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Depositary system

Depositary system is a system of computerized book entry of securities and their

transfer in capital market transactions. In the depository system, securities are held
in depository accounts, which is more or less similar to holding funds in bank
accounts. Transfer of ownership of securities is done through simple account
transfers. This method does away with all the risks and hassles normally associated
with paperwork. Consequently, the cost of transacting in a depository environment
is considerably lower as compared to transacting in certificates.

A depositary performs the functions of ³holding, transferring, withdrawal of

securities. The depositary will turn to appoint agent called µparticipant¶, who
directly deals with the investors. According to SEBI guidelines, financial
institutions, banks, custodians, stockbrokers, etc. are eligible to act as DPs. The
investor who is known as beneficial owner (BO) has to open a demat account
through any DP for dematerialisation of his holdings and transferring securities.

’ e benefits of availing Depository Services are as follows:

„c A safe, convenient way to hold securities;

„c Instant transfer of securities;
„c Stamp duty is not required on transfer of securities;
„c Elimination of risks associated with physical certificates such as bad
delivery , fake securities, Delays, thefts etc.;
„c Geduction in paperwork involved in transfer of securities;
„c Geduction in the cost of transaction,
„c ^o odd lot problem, even one share can be sold;
„c uacility of nomination;
„c 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;
„c Transmission of securities is done by DP eliminating correspondence with
companies;
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„c Credited automatically into demat account of shares, arising out-of bonus or

split or consolidation or merger etc.

rocess of opening an account

Opening of an account with any of the depository Participant of any depository is

required to avail the services.

Opening of an account: The investor has to approach a Depository Participant and

fill up an account opening form with the support proof of identity and address.

roof of Identity: Photograph and Signature of investor must be authenticated by

investor's bank or by an existing demat account holder. Alternatively, one can
submit a copy of a valid Passport, Voters Id Card, Driving License or PA^ card
with photograph.

roof of Address: A copy of ration card or passport or voter ID or PA^ card or

driving license or bank passbook as proof of address.

The investor has to sign an agreement with DP in a depository prescribed standard

format, which holds a detail of investor's and DPs rights and duties. DP provides
investor with a copy of the agreement and schedule of charges for future reference.
The DP opens the account for the investor in the system and give an account
number, which is also called BO ID (Beneficiary owner Identification number).

Kindly note that there is no balance of securities required in the account and more
than one account in the same name can be opened either with the same DP or with
other irrespective of the brokers account.
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a isting depositaries in India

Presently, there are two depositary in the country

„c ^ational securities depositories limited (^SDL)

„c Central depositories services limited (CDSL)

^SDL

^SDL, the first and largest depository in India, established in August 1996 and
promoted by institutions of national stature responsible for economic development
of the country has since established a national infrastructure of international
standards that handles most of the securities held and settled in dematerialized
form in the Indian capital market

Using innovative and flexible technology systems, ^SDL works to support the
investors and brokers in the capital market of the country. ^SDL aims at ensuring
the safety and soundness of Indian marketplaces by developing settlement
solutions that increase efficiency, minimize risk and reduce costs. At ^SDL, we
play a quiet but central role in developing products and services that will continue
to nurture the growing needs of the financial services industry.

Functions of ^SDL

„c It enables the surrender and with drawl of securities to, and from, the
depository.
„c raintains investors holding in the electronic form.
„c Transfer of securities.
„c Geceipt of non cash corporate benefits like bonus, rights and so on.
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romoters / S are olders

^SDL is promoted by Industrial Development Bank of India Limited (IDBI) - the

largest development bank of India, Unit Trust of India (UTI) - the largest mutual
fund in India and ^ational Stock Exchange of India Limited (^SE) - the largest
stock exchange in India. Some of the prominent banks in the country have taken a
stake in ^SDL.

romoters

„c Industrial Development Bank of India Limited (^ow, IDBI Bank Limited)

„c Unit Trust of India (^ow, Administrator of the Specified Undertaking of the
Unit Trust of India)
„c ^ational Stock Exchange of India Limited

Ot er S are olders

„c State Bank of India

„c  DuC Bank Limited
„c Deutsche Bank A.G.
„c Axis Bank Limited
„c Citibank ^.A.
„c Standard Chartered Bank
„c The  ongkong and Shanghai Banking Corporation Limited
„c Oriental Bank of Commerce
„c Union Bank of India
„c Dena Bank
„c Canara Bank
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CDSL
CDSL is the secondary depository in India for dealing in securities.

Objectives of CDSL are

„c To accelerate the growth of scrip less trading.

„c To create competitive environment, this will be responsive to the user¶s
interest and demands.
„c To enhance liquidity.

Features of CDSL

„c Centralized database and accounting.

„c Disasters recovery.
„c CDSL link up ^SDL.
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Services offer CDSL

„c Dematerialization of existing scripts.

„c Dematerialization of existing scripts.
„c Dematerialization of new issues.
„c Geliable and efficient settlements.


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Sr. ^ame of s are olders Value of % terms to total

^o. olding (in equity
Rupees Lacs)
1 Bombay Stock Exchange Limited 5,663.46 54.20
2 Bank of India 582.00 5.57
3 Bank of Baroda 530.00 5.07
4 State Bank of India 1,000.00 9.57
5  DuC Bank Limited 750.00 7.18
6 Standard Chartered Bank 750.00 7.18
7 Canara Bank 674.46 6.45
8 Union Bank of India 200.00 1.91
9 Bank of raharashtra 200.00 1.91
10 The Calcutta Stock Exchange 100.00 0.96
Limited
11 Others 0.08 0.00
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 . 100.00