How did CDSL manage to push through so many demat accounts?

In a significant move, the Central Depository Services Limited (CDSL) crossed 6 crore demat accounts during the week. This was put out by CDSL in a press release. NSDL has just about 2.5 crore demat accounts, although custody value is much higher for NSDL at $4.15 trillion. In the case of CDSL, the last 1 crore accretion from 5 crore demat holders to 6 crore demat holders happened in a span of just about 3 months and the last 2 crore in 6 months.

Most of the fresh registration of new demat accounts is shifting from metros to Tier II and Tier III cities and CDSL appears to be driving that change. Clearly, it looks like CDSL has been a lot more aggressive in going to the smaller towns and cities and spreading the equity cult across these places. Also, their lower cost structure has appealed to many of the smaller and discount brokers and that has given a big automatic boost to the company.

However, till now only a fraction of the potential has been identified and tapped. Total number of demat accounts at CDSL are 6 crore and combined demat accounts for CDSL and NSDL stands at 8.5 crore demat accounts. However, this is just about 6% of the population of India. The equity cult appears to have firmly taken roots in India and ensuring greater participation of retail investors in equity wealth creation appears to be the road ahead.

There have been several reasons for this surge in demat accounts at CDSL. Since the pandemic, scores of retail investors flocked to the Indian stock market. With debt giving returns less than inflation, most investors are naturally gravitating towards equities. There is also the fear of missing out or FOMO effect driving demat accounts. Also the surge in IPOs last year and the mega LIC IPO this year are likely to add another 2-3 crore demat accounts.