This system came in to force with effect from

DEPOSITORIE
September 20, 1995.

S
WHAT IS SCRIP BASED
SYSTEM?
Scrip based system of securities transactions involves
enormous paper work involving certificates and
transfer deeds.
Simply, securities are held in physical form.
 FEATURE OF SCRIP
BASED SYSTEM:
1. There is physical movement of securities certificates
along with transfer deeds.

2. Registration with the company.

PROBLEMS WITH SCRIP
BASED SYSTEM:
1. Time consuming (processing time by co.)
2. Bad deliveries due to signature difference
3. Mistakes in completion of transfer deeds
4. Tearing and mutilation of certificates
5. Fake certificates
6. Cost of transfer : stamp duty
7. Postal delays and charges etc.
WHAT IS DEPOSITORY
SYSTEM
A system in which securities of an investor are held by
depository on behalf, and at the request, of an investor
in an Electronic Form.
This system is also know as Scrip Less Trading system.
FEATURES OF
DEPOSITORY SYSTEM
In the depository system, securities are held
in depository accounts, which is more or less
similar to holding funds in bank accounts.
Transfer of ownership of securities is done
through simple account transfers.
This method does away with all the risks and
hassles normally associated with paperwork.
Consequently, the cost of transacting in a
depository environment is considerably
lower as compared to transacting in
certificates.
A BANK-DEPOSITORY
ANALOGY
Bank
1.Holds funds in an account
on behalf of a customer
2.Transfer funds between
accounts on the instruction
of the account holder.
3.Physical handling of funds
is avoided.
4.Provides safe custody of
fund
Depository
1.Holds securities in an
account on behalf of an
investor.
2.Transfer securities between
accounts on the instruction
of the account holder.
3.Physical handling of
securities is avoided.
4.Provides safe custody of
securities.
CONSTITUENTS OF
DEPOSITORY SYSTEM
There are basically four participant:
The Depository
The Depository Participant
The Issuing Company
The Investor
 WHAT IS
DEMATERIALISATION?
Dematerialisation is the process by which physical
certificates of securities of an investor are
converted to an equivalent number of securities in
electronic form and credited into the investors
account with his/her DP.

It is to be noted that an investor can hold shares

in physical form but for the purpose of trading in
stock exchanges shares should be in electronic
form.
REMATERIALISATION

Rematerialisation is the process by which a client can get

his electronic holdings converted into physical
certificates.
A client can rematerialise his dematerialised holdings at
any point of time.
The rematerialisation process is completed within 30
days.
The securities sent for rematerialisation cannot be traded.
DEPOSITORY
The first depository was set up way back in 1947 in
Germany.
In India it is a relatively new concept introduced in
1996
NATIONAL SECURITIES
DEPOSITORIES LIMITED
NSDL is the first and largest depository in India,
and established in August 1996
It is a joint venture of:
1. IDBI (Industrial Development Bank of India Limited);
2. NSE (National Stock Exchange); and
3. UTI (Unit Trust of India).

Address:
Trade World, a Wing, 4th &5th Floors
Kamala Mills Compound
Lower Parel
Mumbai 400013

website: nsdl.co.in
SHAREHOLDERS 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
CENTRAL DEPOSITORY
SERVICES (INDIA) LIMITED
This is the second depository in India.
This was formed and registered in 1999.
It has been promoted by
1. Bombay Stock Exchange Limited
2. Bank of India,
3. Bank of Baroda,
4. State Bank of India and
5. HDFC Bank

Address:
Phiroz Jeejeebhoy Towers
16th Floor, Dalal Street
Mumbai
website: www.cdslindia.com
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
Others
 TYPES OF OWNERSHIP
In the depository system, the ownership of securities
dematerialized is bifurcated in to:

REGISTERED BENEFICIAL
OWNER OWNER
WHO IS REGISTERED
OWNER
The registered owner is that person
whose name is registered in the register
of members of the company (issuer)
For the securities dematerialized,
NSDL/CDSL is the Registered Owner in
the books of the issuer.
But Registered Owner does not enjoy
any right and liability attached with the
security.
WHO IS THE BENEFICIAL
OWNER
Beneficial owner is that person who enjoys all rights,
duties, and liabilities attached with the security.
It means voting right, dividend right, bonus share
right , right share right etc are all exercised by the
Beneficial owner.
A depository system is governed by
the following acts
Securities & Exchange Board of India Act 1992
The SEBI (Depositories and Participants)
Regulations, 1996
Bye laws of depository
Business rules of depository
The Companies Act 1956/2013
SEBI ACT 1992
Section 11: Functions of SEBI
Clause 2(ba): registering and regulating the working of the
depositories & DP

Section 12 (1A): Registration of Intermediaries

section 30: Power to make Rules
DEPOSITORIES ACT 1996

The Act also made consequential

amendments in
the Companies Act, 1956;
the Securities and Exchange Board of India
Act, 1992;
the Indian Stamp Act, 1899;
the Income tax Act, 1961; and
the Benami Transactions (Prohibition)Act,
1988.
INTERPRETATIONS FOR
REGISTERED OWNERS
In Probir Kumar Misra v. Ramani
Ramaswamy it was held that after the
Depositories Act, 1996, such depositors
who are holding equity share capital of
the company and whose name is
entered as beneficial owner are also
deemed to be members of the
company, thus making them members
under the Act.
 Transfer of Securities
Transfer Instruction
DEPOSITORY Transfer Instruction

Transfer Instruction

DP CC/ DP
Transfer
CH
2 Transfer
Instruction 3 Instruction

ry
CM CM Receipt
live on Instruction
De ructi
t
Ins

1
4

Securities
movement
SELLER BUYER
Instruction
23
SECURITIES AND
EXCHANGE BOARD OF
INDIA (DEPOSITORIES
AND PARTICIPANTS)
REGULATIONS, 1996
Provides for the Registration of DP

MASTER CIRCULAR
For oprations