SEBI: “Depositories to transfer cash directly to investors account”

In what can be termed as an Investor friendly initiative, SEBI is mulling on allowing depositories to distribute cash directly to the investors. Equity investors especially retail investors have frequently struggled to track the dividends received and tally the credits in bank account in the form of dividends received. Investors receive cash benefits in the form of dividends for their investments in shares.

The present structure is working fine with the issuer taking all the necessary information from the depository and arranging to send the funds directly to the investors, through their Registrar and Transfer Agents. This process leads to some delay in distribution of cash benefits. SEBI believes there is room for further improvement in the process and the current system can be made more efficient. In case of most of the developed economies the depositories directly distribute the cash benefits to the investors.

According to SEBI several concern areas will be addressed by direct cash transfer from depositories viz. efficient tracking of payment, having a consolidated view of all benefits received, non payment and delayed payment, updation of investor bank details, disclosure of unpaid cash benefits, etc.

NSDL & CDSL the two registered depositories with SEBI currently manage all the non cash benefits such as bonus, rights, amalgamations etc., and the cash benefit transfer happens outside the depository system. The SEBI proposal is in the right direction which will improve Indian financial markets'  efficiency. The proposal will benefit both the investors and issuers and the speedy cash transfer will definitely be cheered by the investors. The final decision will be made after taking into consideration the various stakeholders’ feedback. SEBI has also seeked public feedback and comment on the same by 5th of May, 2016.