In India’s securities market, when you buy shares or other securities, you don’t receive a paper certificate. Instead, the ownership is recorded electronically and held in what’s called a demat account. This is made possible by depositories institutions that act like “custodians” for securities, storing them in digital form rather than physical. Both NSDL and CDSL perform this function.
Investors do not sign up directly with NSDL or CDSL. Instead, they open a demat account through a registered intermediary known as a Depository Participant (DP) typically a broker, bank, or financial institution. That DP acts as the link between the investor and the depository.

Core Functions
Whether your demat account is held under NSDL or CDSL, the depository offers the following essential services:
•    Secure electronic custody of securities : equities, bonds, mutual-fund units, and other eligible instruments eliminating the need for physical certificates.
•    Seamless transfer and settlement: when you buy or sell securities, the depository updates (credits or debits) your demat account accordingly, making ownership transfer efficient and timely.
•    Handling corporate actions: dividends, bonus shares, rights issues, share-splits, etc., are processed electronically and credited appropriately to demat accounts or linked bank accounts.
•    Other services such as pledging/unpledging of securities (e.g. for loans), off-market transfers, and maintenance of accurate ownership records.
In effect, both NSDL and CDSL provide a secure, regulated, and efficient infrastructure that underpins modern electronic securities trading and holding in India.

Similarities Between NSDL and CDSL
From an investor’s perspective, here’s how NSDL and CDSL are effectively equivalent:
•    Both operate under regulatory oversight (by the relevant securities market regulator) and follow defined norms for custody, settlement, and investor protection.
•    The basic experience : opening a demat account via a DP, holding securities electronically, trading and settlement, corporate-action processing works the same irrespective of whether the account is with NSDL or CDSL.
•    For many investors, the depository used is not a decision they make. It depends on the DP/broker with whom they open the demat account.

Some Structural / Historical Distinctions
While both serve the same functional role, there are a few structural or historical differences worth noting:
•    Establishment: NSDL was established earlier, in 1996.
CDSL began operations in 1999.
•    Demat-Account Number Format: Demat accounts under NSDL often have an identification number beginning with “IN”. Meanwhile, CDSL demat-account numbers are typically 16-digit numeric sequences.
•    Investor / Account Composition (as sometimes described): Some sources observe that NSDL tends to hold a higher value of institutional or high-value holdings, while CDSL is described as having a larger number of individual/retail demat accounts.
Importantly, these distinctions are administrative or legacy-based; they do not generally affect the core services or rights of an investor. 

What Investors Should Know
If you are investing in Indian securities:
•    You only need to open a demat account through a SEBI-registered DP (broker/bank/financial institution). That DP will link you to either NSDL or CDSL depending on its association. 
•    Whether your demat account is with NSDL or CDSL doesn’t matter much for day-to-day investing - buying, selling, holding, receiving dividends, pledge/unpledge, transfers, and record-keeping work the same way under both.
•    What matters more is the reliability of your broker/DP, their service quality, ease of use of trading & demat interfaces, and transparency in fees/charges.

Why the Demat + Depository System Is a Big Deal in Indian Markets
Switching from physical share certificates to a demat/depository infrastructure transformed how investing works in India. The benefits include:
•    No risk of losing or damaging physical certificates.
•    No paperwork, no courier delays, no stamp-duty hassles every time you buy or sell.
•    Instant, electronic transfer and settlement (subject to settlement cycles).
•    Easy tracking of holdings, transactions, corporate-actions; consolidation of multiple holdings in one digital vault.
•    Accessibility: even small or first-time investors can participate, without needing to manage physical paperwork.

Thus, NSDL and CDSL through their roles as depositories form a foundational pillar of modern Indian securities markets.