Depositories &Custodian Prof.S.B.

Mishra Depository A depository is an organization which holds the securities of its beneficial owners in paperless or Scripless form or in Book entry form. It holds the securities either in Or Immobilized Form A depository functions somewhat similar to a Commercial Bank. Need for Depository Security Scam1992 Time and cost involved in Allotment and Transfer of Shares were too high. Problems of Dealing with Phisycal shares. Opening up of economy resulted larger investor base. FDI Inflow was restricted due to lack of Depositories. Functions Dematerialisation : Rematerialisation: To maintain record of holdings in the electronic form. Providing electronic credit in respect of securities allotted by issuers under IPO or otherwise. Functions contd Dematerialized

Settlement of trades by delivering/ receiving underlying securities from/in BO accounts. Settlement of off-market trades i.e. transactions between BOs entered outside the Stock Exchange. Functions contd

Receiving non-cash corporate benefits: Allotment of bonus and rights shares in electronic form or ensuing securities upon consolidation, stock split or merger/ amalgamation of companies.

Functions

contd..

Pledging of dematerialised securities. Facilitating Securities Lending and Borrowing, if the DP is registered as an "Approved Intermediary" for the purpose. Features Indian Depository System Dematerialization as against immobilization: Depository services through depository participants: Features Fungibility Registered Owner/ Beneficial Owner Free Transferability of shares: contd.

Depository Participant Could be Public Financial Institutions. Banks Custodians Stock Broker. The Stock Holding Corporation of India was the first depository participant registered with SEBI. No. of DPs was 212 in 2002 with 1649 service centres. Charge Account Opening Charges and Annual Renewal Fees. Custodians A custodian is an intermediary who keeps the scrips of the client in safe custody or is the keeper of the accounts of its clients. It is different from Depositories. Benefits of Dematerialisation

1.

No bad deliveries;

2. Immediate transfer of shares and registration of securities, increasing liquidity of stocks with investors; 3. No stamp duty on transfer of shares; 4. Considerable reduction in the handling of large volumes of paper; 5. Elimination of risk associated with physical certificates such as loss, theft, mutilation and forgery; 6. Reduction in transaction cost; Option to deliver dematerialised securities in the dematerialised or physical segment with effect from 6th April, 1998 on both NSE and BSE. But physical securities not allowed to be delivered in dematerialised segment, making dematerialised stock held with investors more liquid than physical stock; 7. Pay-in and pay-out of securities and funds on the same day for scripless trades; faster settlement cycle faster disbursement of corporate benefits like rights and bonus; 8. Reduction in rate of interest on loans granted against pledge of dematerialisedsecurities by banks; 9. Lower margin on securities pledged with banks; 10. Reduction in brokerage by several brokers for trading in dematerialised securities; 11. Periodic status reports to investors on their holdings and transactions, leading tobetter controls Depositories in India-NSDL National Securities Depository Ltd . Promoted by IDBI,NSE,UTI,SBI in 1996 918 Companies in 1999-2000. 84% of Total Market Capitalisation CSDL Central Depository Services (India) Ltd Promoted by BSE,SBI ,BOI,Bob HDFC Bank etc in 1999 Has 163 DPs in 91 cities.. Preffered by Govt.for its transactions.

Depository Charges Custody Fee On Purchase of Share On Sale of Share Pledge Creation Annual Fee Rematerialisation Thank You.