Page 124 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 7: Depositories and Custodians

pledge or hypothecation, details of participants, Details of securities declared to be eligible for Notes
dematerialisation in the depository, and other documents necessary for carrying on the activities
as a depository has to be kept. Every depository has to intimate SEBI of the location where the
records and documents are maintained. The depository has to preserve records and documents
for a minimum period of five years.
Every depository has to extend all such cooperation to the beneficial owners, issuers, and issuer's
agents, custodians of securities other depositories and clearing organizations as is necessary fro
the effective prompt and accurate clearance and settlement of securities transactions and conduct
of business. A depository or the participant is rendering such advice, disclosure as to the interest
of the dependent family members and the employer indicating their long or short position in
that security has to be made.

The operations in the Depository System involve the participation of a Depository, Depository
Participants, Company/Registrars and Investors. The company is also called the Issuer.
A Depository (NSDL and CDSL) is an organisation like a Central Bank, i.e. Reserve Bank where
the securities of an investor are held in electronic form, through Depository participants.
A Depository Participant is the agent of the Depository and is the medium through which the
shares are held in the electronic form. They are also the representatives of the investor, providing
the link between the investor and the company through the Depository.
To draw analogy, the Depository system functions very much like the banking system. A bank
holds funds in accounts whereas, a Depository holds securities in accounts for its clients. A bank
transfers funds between accounts whereas, a Depository transfers securities between accounts.

In both systems, the transfer of funds or securities happens without the actual handling of funds
or securities. Both the banks and the Depository are accountable for safe keeping of funds and
securities respectively. The company has to sign an Agreement with NSDL/CDSL (the
depositories) and install the necessary hardware/software for operations.

7.1 Depository Services to Investors

As a Depository Participant with the National Securities Depository Limited (NSDL) and Central
Depository Services (India) Limited (CDSL). The Depository system in India links Issuers,
National level Depositories, Depository Participants and Clearing Houses/Clearing Corporation
of Stock Exchanges.
Our demat services business has the distinction of having all its operations ISO 9001: 2000
certified with state-of-the-art technology and operations capabilities. Our demat services has
innovated over time and we provide online access to account statements and transaction alerts
through SMS to its clients.
Demat services offers a secure, convenient and paperless way to keep track of investments in
shares and other security instruments over time, without the hassle of handling paper based
transcripts.
Dematerialisation ('Demat' in short form) signifies conversion of a share certificate from its
present physical form to electronic form for the same number of holding. It is a direct application
of scope provided by the tremendous progress made in the area of Information Technology
whereby voluminous and cumbersome paper work involved in the scrip based system is
eliminated. It offers scope for paperless trading through state-of-the-art technology, whereby
share transactions and transfers are processed electronically without involving any share
certificate or transfer deed after the share certificates have been converted from physical form to
electronic form.

LOVELY PROFESSIONAL UNIVERSITY 119