also the technology required for this work is not readily available in India.
Many places in India still lack the basic facilities so thinking about bringing such
techniques in India is still a dream.

M. P. BIRLA INSTITUTE OF MANAGEMENT 43 REG. NO. – 05XQCM6112

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RESEARCH
DESIGN

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PROBLEM STATEMENT

The process of filling the demat application form is very cumbersome and
redundant. The applicant has to fill an application booklet (forty to fifty pages)
and sign in about forty to fifty fields in the application booklet. The applicant also
has to provide various documents to prove his credibility and for identification
purposes. The process is very time consuming and tedious. On several
occasions the application gets rejected e.g. mismatch in even two signatures in
the application booklet.

RESEARCH OBJECTIVES

¾ To simplify the demat application process

¾ To make the application filling process more user friendly
¾ To make it available online so that customer don’t have to go personally to
apply for demat account
¾ To make the process highly secure and authentic

FEASIBILITY STUDY

¾ To find out the feasibility of the project

¾ To find out the acceptance of the project
¾ To get the customer’s feedback
¾ To implement it in the real life situation

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DATA ANALYSIS
AND
INTERPRETATION

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Findings from the Survey

The survey was carried out with a sample size of 50 people by giving them the
questionnaire and taking their inputs. The conclusion derived from the survey is
as follows:

Table1: Showing number of people having Demat Account

Particulars Respondents Percentage

Yes 40 80%

No 10 20%

Interpretation

Out of 50 people, who were given the questionnaire, 40 of them were having
their Demat Account in one or other company.

10 of them were not having any Demat account.

The reason when asked, were many such as, most of them were not aware of
the procedure of opening Demat Account, and some of them were not
investing in the equity market.

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Inference

The scenario in India is changing now days. People are investing more and
more in equity market. The data shows that many people know about the
demat account and its process. Very few of them are not aware of the
process. They are the one who are not investing in equity market.

Graph1: Showing number of people having Demat Account

Number of people having Demat Account

No
20%

Yes
80%

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Table2: Showing level of ease of opening a Demat Account

Particulars No. of Respondents Percentage

Very Simple 5 12%

Simple 7 18%

Cumbersome 18 45%

Very Cumbersome 10 25%

Interpretation

5 out of 40 people think that the process is very simple and they don’t find any
difficulty in opening the account.

7 out of 40 people think that the process is not very simple but they can
understand it well and fill the form.

18 out of 40 people think that process is very cumbersome and they had to take
someone’s help to fill up the form.

10 out of 40 people think that the process is very difficult and they couldn’t
understand it.

Inference

Though 30% of the people think that the process is very simple and they did not
find any difficulty in understanding and filling up of the form. But majority of them
find it very difficult. The process is very cumbersome and some of them couldn’t
understand it. They somehow managed to fill the form.

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Graph2: Showing Level of Ease of opening a Demat Account

Level of Ease of opening a Demat Account

20

15

10

0
Very
Very Simple Simple Cumbersome
Cumbersome
Series1 5 7 18 10
Series2 12% 18% 45% 25%

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Table3: Showing cumbersome aspects of the Demat Application form.

Particulars Respondents Percentage

Lengthy Application form 20 50%

Too many signatures 22 55%

Repetitive Field 15 38%

Interpretation

Half of the respondents feel that the application form is too lengthy

More than half of the respondents feel that there are too many signatures field in
the form which needs to be removed.

Some of them feel that many fields are repetitive.

Inference

More or less all of the respondents feel that the application form is very lengthy
and there is too much to read. Also the number of signatures which a customer
has to do is too much which makes him crazy sometimes.

There are many fields which repeat themselves again and again. The customer
feels there is no need for the duplication of the information. Once given it should
be considered same everywhere.

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Graph3: Showing cumbersome aspects of the Demat Application form.

Graph Showing cumbersome aspects of the

Application form.

25
20
15
10 Series1
5 Series2
0
Lengthy Too many Repetitive
Application signatures Field
form

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Table4: Showing needs to simplify the process.

Particulars Respondents Percentage

Yes 28 70%

No 5 13%

Can’t say 7 17%

Interpretation

Seventy percent of the respondents say that the process should be simplified

Thirteen percent of the respondents say that the process need not to be
simplified and they are okay with it.

Seventeen percent of the respondents did not intend to change neither they were
okay with the process.

Inference

Majority of the respondents feel that the process needs to be changed and
improved. They feel that the whole process is very cumbersome and time taking.
Very few of the respondents feel that the process need not to be changed and it
should remain as it is. And some of them were there who feel that though the
process is cumbersome but they don’t want to change it.

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Graph4: Showing needs to simplify the process.

Graph Showing needs to simplify the process.

Can’t say
18%

No
13%
Yes
69%

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Table5: Showing safety aspects of Demat Account

Particulars Respondents Percentage

Not So Safe 10 25%

Very Safe 25 63%

Can’t Say 5 12%

Interpretation

Twenty five percent of the respondents say that the Demat account is not so safe.

Sixty three percent of the respondents say that the Demat account is very safe
and no one can misuse it without their knowledge.

Very few of them don’t know whether it’s safe or not. The reason being they are
not using it, or they hardly trade or some other person trade on their behalf.

Inference

Most of the respondents feel that the Demat Account is a safe account where
nobody can misuse it without their knowledge. They feel that there is ample
security given to protect their privacy. Very few who think that it is not safe is
because of the fact they are not very much aware of the internet and its facilities

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Graph5: Showing safety aspects of Demat Account

Graph Showing safety aspects of

Demat Account

Not So Safe
Very Safe
Can’t Say

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Table6: Showing most preferred companies for opening Demat Account.

