capital market

depositories meaning and participant in India

Depositories meaning?

The depository is an organization which holds securities of the investor in electronic form at the request of the investor through a registered depository participant. it also provides service related to the transaction in securities.

How many Depositories are registered with SEBI?

At now India two Depositories are registered first one is National Securities Depository Limited and second one is Central Depository Services Limited.

Who is a Depository Participant?

A Depository Participant (DP) is an agent of the depository through which it interfaces with the investor. A DP can offer depository services only after it gets proper registration from SEBI Depository can be compared with a bank, likewise, a DP may be compared with a branch of a Bank.

What minimum net is worth required for a depository?

The minimum net worth stipulated by SEBI for a depository is Rs. hundred crores.

How many many Depository Participants are registered with SEBI?

At present approximately 390 DPs are registered with SEBI. A list of DP’s and their addresses can be downloaded from the SEBI website.

What are the benefits of availing depository services?

Benefits are enumerated below:
A safe, convenient way to hold securities;
Immediate transfer of securities;
No stamp duty on transfer of securities;
Elimination of risks associated with physical certificates such as bad delivery, fake securities, Delays, thefts etc.;
Reduction in paperwork involved in the transfer of securities; Reduction in transaction cost;
No odd lot problem, even one share can be sold;
Nomination facility;

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; Transmission of securities is done by DP eliminating correspondence with companies; Automatic credit into demat account of shares, arising out-of bonus/split/ consolidation/merger etc.

Account opening, How can the services of a depository be availed?

To avail of the services of a depository, you require to open an account with any of the Depository Participant of any depository.

How can one open an account?

First, an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by Proof of Identity: Signature and photograph of the investor must be authenticated by an existing demat account holder or by an investor’s bank. Alternatively, one can submit a copy of a valid Passport, Voters ID Card, Driving License or PAN card with photograph. Proof of Address: A copy of ration card/ passport/voter ID / PAN card/ driving license/ bank passbook as proof of address. (Investor should carry original documents for verification by an authorized official of the depository participant, under his signature.) Further, the investor has to sign an agreement with DP in a depository prescribed standard format, with retail investors and DPs rights and duties. DP should provide the investor with a copy of the agreement and schedule of charges for your future reference. [he DP will open investors’ account in the system and give an account number, which is also called BOID(Beneficiary owner Identification number).

What should be done if the address of the investor changes?

An investor should immediately inform his/her DP, who in turn will update the records. This will obviate the need of informing different companies.

Can multiple accounts be opened?

Yes. An investor can open more than one account in the same name with the same DP and also with different DPs.

Does the investor have to keep any minimum balance of securities in my accounts?

No

Is it necessary to have an account with the same DP as a broker has?

No. Depository / DP can be chosen by the investor as per convenience irrespective of the DP of the broker.

Can an investor open a single account for securities owned in different ownership patterns such as securities owned individually and securities owned along with others?

No. The demat account must be opened in the same ownership pattern in which the securities are held in the physical form. e. g. if one share certificate is In your individual name and another certificate is joint with some other, two different accounts would have to be opened.

What is required to be done if one has physical certificates with the same combination of names, but the sequence of names is different i.e. some certificates with ‘A’ as the first holder and ‘B’ as the second holder and other sets of certificates with ‘B’ as first holder and ‘A’ as the second holder?

In this case, ONE may open only one account with ‘A’ & ‘B’ as the account holders and lodge the security certificates with a different order of names for dematerialization in the same account. You will fill-up an additional form called “Transposition cum Demat” form. This would help you to effect change in the order of names as well as dematerialize the securities.

Whether investors can freeze or lock their accounts?

Investors can freeze or lock their accounts for any given period of time if so desired. Accounts can be frozen for debits (preventing the transfer of securities out of accounts) or for credits (preventing any movements of hindrances into accounts) or for both.

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