The move has come as a shot in the arm for the depository as this lack of inter-connectivity has proved to be a stumbling block in its growth.The NSDL will now call for a meeting with all the bank depository participants asking them to study the DoT relaxation proposal and implement it if found to be feasible.

DoT had, after close to two years, recently sent a communication to NSDL saying that it would allow networks to connect but for a fee. There was no mention of how the fee was to be computed. The Sebi chairman, DR Mehta took up the matter with the finance minister Yashwant Sinha when he visited the Sebi office for a presentation. Sinha had promised all assistance recognising fully well that the relaxation would lead to a growthin the depository.

DoT has now got back to NSDL with a detailed package but said that the relaxation would only be for banks as it did not want the facility to be misused.

As per the DoT package, all banks who wish to avail of the facility would need to make a payment of Rs 30,000 per annum initially. It has asked NSDL to monitor flow of traffic between the two connecting networks and after six months get back to DoT with details of the traffic flow. The I-Net (the information highway of the DoT) charges would be applicable to this flow of information between the connecting networks and it would be adjusted against the amount deposited upfront.

DoT has not allowed two independent wide area networks (WAN) to connect to each other as it fears that this would lead to loss in revenue for the telecom service provider. And as it is not easy to monitor the flow of traffic by DoT, it decided to stop inter-connectivity altogether. The move has, however, throttled the growth of organisations like the depository.In the case of the depository which depends on electronic flow of information, a depository participant's branch office cannot connect directly to the NSDL network and hence, the efficiency and speed with which it can service an investor has been drastically cut down.

Failure to connect with the NSDL network has also led to banks, particularly the nationalised ones with large branch networks, staying away from the depository participant business. This has restricted the growth of the depository.

NSDL is now going to hold talks with its bank DPs to discuss in detail what the DoT package implies and also assess the extent to which a bank DP would end up paying charges to DoT to interconnect.