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Depository services
This document discusses depository services in India. It explains that depository services allow for the electronic holding of securities and enable transactions to be processed via book entries. There are two main depositories - National Securities Depository Limited and Central Depository Services Limited - that interface with investors through depository participants like banks and stockbrokers. The depository system works similarly to the banking system, with a central authority and transactions occurring through associated participants rather than directly with the central authority.
In this document
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Introduction to depository services, participants, and their role in securities transactions.
Explanation of depository services, the role of depositories, and the functionality of demat accounts.
Definition and role of Depository Participants (DPs), including the book entry system for ownership changes.
Basic overview of how depository services work and the key depositories providing these services in India.
Details on NSDL, its establishment, stakeholders, and role in facilitating electronic securities transactions.
Information on CDSL, its formation, and comparison to NSDL, highlighting the network and operational similarities.
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Depository services
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- 2. Index • Depository Service •Depository Participants • Depositories • Who provide depository service & Depositors in India • How depositories work? • Book entry system
- 3. What is DepositoryServices? • Depository services related to various transactions in such securities. • A depository interfaces with its investors through Depository Participants. • Depository Participants maintain investors' accounts (demat accounts) which are similar to Savings Bank/Current accounts with a Bank. • Purchase and sale of securities can be done through demat account.
- 5. Depositories • A Depositoryfacilitates holding of securities in the electronic form and enables securities transactions to be processed by book entry.
- 6. Who are DepositoryParticipants ? • A Depository Participant (DP) is an agent of the depository who is authorized to offer depository services to investors.
- 7. • Financial institutions,banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.
- 8. Book entry system •Book entry system is a system under which no physical transfer of securities takes place. In case of change of ownership rights, securities do not change hands physically. • To facilitate the change of name/ownership rights, merely a book entry is passed. • Since, the securities are fungible; transfer becomes easier.
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- 10. Who provide DepositoryServices & Depositors in India • NSDL • CDSL
- 11. National Securities Depository Limited(NSDL) • National Securities Depository Limited (NSDL) does the above tasks for the trades • done on NSE. It is a joint venture of: • IDBI (Industrial Development Bank of India Limited); • NSE (National Stock Exchange); and • UTI (Unit Trust of India).
- 12. • NSDL isthe first depository to be set up in India. It was registered by SEBI on June 7, 1996.
- 13. Central Depository ServicesLimited (CDSL) • The second depository Central Depository Services Limited (CDSL) has been promoted by Bombay Stock Exchange and Bank of India. • It was formed in February 1999.
- 14. • Both depositorieshave a network of Depository participants (DPs) which are further electronically connected to their clients. • So, DPs act as a link between the depositories and the clients.
- 15. • The Depositorysystem to some extent works like the banking system. • There is a central bank and the rules and regulations related to the working of all the commercial, foreign, co-operative and other types of banks are framed by the central bank. • In order to do the daily transactions, the investors open an account with the associate banks, and not with the central one. • Like an investor can have a bank account with more than one bank, similarly one can have more than one Demat Account.