A Depository is an organization that holds securities such as shares, debentures, bonds, and mutual funds in an electronic form on behalf of investors.
Depository Class 10 Notes
How is a depository similar to a bank?
A depository is like a bank; depositors do not keep the money. Instead,it keeps your share and other investments safe. The difference between depositors and banks is given below:
Which are the depositories in India?
In India, there are two main depositories that handle the dematerialisation of securities: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
What are the benefits of participation in a depository?
The benefits of participation in a depository are:
- Instant transfer of securities
- No stamp duty on transfer of securities
- No risks like fake or lost certificates
- Less paperwork; don’t need to fill out the forms.
- Electronic transactions are cheaper than physical ones.
- You can nominate your family member easily.
- If you change the address, then the address will automatically be changed across all companies.
- If the account holder passes, then the share will transfer automatically to the family members.
- You can hold multiple shares in one account.
- In a single demat account, you can hold shares, bonds, mutual funds and government securities.
- Automatic credit of shares from company actions like share split, merger or bonus.
Who is a Depository Participant (DP)?
A depository like NSDL or CDSL does not deal directly with investors. Instead of that, it offers its services through Depository Participants (DPs). Depository Participants are like agents or middlemen who help investors open and manage demat accounts.
Does one need to keep any minimum balance of securities in his account with his DP?
No. The depository has not prescribed any minimum balance. You can have zero balance in your account.
What is an ISIN?
ISIN (International Securities Identification Number) is a unique identification number for a security.
What is a custodian?
A custodian is basically an organisation which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients:
- Maintaining a client’s securities account
- Collecting the benefits or rights accruing to the client in respect of securities
- Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client.
How can one convert physical holdings into electronic holdings, i.e., how can one dematerialise securities?
If you have physical share certificates and want to convert them into electronic form. The steps you can take:
- Get a Demat Request Form (DRF).
- Fill out the DRF.
- Submit the DRF with your physical certificates.
- Verification and Processing
- Can odd lot shares be dematerialised?
- Yes, odd lot share certificates can also be dematerialised.
Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable.
Can electronic holdings be converted into physical certificates?
Yes. The process is called rematerialisation. If one wishes to get back your securities in the physical form, one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account.
Can one dematerialise his debt instruments, mutual fund units, and government securities in his demat account?
Yes. You can dematerialise and hold all such investments in a single demat account.
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