DEPOSITORY

DEPOSITORY
An Organization that holds securities of

investor in electronic format at the

request of the investor through a
registered Depository Participant .
In India ,Depository Act defines a depository to

mean a company formed and registered

under Companies Act,1956 and which has been
granted a certificate of registration under sub
section(IA) of section 12 of Securities and
Exchange Board of India Act,1992

Diff b/w Bank & Depository

BANK
Holds Funds in an Account
Transfers Funds between
accounts on the instruction
of the account holder.
Facilitates transfers
without having to handle
money
Facilitates safekeeping of
money

DEPOSITORY
Hold securities in an
account
Transfers securities between
accounts on the instruction
of the account holder
Facilitates transfers of
ownership without having to
handle securities
Facilitates safekeeping of
shares

CONSTITUENTS OF
DEPOSITORY SYSTEM
The Depository Participant :- A Depository

Participant (DP) is an agent of the

depository through which it interfaces with
the investor. A DP can offer depository
services only after it gets proper
registration from SEBI.
The Beneficial Owner/Investor
The issuer
The Depository

FACILITIES OFFERED BY
DEPOSITORY SYSTEM
Dematerialization
Dematerialization
Electronic settlement of trade
Electronic credit of securities allotted

in public, rights and bonus issue.

Pledging or hypothecation of
dematerialized securities.
Freezing of demat account.

ADVANTAGES OF
DEPOSITORY SYSTEM:
(A) Advantages to the Investors :
Quick transfer of funds and securities.
Elimination of all risks associated with

physical certificates.
Minimized chances of fraud, theft of
securities.
Statement of accounts

Advantages to the issuer:

Costs of registration & transfer of

shares get reduced which were earlier

incurred by the issuer company.
Saving in cost involved at the time of
public issues.
Easy to attract foreign investors
without any cost of issuance in
overseas market.

Advantages to
Intermediaries :
Faster settlement

Less risk of Bad Delivery

Reduced chances of forgery,

counterfeit certificates, loss in transit,

theft etc.

DEMAT ACCOUNT
Demat refers to a dematerialised account .

It is just like a bank account where actual

money is replaced by shares.

Benefits OF Demat
ACCOUNT

A safe and convenient way to hold securities

Immediate transfer of securities
No stamp duty 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 transaction cost
No odd lot problem, even one share can be
sold

BENEFITS
Nomination facility
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
Automatic credit into demat account of shares,
arising out of bonus/split/consolidation/merger
etc.
Holding investments in equity and debt
instruments in an account

PROCESS
In order to dematerialize physical securities

one has to fill in a DRF (Demat Request Form)

which is available with the DP and submit the
same along with physical certificates one
wishes to dematerialize.
Surrender certificates for dematerialization to
your depository participant.
Depository participant intimates Depository
of the request through the system.
Depository participant submits the certificates
to the registrar of the Issuer Company.

Process
Registrar confirms the dematerialization

request from depository.

After dematerializing the certificates,
Registrar updates accounts and informs
depository of the completion of
dematerialization.
Depository updates its accounts and
informs the depository participant.
Depository participant updates the demat
account of the investor.

Fees
There are four major charges usually levied

on a demat account that vary from DP to

DP. :
Account opening fee
Annual maintenance fee
Custodian fee
Transaction fee

Rematerialisation
The process of converting electronic

holdings (demat shares) back into

Physical Certificates is called
Rematerialisation.

PROCESS OF
REMATERILISATION

Fill in the RRF (Remat Request Form) and request

his DP for rematerialisation of the balances in his

securities account
Depository participant intimates depository of the
request through the system.
Depository confirms rematerialisation request to
the registrar.
Registrar updates accounts and prints
certificates.
Depository updates accounts and downloads
details to depository participant.
Registrar dispatches certificates to investor.

Benefits of availing depository

services
Safe & convenient
Immediate transfer of securities
No stamp duty for transfer of securities
Elimination of risks with physical certificates
Reduction in paper work & transaction cost
Nomination facility
Change in address gets automatically updates

with all companies

Automatic credit in demat accounts

Depositories in India
There are two Depositories and

approximately 390
Depository Participants (DP) are registered
with SEBI at present. The two Depositories
are:
National Securities Depository Limited
Central Depository Services (I) Limited

NSDL
NATIONAL SECURITIES DEPOSITORY

LIMITED
[NSDL] is a depository promoted by National
Stock Exchange of India Limited, IDBI,UTI,SBI
and other financial institutions. NSDL
commenced operation in November 1996
NSDL is the largest depository of Indian

stocks.
Trades done is NSE - National Stock
Exchange are linked directly to NSDL.

CDSL
CENTRAL DEPOSITORY SERVICE [INDIA] LIMITED
CDSL is a depository promoted by Bombay Stock

Exchange Limited (BSE) jointly with leading banks such

as State Bank of India, Bank of India, Bank of Baroda,
HDFC Bank, Standard Chartered Bank, Union Bank of
India and Centurion Bank.
CDSL commenced its operations in July 15th 1999.
CDSL was set up with the objective of providing
convenient, dependable and secure depository services
at affordable cost to all market participants
Bombay Stock Exchange are linked directly to CDSL.