2. A bank or company which holds funds or securities depos
ited by others, and where exchanges of these
securities take place.
Depository

4. • India has adopted
the depository
system for securities
trading in which
book entry is done
electronically and no
paper is involved.
• Before the
introduction of the
depository system
through
the Depository Act,
1996, the process of
sale, purchase and
transfer of securities
was a huge problem,
and there was no
safety at all.
Evolution of
Depository

5. Key Features of the
Depository System in India
1. Multi-Depository System
2. Depository services through
depository participants
3. Dematerialization
4. Fungibility
5. Registered Owner/ Beneficial
Owner
6. Free Transferability of shares

6. Merits of Depository
• The shares, represented by
dematerialized share certificates are
fungible and, therefore, certificate
numbers and distinctive numbers are
cancelled and become non-operative.
• Transfer of dematerialized securities is
immediate.
• The investor is also relieved of
problems like bad delivery, fake
certificates, shares under litigation,
signature difference of transferor and
the like.
• The threat of loss of certificates or
fraudulent interception of certificates
in transit that causes anxiety to the
investors, are eliminated.

7. Demerits of the
Depository
System
•Lack of control
•Need for greater
supervision
•Complexity of the
system

8. Dematerialization
Dematerialization refers to the substitution of paper-
form securities by book entry securities.

9. Process of
Dematerialization
• Fill up a dematerialization request form, which
is available with your DP;
• Submit your share certificates
• Receive credit for the dematerialized shares
into your account in 15 days.

10. NSDL
• National Securities Depository Limited (NSDL) is the
first central securities depository in India based
in Mumbai.
• It was founded in November 1996.
• NSDL is promoted by IDBI, UTI and NSE.

11. CDSL
• Central Depository
Services Limited (CDSL) is
the second
Indian central securities
depository based
in Mumbai.
• It was founded in 1999.
• CDSL is promoted
by Bombay Stock
Exchange Limited (BSE)
jointly with State Bank of
India, Bank of India,
Bank of Baroda, HDFC
Bank, Standard
Chartered Bank and
Union Bank of India.