including NSDL and CDSL

1. Presented By
JYOTHI B O
1DA16MBA12

2.  MEANING:-
 The term Depository means a place where a
deposit of money, securities, property etc. is
deposited for safekeeping under the terms of
depository agreement.
 A depository system is an organization, which
assists in the allotment and transfer of securities
and securities lending.
 The shares here are held in the form of electronic
accounts i.e. dematerialized form and the
depository system revolves around the concept of
paper-less.

3.  Before introduction of Depository system, the
problems faced by investors and corporates in
handling large volume of paper were as follows:
1. Bad deliveries
2. Fake certificates
3. Loss of certificates in transit
4. Mutilation of certificates
5. Delays in transfer
6. Long settlement cycles
7. Mismatch of signatures
8. Delay in refund and remission of dividend etc

4.  HISTORY:-
 The first depository was set up way back in 1947 in
Germany.
 In India it is a relatively new concept introduced in
1996 with the enactment of Depositories Act 1996
 Their operations are carried out in accordance with
regulations made by SEBI bye-laws and rules of
Depositories Act and
 SEBI (Depositories and Participants) Regulations
Act 1996

5.  FEATURES:-
1) Depository system through depository participant’s.
2) Dematerialization
3) Fungibility
4) Registered owners
5) Free transferability of shares
6) Beneficial owner
7) Multi depository system

6.  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

7.  Presently there are two Depositories working in India:
1. 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.
It is promoted by IDBI, UTI, NSE
 Shareholders of NSDL:
1. State Bank of India
2. Citi Bank
3. Oriental Bank of Commerce
4. Standard Chartered Bank
5. Dena Bank
6. Canara Bank
7. Union Bank of India

8. 2. Central Depository Services (India) Limited (CSDL)
It commenced its operations during February
1999.
It was promoted by Stock Exchange Mumbai in
association with Bank of Baroda, Bank of India, SBI and
HDFC bank.
 Shareholders:-
1. Standard chartered bank
2. Canara Bank
3. Union Bank of India
4. Bank of Maharashtra
5. Jammu And Kashmir Bank Limited
6. Centurion Bank of Punjab Ltd
7. The Calcutta Stock Exchange Association Ltd

9.  Facilities offered by the DS:
1. Opening of depository system
2. Dematerialization
3. Rematerialisation
4. Settlement of trades in dematerialized securities
5. Account transfer
6. Transfer ,transmission and transposition
7. Pledge and hypothecation
8. Redemption or repurchase
9. Stock lending and borrowing
10. Corporate action
11. Account freezing
12. Nomination
13. Demat of debt instruments
14. Dealing in Govt. securities

10.  Benefits of the Depository System:
 To the nation:
i. Growing and more liquid markets
ii. Increase in competitiveness in the international market place
attracting many investors
iii. Improved prospects for privatization of public sector units by
creating a conducive environment
iv. Considerable reduction in delay
v. Minimizes settlement risk and fraud restoring investors’ faith in the
capital markets
 To the investing public
i. Reduction of risks associated with loss, mutilation, theft and forgery
of physical scrip
ii. Elimination of financial loss from loss of physical scrip
iii. Greater liquidity from speedier settlements
iv. Reduction in delays in registration
v. Faster receipt of corporate benefits
vi. Reduced transaction costs through greater efficiency.

11.  To issuers:
i. Up-to-date knowledge of shareholders’ names and
addresses
ii. Reduction in printing and distribution costs of new
issues
iii. Easy transfer of corporate benefits
iv. Improved ability to attract international investors without
having to incur expenditure of issuance in overseas
markets

12.  Constituents:-
1) Depository
2) Depository Participant (DP)
3) Securities, Issuers and Registrars and Share
Transfer Agents
4) Stock Exchanges and Stock Brokers
5) Clearing Corporation/ Clearing House and
Clearing Members
6) Banking system
7) Investors

13. 1. Depository :
it is an organization where the securities are held in
electronic form and carries out the securities
transaction by book entry.
2. DP :
 DP is an agent of the depository and functions as
the interacting medium between the depository
and the investor.
 He should be registered with the SEBI.
 He is responsible for maintaining the investors’
securities a/c with the depository and handles
them as per the investors written instructions.
 He is linked to a broker who trades on behalf of
investors.

14. 3. Securities, Issuers and Registrars and Share Transfer
Agents:
eg: an agreement between the depository , issuer of security
and the designated registrar/ share transfer agents for the
underlying security in the cases of issues like transfer of
securities by their beneficial owners.
4. Stock Exchanges and Stock Brokers
SE is an organized market for dealings in securities
commonly referred as secondary market.one of its main
functions is price discovery i.e. to cause prices to reflect
currently available information about a security
SB are members of SE primarily engaged in 2 main activities
i.e. buy and sell securities for their clients charging a
commission.

15. 5. Clearing Corporation/ Clearing House and Clearing
Members:
A clearing corporation is a central organization created to
facilitate efficient , fast and economical settlement of transactions
at a SE . it being an internal department of a SE is an
independent entity.
The members of Clearing Corporation brokerage firms, banks or
other financial institutions who are called as clearing members
6. Banking system
Depository essentially plays a dual role i.e. of a depository and a
limited bank
It maintains current a/c’s for participants and executes fund
transactions relating to securities transactions for participants.
7.Investors :
may be individuals or corporates who have acquired shares
either in primary market or in secondary market

16. Depository System
InvestorCompany
Depository
Participants

17. Step-1:
Shareholder/Investor opens an account with the
depository of his account unlike a bank account after
submitting the necessary documents. The client to given
an identification number & he submits the
Dematerialization Request Form(DRF) along with original
share certificates.
Step-2
After receipt of DRF the depository participants sends it to
the company for confirmation of Demat account.
Step-3
The company should have well equipped required
software & hardware so that it can be linked to DP through
a V-SAT connections.

18. Step-4
On receipt of DRF & share certificates of the
shareholder necessary verification is done & demat
account is confirmed to depository.
Step-5
The depository further confirms the demat to the
shareholder.
Step-6
D P credits the shareholders demat account with the
number of shares dematerialized and gives a
statement of holding & updates the account of
investor.

19.  Highlights of Depositories Act- 1996:
 Investors are free to leave depositories at any
point of time and get registered to the company to
leave share certificates.
 No stamp duty on the transfer of a shares
automatically transfer immediately after the
payment.
 Any losses caused to the beneficial partner/ owner
is indemnified by the depository.
 Every depository participants must be registered
with SEBI.
 Investors are given a choice to continue with
existing share certificates / depository mode.

20.  Investor opting for depositories must register with
DP’s. DP’s will be banks, FI’s and large brokerage
firms.
 The depository name will be their in register of the
companies and benefits are enjoy by investors by
receiving the dividend right shares, bonus shares,
and voting shares.
 Shares in depository mode cease to have
distinctive number hence fungible – freely
transferable.