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All About The Depository Participants In Simple Language
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DEPOSITORY
• A “Depository” is a provider of facility for holding securities .
• It is a kind of bank for securities like shares, debentures, bonds, etc.
DEPOSITORY IN INDIA
• National Securities Depository Ltd. – NSDL
• Central Depository Services Ltd. - CDSL
DEPOSITORY PARTICIPANT •Agent of the depository.
•Intermediary between the depository and the
investors.
•Registered with SEBI.
CONT…
• Organization – holds securities for TRADING.
• Shares, Debentures, Mutual Funds, Derivatives and Commodities.
DEPOSITORY IN INDIA
• National Securities Depository Ltd. – NSDL
Having 95 lakh Demat A/c - 300 DPs in India
• Central Depository Services Ltd. - CDSL –
Having 65 lakh Demat A/c - 500 DPs in India
HOW DO DEPOSITORY OPERATE?
• Interacts with its investors.
• Through its agents, called Depository Participants normally known as DPs.
• By opening Demat A/C WITH DPS
• Agreement to be made between the parties.
IMPORTANT POINTS
• Registered owner of Securities- Physical certificates – INVESTOR
electronic form- DEPOSITORY
• Beneficial Owner (BO) - INVESTOR
SERVICES PROVIDED BY THE DEPOSITORY
• Dematerialisation ( demat) - converting physical certificates to electronic form
• Rematerialisation ( remat) is reverse of demat.
• Transfer of securities, change of ownership.
BENEFITS OF DEPOSITORY• Immediate transfer of
shares
• No stamp duty on such transfers
• Reduced transaction cost
• Transparency
BENEFITS (CONT…)
Elimination of risks - associated in dealing with Physical certificates - loss / theft / forgery /etc.