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India Agent: How Do Depository Operate

In India, a Depository Participant (DP) acts as an intermediary between investors and the depository, governed by an agreement under the Depositories Act. DPs include stockbrokers, registrars and transfer agents, and non-banking finance companies, who must have a minimum net worth of Rs. 50 lakh to register as a DP. Depositories allow for the electronic holding of shares and securities, eliminating risks like loss, theft, or forgery of physical certificates, and reducing transaction costs. Investors open demat accounts with DPs to avail of depository services like dematerialization, rematerialization, securities transfers and trade settlements. Currently there are two depositories in India -

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13 views

India Agent: How Do Depository Operate

In India, a Depository Participant (DP) acts as an intermediary between investors and the depository, governed by an agreement under the Depositories Act. DPs include stockbrokers, registrars and transfer agents, and non-banking finance companies, who must have a minimum net worth of Rs. 50 lakh to register as a DP. Depositories allow for the electronic holding of shares and securities, eliminating risks like loss, theft, or forgery of physical certificates, and reducing transaction costs. Investors open demat accounts with DPs to avail of depository services like dematerialization, rematerialization, securities transfers and trade settlements. Currently there are two depositories in India -

Uploaded by

rohit1chauhan2076
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Depository Participant

• In India, a Depository Participant (DP) is described as an agent of


the depository. They are the intermediaries between the depository
and the investors. The relationship between the DPs and the
depository is governed by an agreement made between the two
under the Depositories Act.

• SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs.


50 lakh for stockbrokers, R&T agents and non-banking finance
companies (NBFC), for granting them a certificate of registration to
act as DPs.

Benefits of Depository

 Bad delivery eliminated


 Immediate transfer of shares
 No stamp duty on such transfers
 Elimination of risks that are normally associated in dealing with
Physical certificates - loss / theft / mutilation due to careless handling /
forgery / etc.
 Reduced transaction cost

How do Depository operate


Depository interacts with its clients / investors through its agents, called
Depository Participants normally known as DPs.
For any investor / client, to avail the services provided by the Depository,
has to open Depository account, known as Demat A/c, with any of the DPs.
Demat A/c

• For individual Indian citizens to trade in listed stocks or debentures.


The Securities Exchange Board of India (SEBI) requires the investor to
maintain a Demat account.

• In a demat account shares and securities are held in electronic form


instead of taking actual possession of certificates.

Services provided by Depository

 Dematerialisation (usually known as demat) is converting physical


certificates to electronic form
 Rematerialisation, known as remat, is reverse of demat, i.e. getting
physical certificates from the electronic securities
 Transfer of securities, change of beneficial ownership
 Settlement of trades done on exchange connected to the Depository

No. of Depository in the country


Currently there are two depositories operational in the country.

1. National Securities Depository Ltd. - NSDL - Having 95 Cr.


Demat A/c as on 31-03-2010 - 300 DPs in India
2. Central Depository Services Ltd. - CDSL - Having 65 laks
Demat A/c as on 31-03-2010 - 500 DPs in India

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