1) What is a depository?
A depository is a facility for holding securities, which enables securities transactions
to be processed by book entry. To achieve this purpose, the depository may immobilize
the securities or dematerialize them (so that they exist only as electronic records).'
India has chosen the dematerialization route. In India, a depository is an organization,
which holds the beneficial owner's securities in electronic form, through a registered
Depository Participant (DP). A depository functions somewhat similar to a commercial
bank. To avail of the services offered by a depository, the investor has to open
an account with it through a registered DP.
2) What is dematerialization?
Dematerialization is a process
by which physical certificates are converted into electronic form.
3) Who is a Beneficial
Beneficial Owner" is a person in
whose name a demat account is opened with CDSL for the purpose of holding securities
in the electronic form and whose name is recorded as such with CDSL.
4)Who is a Depository
A Depository Participant (DP) is
an agent of the depository who is authorized to offer depository services to investors.
Financial institutions, banks, custodians and stockbrokers complying with the requirements
prescribed by SEBI/ Depositories can be registered as DP. Further information on
DP, can be accessed from CDSL's web site www.cdslindia.com
5) Who is an Issuer?
Issuer means any entity making
an issue of securities.
6)What is an ISIN?
ISIN (International Securities
Identification Number) is the identification number given to a security of an issuer
at the time of admitting such security in the depository system.
7) How do I buy financial
instruments as investment options?
One cannot buy directly from the
market or stock exchange. A buyer has to buy stocks or equity through a Stock Broker,
who is a registered authority to deal in equities of various companies. In effect
a lot many intermediaries might come in between the buyer and seller, as brokers
do their business through many sub-brokers and the like.
8) Whether different
securities issued by the same Issuer will have same ISIN?
No, different securities issued
by the same issuer will have different ISINs.
9) What services are
provided by a DP?
Following services can be availed
of through a DP:
- Dematerialisation i.e. converting physical securities into electronic form.
- Rematerialisation, i.e. converting electronic securities balances in a BO account
into physical form.
- To maintain record of holdings in the electronic form.
- 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
- Providing electronic credit in respect of securities allotted by issuers under IPO
- Receiving on behalf of demat account holders non-cash corporate benefits, such as,
allotment of bonus and rights shares in electronic form or securities ensuing upon
consolidation, stock split or merger/amalgamation of companies.
- Pledging of dematerialised securities.
- Facilitating Securities Lending and Borrowing, if the DP is registered as an "Approved
Intermediary" for the purpose.