DEPOSITORY

Functions of depository?

A Depository can be compared with a bank, which holds the funds for depositors.

Hold securities in an account
Transfers securities between accounts on the instruction of the account holder.
Facilitates transfers of ownership without having to handle securities.
Facilitates safekeeping of shares.
Which are the depositories in India?

There are two depositories in India, which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CSDL).

What are the benefits of participation in a depository?

The benefits of participation in a depository are:

Immediate transfer of securities
No stamp duty on transfer of securities
Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.
Reduction in paperwork involved in transfer of securities
Reduction in transaction cost
Ease of nomination facility
Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately
Transmission of securities is done directly by the DP eliminating correspondence with companies
Convenient method of consolidation of folios/accounts
Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/consolidation/merger etc.

Who is a Depository Participant (DP)?

The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs.

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 holding into electronic holding i.e. how can one dematerialise securities?

In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF), which is available with the DP, and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number.


Can odd lot shares be dematerialised?

Yes, odd lot share certificates can also be dematerialised.


Do dematerialised shares have distinctive numbers?

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, government securities in his demat account?

Yes. You can dematerialise and hold all such investments in a single demat account.