The document provides information on the depository system in India. It discusses key aspects such as what is a depository participant, the two depositories in India (NSDL and CDSL), how securities are held in dematerialized form through a beneficial owner account with a depository participant, and the processes of dematerialization and rematerialization of securities. The depository system eliminates risks associated with physical certificates and provides various benefits to investors such as convenient transfer of securities and safe custody of holdings.

1. DEPOSITORY PARTICIPANTSThis system came in to force with effect from September20,
1995.
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2. 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.

3. Feature of scrip based system:
1. There is physical movement of securities
certificates along with transfer deeds.
2. Registration with the company.

4. 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.

5. 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.

6. 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.

7. Whole system of
Depository

8. Constituents of depository
system:
There are basically four participant:
 The Depository
 The Depository Participant
 The Issuing Company
 The Investor

9. Who is depository?
 Depository facilitates holding of securities
in the electronic form and enables
securities transactions to be processed by
book entry by a Depository Participant
(DP), who as an agent of the depository,
offers depository services to investors

10. Features of depository system in
India
1. In the depository system, the apex body is the
Depository..
2. A depository can be compared with a bank
3. Depository services through depository
participants.
4. Fungibility
5. Registered Owner/ Beneficial Owner (two types
of owner)

11. Who can be a depository:
Depository Act, 1996 provides that -
Depository means:
 A company formed and registered under
the companies Act, 1956, and
 Which has got a Certificate of Registration
from the SEBI.

12. 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.

13. NATIONAL SECURITIES
DEPOSITORIES LIMITED
 NSDL is the first and largest depository in India, and
established in August 1996
 It has 288depository Participants (as on 21.09.13)
 Address:
Trade World, a Wing, 4th
&5th
Floors
Kamala Mills Compound
Lower Parel
Mumbai 400013
website: nsdl.co.in

14. PROMOTERS OF NSDL
1. Industrial Development Bank of India Limited
2. Unit Trust of India
3. National Stock Exchange of India Limited

15. 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
 Axis Bank of India

16. CENTRAL DEPOSITORY SERVICES
(INDIA) LIMITED
 This is the second depository in India.
 This was formed and registered in 1999.
 It has 579DPs as on 21.09.13
 Address:
Phiroz Jeejeebhoy Towers
16th
Floor, Dalal Street
Mumbai
website: www.cdslindia.com

17. PROMOTERS OF CDSL
 Bombay Stock Exchange Limited
 Bank of India,
 Bank of Baroda,
 State Bank of India and
 HDFC Bank
 Standard Chartered Bank
 Canara Bank
 Union Bank of India
 Bank of Maharashtr
 The Calcutta Stock Exchange Limited

18. 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

19. A Bank-Depository Analogy
Bank Depository
1.Holds funds in an account
on behalf of a customer
1.Holds securities in an
account on behalf of an
investor.
2.Transfer funds between
accounts on the instruction
of the account holder.
2.Transfer securities between
accounts on the instruction
of the account holder.
3.Physical handling of funds
is avoided.
3.Physical handling of
securities is avoided.
4.Provides safe custody of
fund
4.Provides safe custody of
securities.

20. Who Is Depository Participant:
 A Depository Participant (DP) is an agent of the
depository through which it interfaces with an
investor.
 A DP can offer depository services only after it
gets proper registration from SEBI.
 A DP is just like a Branch of a Bank.

21. Who can be Depository
Participant?
In terms of the Depositories Act, 1996, SEBI
(Depositories & Participants) Regulations,1996, only
the following entities are eligible to become a
Depository Participant:
 Financial Institutions,
 Banks, including approved foreign bank
 Custodians,
 Stockbrokers,
 A clearing corporation or a clearing house of a stock exchange
 A non-banking finance company,
 A registrar to an issue or share transfer agent

22. Types of ownership
REGISTERED
OWNER
BENEFICIAL
OWNER
In the depository system, the ownership of securities
dematerialized is bifurcated in to:

23. 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.

24. 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.

25. Benefits of depository system/holding
securities in dematerialized form
Depository system provides benefits to:
 The investors,
 The issuers.

26. Benefits to investors:
1. The transactions in electronic mode eliminated the risk and
problems of delays.
2. The risk of bad deliveries is totally eliminated
3. There is no requisite of filling up the transfer deeds, payment of
transfer stamp duty and a lot of other paper work at the end of
the investor.
4. It totally eliminates the risk associated with fraudulent
interception of certificates in postages or transits..
5. Transfer of ownership of securities is immediate in case of
depository mode.
6. The investment, automatically, becomes more liquid.
 contd.

27. Contd.
7. The problem of odd lot is also eliminated, as the
depository mode does not have any concept of market lot.
8. Holding investments in equity and debt in a single account.
9. 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.
10. Transmission of securities is done by DP eliminating
correspondence with companies.
11. Nomination facility.

