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Unit 7: Depositories and Custodians

under the supervision of the exchanges and oversight of SEBI. The investor can access the trading Notes
platform of an exchange only through a registered brokers.

Depository System

A major reform of the Indian stock markets has been introduction of the depository system and
scrip less trading mechanism, since 1996. This system of trading based on physical transfer of
securities militated against the efficient functions of markets, particularly large scale entry of
Foreign Institutional Investors (FII's).
Depository Participant (DP)

The DP's are service providers to the investors. A depository interfaces with its investors through
them as agents/participants. To utilize the services of a depository, an investor had to open an
account with a DP.

Existing Depositories in India

There are two types of depositories, they are:

NSDL

NSDL is the first depository company in the country. It has been promoted by the UTI, NSE, State
Bank of India, HDFC Bank and City Bank.
Functions: NSDL performs the following functions through depository participants:

1. Enables the surrender and withdrawal of securities to and from the depository
(dematerialization and rematerialisation).
2. Maintains investor holdings in the electronic form.

3. Carries out settlement to trade not done on the stock exchanges.
4. Electronic credit in public offerings of companies.
5. Transfer of securities.
6. Stock lending and borrowing.

Services Offered by the NSDL:
1. Maintenance of beneficial holdings through DP's
2. Dematerialization.
3. Trading and settlement in dematerialization securities.

4. Receipt of allotment in the dematerialized form.
5. Receipt of corporate benefits.
6. Rematerialisation.
7. Locking of an investor's account.

8. Market trade.
9. Off market trade.

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