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What Is A Depository

A depository holds securities electronically for investors through depository participants (DPs) like banks and financial institutions. DPs act as intermediaries between depositories and investors, allowing investors to open demat accounts to store securities. Dematerializing physical certificates converts them into electronic form in the demat account. Demat accounts provide benefits like safekeeping of securities, convenient transfers, and automatic credit of shares from corporate actions.

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63 views17 pages

What Is A Depository

A depository holds securities electronically for investors through depository participants (DPs) like banks and financial institutions. DPs act as intermediaries between depositories and investors, allowing investors to open demat accounts to store securities. Dematerializing physical certificates converts them into electronic form in the demat account. Demat accounts provide benefits like safekeeping of securities, convenient transfers, and automatic credit of shares from corporate actions.

Uploaded by

jiten_dra14
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Avneet Sachdeva Krishna Gopal Mazumdar

Jitender Sahani
Prateek Mazumdar Sourav Choudhary Suman Kumar

WHAT is a DEPOSITORY ?
A depository is an organization where the securities of an
investor are held in electronic form, at the request of the investor through the medium of a Depository Participant.

If an investor wants to utilize the services offered by a depository, he has to open an account with the depository through its Depository Participant. This is similar to opening an account with any of the branches of a bank in order to utilize the services of that bank.

WHO is a DEPOSITORY PARTICIPANT ?


A DP is an interface between customers and the depository A customer opens an account with a DP and commences operations Balances are maintained with the depository and are available through the DP DP intimates customers status transactions from time to time of holdings or

WHO can be a DEPOSITORY PARTICIPANT ?


A Depository Participant (DP) is an agent of the depository and is authorized to offer depository services to investors In terms of the Depositories Act, 1996, only the following entities

are eligible to become a Depository Participant.


1. Financial Institutions, 2. Banks, including approved foreign banks, 3. Recognized stock exchange 4. A non-banking finance company, 5. A custodian of securities approved by Government of India,

DIFFERENCE BETWEEN BANK & DEPOSITORY

BANK
Holds Funds in an Account

DEPOSITORY
Hold securities in an account

Transfers Funds between accounts Transfers securities between on the instruction of the account holder. accounts on the instruction of the account holder Facilitates transfers of Facilitates transfers without having ownership without having to to handle money handle securities

Facilitates safe-keeping of money

Facilitates safekeeping of shares

DEPOSITORY SERVICES IN INDIA


Securities and Exchange Board of India (SEBI) is the regulating authority.

NSDL :National Securities Depository Limited First and largest depository in India, established in August 1996. National Stock Exchange is linked directly to NSDL. PROMOTERS OF NSDL - Industrial Development Bank of India Limited, Unit Trust of India ,National Stock Exchange of India Limited SHARE-HOLDERS OF NSDL-State Bank of India, Oriental Bank of Commerce, Citibank, Standard Chartered Bank, HDFC Bank Limited,The Hongkong and Shanghai Banking Corporation Limited, Deutsche Bank, Dena Bank , Canara Bank, Union Bank of India.

CDSL: Central Depository Services Limited


This is the second depository in India. This was formed and registered in 1999. Bombay Stock Exchange are linked directly to CDSL. PROMOTERS OF CDSL - Bombay Stock Exchange Limited, Bank of India, Bank of Baroda, State Bank of India and HDFC Bank

SHAREHOLDERS OF CDSL - Standard Chartered Bank Centurion ,Bank of Punjab Ltd. ,Canara Bank, Union Bank of India, Bank of Maharashtra, Jammu and Kashmir Bank Limited, The Calcutta Stock Exchange Association Limited.

Settlement of market trade


Seller gives delivery instructions to DP to move securities to brokers account Securities are transferred to clearing corporation from brokers account
Clearing Corporation

Broker

Broker

On pay out securities are moved from Clearing corporation to buying brokers account
Buying broker credits buyers account

Buyer

Seller

Off market trade


Seller gives Delivery Instruction to his DP Securities are transferred from sellers DP to Buyers DP Buyer gets credit automatically into his account
DP1 Depository

DP2

Buyer

Seller

BENEFITS of Depository Services


A safe, convenient way to hold securities Instant transfer of securities; Stamp duty is not required on transfer of securities; Elimination of risks associated with physical certificates such as bad delivery fake securities, Delays, thefts etc.; Reduction in paperwork involved in transfer of securities; Reduction in the cost of transaction, No odd lot problem, even one share can be sold; Facility of nomination; Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately; Transmission of securities is done by DP eliminating correspondence with companies; Credited automatically into Demat account of shares, arising out-of bonus or split or consolidation or merger etc.

Services offered by a Depository Participant


Account Opening & Maintenance Dematerialization of Securities Rematerialisation of Securities Transfer of Securities Pledging of Securities An investor who wishes to avail of all Depository Services has to open a Demat Account with a DP.

DEMAT ACCOUNT
Dematerialization is the process by which physical certificates of an investor are converted into electronic form. Demat account is necessary for Investing in IPO i.e. Primary Market
A/C Opening Depository Participants

Share Holder

Investing in Secondary Market DEMAT PROCESS :


DEMAT request form

1. Shareholder with physical certificates. 2. Makes a Demat request form with certificates. 3. Forward Demat request. 4. Shares are credit to the beneficiary owners account
credit to the beneficiary owner a/c of the investor Depository

Dematerialisation

Who can open a demat account?


Individuals, NRIs, Minors, HUFs, Trusts (Regd), Corporates can open demat account. Proprietary firms, partnership firms and unregistered trusts cannot open a demat account as the Companies Act,1956 prohibits these entities from becoming shareholders of companies

Basic documents for account opening


Registration form

Photograph/s with signatures across it


PAN Card

Proof of residence-Passport, Voters ID card, Driving license, Ration card


Proof of identity-Passport, Voters ID card, Driving license, PAN card Bank Account Proof-Bank statement, cancelled cheque

Advantages of Depository
Free from worries of bad delivery, loss of shares, delivery of stolen shares etc. Transfer is faster.

Safety in transactions, as freezing of account is permitted.


Option of rematerialising dematerialised shares. There is no need to fill a transfer form for transfer of shares and affix share transfer stamps.

Disadvantages of Depository
Lack of control: Trading in securities may become uncontrolled in case of dematerialized securities. Need for greater supervision: It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as a detriment to investors. The role of key market players in case of dematerialized securities, such as stock brokers, needs to be supervised as they have the capability of manipulating the market. Current regulations prohibit multiple bids or applications by a single person. But investors open multiple demat accounts and make multiple applications to subscribe to IPOs in the hope of getting allotment of shares.

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