28. Benefits to the issuing company:
1. The company saves a lot of paper work which
otherwise is required in the physical mode.
2. The company saves a postal cost for the dispatch
of right shares, bonus shares or share certificates
after affecting the transfer.
3. By offering depository services to its
shareholders, a company may send a positive
sign to its shareholders about its concern for their
welfare.
4. Depository services adds liquidity to the security
thus fund raising capacity of the company.

29. How can services of Depository
availed by an investor?
 ACCOUNT OPENING:ACCOUNT OPENING:
1.1. In order to avail of depository facilities, an investor has to open aIn order to avail of depository facilities, an investor has to open a
beneficiary account with a depository participant of his choice.Thisbeneficiary account with a depository participant of his choice.This
is similar to opening a bank account to use the banking services.is similar to opening a bank account to use the banking services.
 Just as one can hold funds in a bank account and transfer fundsJust as one can hold funds in a bank account and transfer funds
across accounts without actually handling cash;one can holdacross accounts without actually handling cash;one can hold
securities in a depository account and transfer securities acrosssecurities in a depository account and transfer securities across
depository accounts without actually handling share certificatesdepository accounts without actually handling share certificates..
contd.contd.

30. Contd.
 The account holder is called 'beneficial owner' in
a depository system and the account is known as
'beneficiary account'.

31. Features of Beneficiary Account
Features of Beneficiary Account
 No minimum balance is required to be retained in a
beneficiary account.
 An investor can close a beneficiary account with one
DP and open an account with another DP.
 To dematerialize existing physical holdings, the
beneficiary account must be opened in the same
ownership pattern in which the securities are held in
the physical form e.g:
 If one certificate is in individual name and another
certificate is jointly held by X & Y, two different
accounts should be opened

32. Procedure of Opening An
Account:
 Investor will choose a DP for the purposes of
opening beneficiary account. The choice of the
investor may be based on convenience, comfort,
services offered, cost or any other reason.
 The investor will obtain the relevant
account opening form from the chosen DP.

33. Contd.
 For the purpose of verification, investor has to
submit the following documents along with the
prescribed account opening form.
1. Proof of Identity(POI) (voter card, pan card,
driving license etc.)
2. Proof of Address (POA) (ration card, ank
pass book copy voter id card etc.)
3. Passport-size photograph

34. Contd.
 Copy of PAN card
 The DP will also provide a copy of the DP-
Client agreement.

35. Some other aspects:
 The demat account cannot be operated on "either or
survivor" basis like the bank account. In case of the joint
account for the beneficial owners, all the joint holders have
to sign the account opening form.
 The investor will submit to his DP the duly filled in account
opening form & DP-client agreement along with the
documents.
 On successful opening of the account, the DP will
give:
1. Client Id - an eight digit number to be used along with DP
Id for any future transactions.
2. Delivery Instruction slip book.

36. Some other aspects
contd.
 More than one demat account can be opened in the
similar / identical name and order with the same DP
or different DPs.
 A periodical statement of holdings and transactions
is provided by DP. This can also be asked for from
the DP

37. 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 investor’s
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.

38. Process of dematerialisation
 An investor intending to dematerialise its securities needs to
have an account with a DP.
 The client (registered owner) will submit a request to the DP in the
Dematerialisation Request Form for dematerialisation, along with
the certificates of securities to be dematerialised. Before
submission, the client has to deface the certificates by writing
"SURRENDERED FOR DEMATERIALISATION".
 The DP will verify that the form is duly filled in and the
number of certificates, number of securities and the security
type (equity, debenture etc.) are as given in the DRF. If the
form and security count is in order, the DP will issue an
acknowledgement slip duly signed and stamped, to the client.

39. Contd.
 After intimating NSDL electronically, the DP sends the securities to
the concerned Issuer/ R&T agent. NSDL in turn informs the Issuer/
R&T agent electronically, using NSDL Depository system, about
the request for dematerialisation. If the Issuer/ R&T agent finds the
certificates in order, it registers NSDL as the holder of the securities
(the investor will be the beneficial owner) and communicates to
NSDL the confirmation of request electronically. On receiving such
confirmation, NSDL credits the securities in the depository account
of the investor with the DP.
 This procedure takes 15to 30 days.

40. 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.

41. Procedure of rematerialisation
 The client has to submit the rematerialisation request to the DP with
whom he has an account.
 The DP enters the request in its system which blocks the client's
holdings to that extent automatically.
 The DP releases the request to NSDL and sends the request form to
the Issuer/ R&T agent.
 The Issuer/ R&T agent then prints the certificates, dispatches the
same to the client and simultaneously electronically confirms the
acceptance of the request to NSDL.
 Thereafter, the client’s blocked balance are debited.