WELCOME

DEPOSITORY
Pre s e nte d by:

A a l e kh Luthra
INTRODUCTION

* What is Depository?

An organization where the securities of an investor are held in electronic form

at the request of the investor and which carries out the securities transactions
by book entry through the medium of a depository participant.

* What is a depository system?

A system whereby transfer of securities takes place by means of book entry

on the ledgers of the Depository without physical movement of scripts.
MEANING

1. Depository means a place where a deposit of money, securities,

property etc is deposited for safekeeping under the terms of depository
agreement.

2. The shares here are held in the form of electronic accounts i.e
dematerialised form and the depository system revolves around the
concept of paper-less.

3. It holds the securities of the investors in the form of electronic book

entries avoiding risks associated with paper.
Features of Depository System

1. In the depository system, securities are held in depository accounts,

which is more or less similar to holding funds in bank accounts.

2. Transfer of ownership of securities is done through simple account

transfers.

3. The investors can continue to enjoy the economic benefi ts From the
shares(I.e., dividend, right issue, sale facility etc) and the voting rights.

4. The cost of transacting in a depository environment is considerably

lower as compared to transacting in certifi cates.

5. The shares in depository system are kept in electronic mode.

Constituents of Depository System

1. Depository – A depository is an organisation where in the

securities of an investor or benefi cial are held in electronic form.

2. Depository Participants (DPs) - DP is an agent of Depository.

3. Benefi cial owners – Benefi cial owner is known as an investor

who is the real owner of securities which have been lodged with
the Depository.

4. Issuers – The issuer is an issuing company which issues the

securities to investors.
Benefi ts of Depositories
• N o r i sks asso ci at e d wi t h ph ysi cal c e r t i fi cat e s su ch as l o ss o f sh ar e
ce r t i fi c at e , Fake se cu r i t i e s, Et c.

• N o bad de l i ve r y.

• Fast e r se t t l e me n t cycl e s.

• L o w t r an sact i o n co st fo r pu r ch ase an d sal e o f se cu r i t i e s co mpar e d t o

ph ysi cal mo de .

• I n cr e ase l i qu i di t y o f se cu r i t i e s.

• Re du ct i o n o f pape r wo r k.

• A l l o t me n t o f I P O, Bo n u s, Ri gh t s sh ar e s e t c. i n e l e ct r o n i c fo r m.

• Wavi e r o f st amp du t y o n t r an sfe r o f se c ur i t i e s.

• I n t i mat i o n l i ke ch an ge o f addr e ss, ban k man dat e , n o mi n at i o n, r e que st o f

t r an smi ssi o n , r e qu i r e d t o be gi ve n o n l y t o D e po si t o r y Par t i ci pant (D P )
I r r e spe ct i ve o f t h e nu mbe r o f co mpan i e s i n wh i ch sh ar e s he l d.
DOCUMENTS REQUIRED FOR OPENING
DEMAT ACCOUNT

• Adhaar card

• PAN card

• Bank Details

• Address proof

• Photograph & signatures

• Application form fi lled for DEMAT

 Diff erence between Demat and
Physical Shares
1. Form: Physical shares are in form of printed certifi cate, but DEMAT
share are informative materialized form.

2. Distinctive Number: Physical shares have distinctive share certifi cate

number or share number butter DEMAT shares do not have distinctive
shared certifi cate number or share number also they do not bear name
and address of shareholder.

3. Safety: DEMAT shares are safe as these are in custody of depositary.

But physical share may be stolen or lost in transit during transfer.
Physical shares certifi cate may also cause problem of forged signature
mismatch or signature duplicate certifi cate etc.
4. Inter-changeable : DEMAT shares of a specifi c category are interchangeable as
they don't have any distinct identifi cation number, but Physical shares of same
category are not fungible and they are not interchangeable.

5. Time required in Transfer : Shares held in physical form, takes long time for the
transmission. Here the buyer has to send physical shares to the company .

Transfer of DEMAT shares needs less time as physical movement of shares does not
take place. Only in entries are passed in DEMAT accounts of transferor and
transferee.

6. Stamp Duty : In case of transfer of physical shares, stamp duty is payable on the
basis of value of securities purchased by the buyer., but in case of DEMAT shares
stamp duty is not payable on transfer of any kind of security .

7. Services of Depository and DP : For holding shares in DEMAT form, the shareholder
needs this services off depository and depository participants.

