NSDL currently charges a custody charge of 3.5 basis points per annum from depository participants who in turn charge an additional custody charge from the investor. This additional charge is not fixed. On an average, each DP charges the investor a total of about 10 basis points for keeping his electronic shares in custody.

"The NSDL authorities have always claimed that the depository is a volumes game. As soon as the depository started picking up the NSDL had brought down by half the custody charge (from 7 to 3.5 basis points). This was done in July last year and a lot has changed since. The depository movement is fast catching up and the number of accounts opened in July are indicative of this. It istime therefore that the depository cuts down its custody charges further to maybe 2 basis points," said a market observer on the condition of anonymity.

Depository proponents argue that custody charges have always been an emotional issue with investors. Right since the inception of the depository, investors have been concerned about the need to pay a custody charge as they have never been used to paying any charge for keeping their shares in a cupboard. And even though the depository works out be a cheaper and safer mode of settlement despite the custody charges, there has been a mental block against the payment of custody charge.

"Investors have more or less accepted the immense benefits of trading in a demat environment. The joint marketing initiative of Sebi, stock exchanges and of course the depository has led to a major surge in the number of accounts that have been opened. At this point of time, a reduction in custody charges could give the much required boost to the depository," said a seniorexecutive at a leading depository participant.

"In any case the bulk of the revenue for the depository would come from transaction fees rather than custody charges. And if the investors are more comfortable with lower custody charges then the depository should oblige," said a market observer.

NSDL managing director CB Bhave, however, told The Financial Express that there were no concrete plans for the moment to bring down custody charges and any decision to this effect would be taken by the board of the depository.

Bhave had, however, earlier said that custody charge is not an issue as is being made out by a section of the market. He has at the same time also maintained that it would be the endeavour of NSDL to bring down costs over a period of time.