National Securities Depository Ltd. Date: 2001.03.31. Chairman speech CHAIRMAN SPEECH FOR THE YEAR ENDED 31ST MARCH, 2001. Dear shareholders, In November, 2001, NSDL will complete five years of operations. When the operations commenced in 1996 with three participants and three companies connected to NSDL, it was difficult to even think of the likely time frame within which it would be possible to achieve 100% settlement in paperless mode. Yet in less than five years we have reached the stage where the equity market now settles over 99.5% of its volumes in paperless form. More than 3.5 million investor accounts have been opened with our depository during this period and these investors are serviced through a network of 200 participants providing services from 425 cities/towns all over the country. Continued efforts at investor education by NSDL have resulted in completely demystifying the concept of dematerialisation. Retail investors are now familiar with this concept. In addition, NSDL has launched a certification programme for the employees of depository participants and it is now mandatory for the participant to have atleast one employee in each branch with the necessary. certification. While the focus of the depository system has been on ensuring settlement without cumbersome exchange of paper documents, its benefits in terms of distribution of shares resulting from corporate actions, such as, splits, mergers, bonus or rights have not been insignificant. As on March 31, 2001, more than 500 corporate actions of various types were effected using the NSDL system. These involved distribution of 8.26 billion securities to 2.08 million investors. The resultant saving in terms of elimination of use of paper, printing and postal costs and speedy receipt by investors have been appreciated by the beneficiaries. Having achieved near 100% settlement in paperless form in equity market, NSDL has been looking at other instruments that could be brought within the purview of its activity. Bringing debt instruments within its scope was naturally the next step. At the suggestion of NSDL in June 2000, the Government of India made the necessary legislative changes to enable the transfer of debt securities in demat form to be on par with transfer of equity instruments. NSDL has already started the work on demat of debt securities and it is expected that during the coming year the settlement of debt trades will take place only in paperless mode. The Reserve Bank of India in its recent Credit Policy has given the process a further boost by requiring banks, financial institutions, primary dealers and satellite dealers to hold various debt instruments as also to subscribe to new debt instruments only in demat form. The debt market in India has not developed in the same manner as the equity market. I hope with the introduction of paperless trading in debt instruments together with various measures announced by the Government and RBI; development of debt market in India will receive a boost. Government securities constitute dominant segment of the debt market. NSDL intends to help retail investors gain access to Government securities through its system. India has seen dramatic progress in the last few years in the area of Information Technology. The availability of internet is increasing rapidly. Keeping pace with the latest trend NSDL has launched a pilot project for enabling investors to give debit instructions to their participants for their respective accounts through the internet. It is expected that the facility will be operational in the second half of the financial year 2001-2002. Looking to the expansion of its activities and growth in volume of business as also with a view to providing high quality service to its clients, NSDL has been investing from time to time in enhancing the capacity and improving the technological capabilities of its IBM mainframe in Mumbai and disaster recovery site in Pune. With the increase in its client base and expansion of operations, NSDL has been reducing its charges for the various services rendered by it from time to time. Needless to mention that NSDL's operations have been profitable all along. It has not only been able to meet all its capital expenditure needs out of its internal accruals, but also bought back equity shares of Rs. 25 crore face value from the shareholders at a premium of Rs. 2 per share. The shareholders should be happy to note that the company has declared a maiden dividend of 7.5% for financial year 2000-01. I am laying down my office after serving as Chairman of NSDL since inception. It has indeed been a matter of pride and satisfaction for me to see this fledgling institution coming of age in such a short time and as a dominant depository occupying the centrestage of the capital market operations in the county. This would, of course, not have been possible but for the dedication and hard work put in by members of staff and the support and encouragement received from SEBI, the capital market regulator; RBI and the market participants. I must place on record my appreciation for the support provided by them. I would also like to thank my colleagues on the Board who provided mature advice and guidance and contributed immensely to the growth of the organisation during these years. With the continuing support of the Regulator, market players and the commitment, integrity and hard work of the employees of NSDL, I have no doubt that NSDL will go from strength to strength in the years to come.