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A Depository system is very similar to the Banking System by
replacing the cash by securities. A Depository System is a corporation where
the shareholder’s securities are held in electronic form at the request of the
shareholder through the medium of Depository Participant. The entity is
appointed by a depository through which its services are provided to the
For availing the services such as Dematerialization and Rematerialization of shares, the investor opens a Demat account with a Depository Participants, it also requires-
Table of Contents
2. The Depository must be registered with SEBI. The Depository Participant has to comply with the eligibility criteria prescribed in the SEBI (Depository and Participants) Regulations, 2018.SEBI grants the certificate of registration.
Note-There are two depositories functioning in
India, i.e. NSDL (National Securities Depository Limited)AND CDSIL(Central
Depository Services(India) Limited.
Depository Participant acts as an agent of the investor at the
Stock Exchange. It is the representative of the Depository in the Depository
system by presuming the link between the Company and the investor through the
Further, as per the SEBI GUIDELINES, below-mentioned
participants can also become the Depository Participants-
services provided by the Depository Participants to the Stock Investor are-
securities is a process by which the physical securities are converted into
electronic securities at the request of the investor. However, the process is optional,
and the investor can still hold shares in physical form.
The Process involved in
the Dematerialization-Various steps are involved in
the Dematerialization Process-
securities is a process by which the electronic securities are converted into
physical securities at the request of the investor.
The Process Involved in
the Rematerialization-Various steps are involved in
the Rematerialization Process-
Immobilization is a
process where the physical share certificate is kept with the depository for
safe custody, and all the subsequent transactions in these securities take
place in the Book-entry form. The immobilization of fresh issues may be
achieved by issuing a jumbo certificate representing the entire issue in the
name of the depository, and the owner has the right to withdraw his physical
securities as and when required.
Trade settlement by
delivery or receipt of securities-
participants help the Stock investor in the settlement when the trade is final,
and the investor must make the payment to the seller while the seller delivers
the securities to the buyer investor. As the settlement date denotes the legal
transfer of ownership of securities.
Conclusion-The functions and responsibilities of the Depository Participants are laid out by the SEBI in the Regulations.
Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.
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