New mechanism to speed up transfer of unlisted NSE shares

Shares of the IPO-bound National Stock Exchange of India will be easily transferable between investors starting Monday, as the bourse moves from an exchange approval-based system to the delivery instruction slip (DIS) mechanism.

The shift is expected to shrink share-transfer timelines from as long as six months to just 3 to 5 days, streamlining transactions in the highly sought-after unlisted market.

“Given Sebi’s circular dated October 14, 2024, the ISIN of NSE will be activated/unfrozen with effect from Monday, March 24,” the exchange said in a message to shareholders. “Accordingly, from Monday, the shares of NSE can be transferred through the DIS mechanism without following the existing Stage 1/Stage 2 process.”

Under the existing system, share transfers require a two-stage process—first, a know-your-customer (KYC) check, followed by a “fit and proper” assessment.

The exchange has been conducting these checks manually, causing significant delays due to limited staff and the physical verification required for each shareholder. Under the new framework, these verifications will be handled by depositories, which already maintain detailed investor records, said a broker.

The change comes as investor frustration has mounted over prolonged transfer timelines, said brokers.“Delays of up to six months unsettled institutional investors,” said Hitesh Dharawat, a broker at Mumbai-based Dharawat Securities. “By the time the transfers were completed, share prices often changed, leading to the cancellation of many deals.”NSE shares have been in high demand in the unlisted market, doubling in value over the past year. They currently trade at Rs 1,850 apiece on an ex-bonus basis. As of December 31, 2024, the exchange had 20,444 shareholders.

Under Sebi regulations, only investors that meet the “fit and proper” criteria are eligible to hold shares in a stock exchange or clearing corporation. Anyone acquiring more than 2% of the shares must seek regulatory approval within 15 days, while holdings exceeding 5% require prior approval from the board.

To transfer shares from one demat account to another offline, a DIS provided by the broker has to be filed with details like the 12-digit ISIN code, the 16-digit DP ID and Client ID, and select the appropriate transfer mode—off-market for intra-depository transfers or inter-depository for others.