DEPOSITORY SYSTEM

Submitted by :
Riya Mary Sebastian
24 B
An effective and fully developed depository
system is essential for maintaining and
enhancing the efficiency of a mature
capital market.
Before introduction of Depository system, the
problems faced by investors and corporates in
handling large volume of paper were as follows:

 Fake Certificates
 Loss of Certificates in transit
 Delay in Transfer
 Mismatch of Signatures
 Bad Deliveries
Introduction to Depositories
A Depository is an Organization like a Central
Bank

Where
 Securities = held in the Electronic Form
Request = SH
Through = DP

Investor has to
Open an account with the Depository
Through a Depository Participant.
Depositories in India
Presently there are two Depositories working
in India:
National Securities Depository Limited
(NSDL)

It was registered by the SEBI on june 7,1996 as

India’s first Depository to facilitate trading and
settlement of securities in the demat form.
Central Depository Services (India)Limited
(CSDL)

It commenced its operations during feb 1999

and was promoted by stock exchange mumbai
in association with Bank of Baroda, Bank of
India, SBI and HDFC Bank
Constituents of a Depository System

There are basically four participant :

 The Depository Participants

 The Depository
 The Issuing
 The Beneficial Owner
Depository participant

 A DP is an agent of the depositories which

provides depository services to the
investors.

Depository :
 A firm wherein the securities of an
investor are held in electronic form.
Issuer
 The company which issues Securities

Beneficial Owner

 A person whose name is recorded as such

with a depository

 Real owner of the securities

BENEFITS OF DEPOSITORY SYSTEM

The transfers take place immediately unlike

physical transfer. The beneficial owner also
transfers as soon as the shares are transferred
from one account to the other.

It only holds the security listed in particular

stock exchange.

The issue of fake certificates, the problem-

related to bad delivery or any kind of issue
related to signature are also reduced.
Now there is no need to fill a transfer form
and affix share transfer form in order to
transfer share.

The electronic system is time-saving.

The fear of losing the certificate or issue of

fraud certificates are also eliminated.

Transfer of benami properties is also

restricted.
Functions of Depository System

1. Account Opening
A Demat account or dematerialised account converts the
shares from the paper form into an electronic form.

For opening demat a/c, the following documents are

required:
 Demat opening form duly filled
 Address proof
 Photograph
2. Dematerialisation (“Demat” in short form)
Dematerialisation signifies conversion of a
share certificate from its physical form to
electronic form.

3.Rematerialisation
Rematerialisationis the process by which a
client can get his electronic holdings
converted into physical certificates.
4.Settlement of trades in dematerialised securities

The following stock exchanges have been admitted on

the depository to conduct this activity
 NSE
 The SE, Mumbai
 Calcutta Stock Exchange
 Delhi SE
 Bangalore SE
 Madras SE
 Inter connected SE
 Ahmedabad SE
5. IPO for corporate benefits

Providing electronic credit in respect of securities

allotted by issuers under IPO or otherwise

6. Pledging

Depositories allow the securities placed with

them to be used as collateral to secure loans and
other credits
Pledging demat securities is easier and
advantageous than pledging physical securities
THANKYOU