The holder of physical shares can keep physical shares with himself . The services of
depository and depository participants are not required in case of physical chairs.
 Basic Services DEMAT Account

The individuals who have only one demat account and value of securities
held in demat account not exceeding ₹2lakh can convert their demat
account do basic services demat account(BSDA). If the value of securities is
up to 50,000 then no annual maintenance charges are livied on these BSDA .
If value of securities is exceeding ₹50,000 but up to ₹2 lakh rupees, annual
maintenance charges not exceeding ₹100 can be charged from these
accounts.

All existing eligible individuals can convert their demat accounts into BS DA
. If value of securities in these account exceeds the prescribed limit of ₹2
Lach at any date then DPs can impose charges as applicable to regular
demat accounts from that date onwards.
 Depository Process
1. The company who's securities are to be converted into paperless or electronic
mode must be registered with the depository .

2. Investor approach DP for opening demat account .

3. In case of existing securities the investor will surrender the share certifi cate for
dematerialization to DP.

4. In case of new issue of securities in investor decides about selection of depositary

mode or physical mode in the application form at the time of off er of securities .

5. Securities held in demat account can be sold in electronic form .

6. If the benefi cial owner tends to get back his securities from electronic mode to
physical mode , then he will make a request for rematerialization with the DP.

7. DP will send the transaction statement and holding statement , periodically to the
investors , who have demat account with DP.
 Depositories in India

The depository model adopted in India provides for a competitive multi-

depository system. There can be various entities providing depository
services. Such system is known as Multi-Depository System.

At present two Depositories are registered with SEBI:

• NSDL (National Securities Depository Limited)

• CDSL (Central Securities Depositories Limited)

 National Securities Depositories Limited
(NSDL)

NSDL is the fi rst and the largest depository in India. It was established
in August 1996. NSDL was promoted by Industrial Development Bank of
India (IDBI)-the largest development bank in India, Unit trust of India
(UTI)-the largest mutual fund in India and National stock exchange
(NSE)- the largest stock exchange in India.

It helps the investors, issuers and brokers in capital market. NSDL aims
at ensuring the safety and soundness of Indian capital market by
developing settlement system that increase effi ciency, minimize risk
and reduce the cost. Here transfer of securities take place by means of
electronic form.
 Functions Of NSDL
1. M a i n t a i n s i n v e s t o r ' s h o l d i n g s i n e l e c t ro n i c f o rm .

2. Tr a n s f e r o f s e c u r i t i e s i n e l e c t ro n i c f o r m .

3. Tr a n s f e r o f s e c u r i t i e s i n e l e c t ro n i c f o r m .

4. Pro v i d e a c c o u n t s t a t e m e n t p e r i o d i c a l l y t o a l l i n v e s t o r s .

5. Fa c i l i t a t e s l e n d i n g a n d b o rro w i n g o f s e c u r i t i e s h e l d i n d e m a t Ac c o u n t .

6. Re c e i p t o f c o r p o r a t e b e n e fi t s l i ke b o n u s s h a re s , r i g h t s s h a re s , d i v i d e n d i n e l e c t ro n i c f o rm .

7. T h e p u rc h a s e a n d s a l e t r a n s a c t i o n a re s e t t l e d o n s e c o n d w o r k i n g d a y f ro m t h e t r a d e d a y.

8. E n a b l e s t h e s u r r e n d e r a n d w i t h d r a w a l o f s e c u r i t i e s t o a n d f r o m t h e d e p o s i t a r y i n
surrender investor surrender their physical securities and these are credited in
t h e d e m o n a c c o u n t o f t h e i n v e s t o r. I n w i t h d r a w a l , i n v e s t o r a s k t h e d e p o s i t o r y
participant to reconvert their electronic securities in demat form to physical
securities and this process is called rematerialization of securities.
 Central Securities Depositories Limited

CDSL is the second depository in India. It was established in February

1999. CDSL was initially promoted by BSE limited., which thereafter
divested its stake to banks. All leading stock exchange like BSE,
National Stock Exchange(NSE) have established connectivity with CDSL.

The clearing corporations of stock exchanges are electronically

connected for processing quick settlement of transactions. The
activities like dematerialization and rematerialisation of securities,
corporate actions such as issue of right shares and bonus shares,
subdivision and redemption securities are carried out by issuer of
securities. It ahs wide network of DPs operating from over 17,000 sites
across across the country.
 Central Securities Depositories Limited

1. Faster settlement of trade transaction in stock market.

2. Dematerialization and Rematerialization of securities.

3. Transfer of securities in electronic mode.

4. Maintaining investor's holding in the electronic form and provide

account statement periodically to all investors.

5. Electronic credit of securities in demat accounts of investors in case

of allotment of shares at time of public issue of securities.

6. Stock lending and borrowing in electronic form.

THANK YOU