Particulars Respondents Percentage

ICICIdirect.com 18 45%

India Bulls 10 25%

Motilal Oswal 5 12%

Others 7 18%

Interpretation

Majority of the respondents were having their Demat Account in ICICIdirect.com.

Next come India Bulls where twenty five percent of the respondents were having
their account. Few of them were having accounts in other companies like Motilal
Oswal, Share Khan, Geojit Securities, Etc.

Inference

ICICIdirect.com still holds the first position in stock broking companies. It is

having maximum number of customer base and is the leader in this industry.
India Bulls is second in the race and it has grown a lot in last few years.

Other players in industry like Share Khan and Motilal Oswal are also there who
have captured a pretty good customer base.

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Graph6: Showing most preferred companies for opening Demat Account.

Graph Showing most preferred

companies for opening Demat
Account.

ICICIdirect.com
India Bulls
Motilal Oswal
Others

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Table7: Showing reasons why people chose above companies.

Particulars Respondents Percentage

User Friendly 15 38%

Time Saving 8 20%

Less Formality 8 20%

Other 9 22%

Interpretation

Majority of the respondents give preference to the company which is more User
Friendly.

Few of them see time saving and fewer formalities in the process.

Others people give prefer companies where rejection rate is low and they don’t
need to come again and again for the formalities.

Inference

Most of the respondents prefer user friendliness as the most important factor.
They want the executives to be friendly and helping. Also time saving and fewer
formalities are other factors which people expect from the companies. Some give
preference to companies which are established from long time and where
rejection rate of the form is very low.

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Graph7: Showing reasons why people chose above companies.

Graph Showing reasons why people chose above

companies.

16
14
12
10
Series2
8
Series1
6
4
2
0
User Friendly Time Saving Less Formality Other

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Table8: Showing respondents for online Demat Account.

Particulars Respondents Percentage

Yes 32 80%

No 5 12%

Can’t Say 3 8%

Interpretation

Eighty percent of the respondents said that they welcome online Demat Account.

Twelve percent of the respondents said they don’t want inline Demat Account.

Eight percent of the respondents didn’t answer anything for this.

Inference

Majority of the respondents welcome online Demat Account and they really liked
the idea. They feel that online application will save their time and money and will
also make the process more simple and user friendly.

Those who were not ready for this concept were having the concern that this will
increase threat to the customers and will increase online crime. Safety was the
concern about which they were worrying.

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Graph8: Showing respondents for online Demat Account.

Graph Showing respondents for online Demat

Account

35
30
25
20 Series2
15 Series1
10
5
0
Yes No Can’t Say

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Suggestions for improving or simplifying the Demat Application process.

The respondents gave various suggestions to improve the process of filling

demat form. Most of them were very happy with the idea of online demat
application and they felt they are very comfortable with it.

Some of them felt that the companies should keep more and more executives to
help the customer in filling form.

Most of the respondents felt that internet is getting popular amongst the masses
and they are very comfortable with its use.

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Table10: Showing Level of flexibility in opening Online Demat Account.

Particulars Respondents Percentage

Very Much 30 75%

Not So Much 7 18%

Not at all 3 7%

Interpretation

Seventy five percent of the respondents said that they are very much flexible for
this new process.

Eighteen percent of them said that they are not very okay with the whole idea
and few of them were not at all ready for this.

Inference

Majority of the respondents said they are very much ready to change themselves
according to the new process.

Few of them who were not so ready with the idea or not at all ready with the idea
said that they do not rely on the process and think that this process is not secure
enough.

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Graph10: Showing Level of flexibility in opening Online Demat Account.

Graph Showing Level of flexibility in opening

Online Demat Account

Not at all

Not So Much

Very Much

0 10 20 30 40

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CONCLUSION

M. P. BIRLA INSTITUTE OF MANAGEMENT 66 REG. NO. – 05XQCM6112

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Findings from the survey clearly states that there is latent need to change the
Demat Application process. People find it very cumbersome and difficult to fill up
the form and they feel there is the need to change the process. Also there is
need to develop a process which is user friendly, simple and easy to understand.

Also from the findings, we could find out that online application for opening the
Demat account would be good alternate for the existing and new applicants.
People will welcome the new and improved way of the Demat application form
over the traditional way.

M. P. BIRLA INSTITUTE OF MANAGEMENT 67 REG. NO. – 05XQCM6112

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Bibliography:

www.google.com

www.wikipedia.com

www.sebi.gov.in

www.nsdl.co.in

www.cdslindia.com

M. P. BIRLA INSTITUTE OF MANAGEMENT 68 REG. NO. – 05XQCM6112

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ANNEXURE

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1. Do you have a demat account?

Yes _______

No _______

If No, Why? _______

2. Is the process of opening a Demat Account:

Simple _______

Relatively Simple _______

Cumbersome _______

Highly Cumbersome _______

3. Which aspects of the Demat Application are cumbersome?

Lengthy Application Form _______

Too many signatures _______

Repetitive field _______

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4. Is there a need to simplify the process of opening a Demat Account?

Yes _______

No _______

Can’t say _______

5. What do you feel about the safety aspects of a Demat Account?

Not so Safe _______

Very safe _______

Can’t say _______

6. Which company’s Demat Account process is most convenient?

ICICI _______

India Bulls _______

Motilal Oswal _______

Others _______

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7. What are the reasons for the company which you stated above?

User friendly _______

Time Saving _______

Less Formality _______

Others

8. Any suggestions for improving or simplifying the process?

9. Would online application for Demat account be a good alternate?

Yes _______

No _______

Can’t say _______

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10. How flexible are you in opening Demat Account online?

Very Much _______

Not so much _______

Not at all _______

M. P. BIRLA INSTITUTE OF MANAGEMENT 73 REG. NO. – 05XQCM6112