DEPOSITORY PARTICIPANTS
1. What is a depository?
A “Depository” is a provider of facility for holding securities in book entry or electronic form. It is a kind of bank for securities like shares, debentures, bonds, etc. It also facilitates transactions in the securities held by it.
2. What is dematerialization (Demat)?
“Dematerialization” is a process by which physical certificates are converted into electronic form.
3. What is Rematerialization (Remat)?
Rematerialization is the process of converting securities held in electronic form in a demat account back in physical certificate form.
4. Who is registered owner of Securities?
When securities of a company are held in physical form by an investor, his/her name is recorded in the books of the company as a ‘Registered Owner’ of the securities. When physical shares are converted into electronic form, the depository becomes ‘Registered owner” in the books of the company and investor’s name is removed from books of the company.
5. Who is a Beneficial Owner (BO)?
All the benefits of the dematerialized shares are given to the actual investor since the Depository holds the securities in a fiduciary capacity on behalf of the investors who have opened a demat account with the depository. Hence, the actual investor is the “Beneficial Owner” (BO) of the securities.
6. Who is a Depository Participant?
A “Depository Participant” (DP) is an agent of the depository who is authorized to offer depository services to investors.
7. Who can be a Depository Participant?
Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/Depositories can be registered as DP.
8. Who is an Issuer?
“Issuer” means any entity such as a corporate/state or central government organizations issuing securities which can be held in depository in electronic form.
9. Who is an RTA?
An RTA (Registrar and Transfer Agent) is an agent of the issuer. RTA act as an intermediary between the issuer and depository for providing services such as Dematerialization, Rematerialization, Initial Public Offers and Corporate actions.
10. What is an ISIN (International Securities Identification Number)?
“ISIN” is a unique 12 digit alphanumeric code given to a security, shares, debentures, bonds etc. when the security is admitted in the depository system. First two digits of the ISIN code indicate country of registration. For all securities registered in depository in India, first two digits of the ISIN code are ‘IN’.
11. Whether different securities issued by the same Issuer will have same ISIN?
No, different securities issued by the same issuer will have different ISIN code.
12. What are the services provided by a Depository?
Following services are provided by a depository to the beneficial owners but of course, through a depository participant:
a. Opening a demat account.
b. Dematerialization, i.e. converting physical securities into electronic form.
c. Rematerialization, i.e. converting electronic securities balances held in a BO account into physical form.
d. Maintaining record of securities held by the beneficial owners in the electronic form.
e. Settlement of trades by delivery or receipt of securities from/in BO accounts.
f. Settlement of off-market transactions between BOs
g. Receiving electronic credit in respect of securities allotted by issuers under IPO or otherwise on behalf of demat account holders.
h. Receiving non cash corporate benefits, such as, allotment of bonus and rights shares or any other non cash corporate benefits given by the issuers in electronic form on behalf of its demat account holders.
i. Pledging of dematerialized securities & facilitating loans against shares.
j. Freezing of the demat account for debits, credits, or both.
13. What is the legal framework governing the depository functions in India?
A depository functions under the following rules and regulations:
1. The Depositories Act, 1996,
2. SEBI (Depositories and Participant) Regulations.
3. Depository Bye-laws which are framed under the above two documents.
4. Prevention of Money Laundering Act (PMLA), 2002
14. Can a demat account be opened directly with Depository?
No. A demat account can not be opened directly with Depository. It has to be opened only though a DP of Depository.
15. Can an investor open multiple demat accounts?
Yes, an investor can open multiple demat accounts. There is no restriction on number of demat accounts which an investor can open.
16. Is it necessary for an investor to open an account with the same DP as that of his broker for settling the trades done through him?
There is absolutely no compulsions on any investor to open his demat account with the same DP as that of his broker. Investor can open account with the DP of his/her choice and can carry on his trading activity through a broker of his choice.
17. Can a demat account be opened in the name of Joint Holders?
Yes. A demat account can be a opened in a single name or in joint holders’ name. There can be maximum three account holders i.e. one main holder and two joint holders.
18. Can a Demat account be opened for a minor?
Demat account can be opened in the name of a minor. The account will be operated by a guardian till the minor becomes major. Guardian has to be the father or in his absence mother. In absence of both, father or mother, the guardian can be appointed by court.
19. Can minor be a joint holder in another demat account?
No. Minor can not be a joint holder in a demat account.
20. Can a demat account be opened in the name of a trust?
A demat account can be opened in the name of a trust If the trust is registered under the Public Trust act 1860/Societies Registration act/Bombay Public Trust act/public trust act in force in the state. If the trust is a private or unregistered trust then a demat account shall be opened in the name of trustees as an individual account. If the trust has more than three trustees, then they will have to decide in whose name the demat account will be opened.
21. Does an NRI need any RBI permission to open a demat account?
No permission is required from RBI to open a demat account. However, credits and debits from demat account may require general or specific permissions as the case may be, from designated authorized dealers.
22. Is nomination compulsory for a demat account?
SEBI has mandated that nomination should be recorded for a demat account held by individuals. If nomination is not to be given then the account holder(s) should give a written and signed declaration to the effect.
23. Is dematerialization of securities compulsory?
According to the Depositories Act, 1996, an investor has the option to hold securities either in physical or electronic form. Part of holding can be in physical form and part in demat form. However, SEBI has notified that settlement of market trades in listed securities should take place only in the demat mode.
24. What type of instruments are available for demat at Depository?
All types of equity/debt instruments viz. Equity shares, Preference Shares, Partly paid shares, Bonds, Debentures, Commercial Papers, Certificates of Deposit, Government Securities (G-SEC) etc. irrespective of whether these instruments are listed/unlisted/privately placed can be dematerialized with Depository, if they have been admitted with Depository.
25. Is there any charge for dematerialization of physical certificates?
Depository does not levy any charge for dematerialization of securities. However, DPs may collect dematerialization charges towards postage/courier charges etc. as per their tariff sheet.
26. How many Depositories are there in India?
There are two Depositories in India. They are:
1. National Securities Depository Limited (NSDL)
Trade World, A wing, 4th & 5th Floors,
Kamala Mills Compound,
Lower Parel, Mumbai-400013
Tel: (022) 2499 4200 (60 lines)
Fax: (022) 24976351
Email: info@nsdl.co.in
2. Central Depository Services (India) Limited (CSDL)
Phiroze Jeejeebhoy Towers,
16thFloor,Dalal Street
Mumbai 400001
Phone:91-22-22723333
Fax91-22-22723199/22722072
Email : investors@cdslindia.com