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Benefits to companies ∑ The companies will be able to know the particulars of beneficial owners and their holdings periodically. ∑ At the time of declaration of dividends, bonus s, etc, there will not be any rush for transfer related activities for the companies. Benefits to the capital market ∑ The capital market will beContinue reading “Depository System:
Objectives, activities, interacting systems, role of depositories and their services, Advantages of
depository system – NSDL and CDSL. The process of clearing and settlement through
Depositories, Depository Participants. Regulations relating to Depositories-SEBI (Depositories
and Participants) Regulations 1996- Registration of depository and participant- Rights and
Obligations of depositories and participants- Recent amendments Custodial services- The Stock
Holding Corporation of India Limited
Depository System
The term depository is defined as „a central location for keeping securities on deposit‟. It is also
defined as „a facility for holding securities, either in certified or uncertified form to enable book
entry transfer of securities. It is understood from the above two definitions that the depository is
a place where securities are stored, recorded in the books on behalf of the investors.
A system in which securities of an investor are held by depository on behalf, and at the request,
of an investor in an Electronic Form. This system is also know as Scrip Less Trading system.
The Need and Objective of Depository System in India:
The old trading system /Traditional Scrip Based System was affected by a lot of problems such
as: Enormous paperwork Time consuming/longer settlement cycles Poor infrastructure Bad
deliveries due to signature difference, mistake in completing details in transfer deeds, litigation
in respect of shares purchased, fake certificates, tearing/mutilation of certificates, postal delays,
processing time taken by companies. Huge transaction cost
Functions of a Depository:
1. Account Opening: An investor wishing to avail depository services must first open an
account with a depository participant registered with a depository. The process of opening a
demat account is very similar to that of a bank account. The account opening form must be
supported by copies of any one of the approved documents which serve as proof of identity and
proof of address as specified by SEBI. Apart from these PAN card has to be shown in original at
the time of account opening W.E.F April 01, 2006.
2. Dematerialization:
One of the primary functions of a depository is to eliminateorminimizethe movement of physical
securities in the market.ThisisachievedthroughDematerialization.Dematerialisation or demat is
the process of converting the securities held in physical form intoan electronic record form or to
directly allot securities in electronic record form. These electronicrecords of securities are shown
as “electronic balances” in the demat accounts of investors.
3.Rematerialisation: is the process by which a client can get his electronic holdings converted
into physical certificates.
4.Transfer of Securities:
The depository gives effects to all transfers resulting from thesettlement of
tradandothertransactions between various beneficial owners by recordingentries in the account of
such beneficial owners.
5 Corporate Actions: is a process by which a company gives benefits to the investors who are
holding securities of the company. Types of corporate actions corporate actions are classified ito
two main categories. Cash and Non-cash corporate actions. Cash corporate action results in,investors getting benefits in form of cash. Examples of cash corporate actions are payment of
interest / dividend. Non cash corporate actions result in the investors getting benefits in form of
securities. Examples of non-cash corporate action are bonus, rights, etc.
5. Cash Corporate Actions: The Issuer/R&T agent will distribute dividend, interest and other
monetary benefits directly to the beneficial owners on the basis of list provided by Depository.
Non-cash Corporate Actions:
∑ Depository will provide the details of the beneficial owners and their holding to
issuer/RTA.
∑ The Issuer / RTA then submit an allotment file to Depository containing the details of
allotments to BOs.
∑ Based on the said allotment file the securities are credited to the demat accounts of the
BOs.
6. Pledge and Hypothecation:
The securities held with the depository may be used as collateralto secure loans and other credits
by the clients. Both pledgee and pledger are required to have ademat account. The pledged
securities are blocked in favour of pledgee /lender, who can releasethe pledge once the loan is
repaid by the borrower. In case of default by the pledgor or any otherreason agreed by pledgor
and pledgee, the pledgee , as per the terms of the agreement, mayinstruct his DP to invoke the
pledge. The pledgee BO has to submit an “Invocation RequestForm” (IRF). On execution of this
instruction, the securities are transferred into the pledgee‟saccount.
7. Account freezing: Account freezing means suspending any further transaction fro depository
account till the account is unfrozen. An investor, by issuing instructions to depository, in which
he is maintaining demat account, can get his account frozen till further instructions.
8. Transmission : The word “transmission” means devolution of title to shares, for example,
devolution by death, lunacy, bankruptcy, winding-up (in case of corporate) etc. The claimant
should submit to the concerned DP an application with Transmission Request Form (TRF) along
with documents like death certificate, Succession certificate, Probate of the will, Letter of
administration. The major advantage in case of dematerialized holdings is that the transmission
formalities for all securities held in a demat account can be completed just by interaction with the
DP alone.
Role of depositories
The role of depository participants in stock market is very important. Now a days all kinds of
trading works in stock market are being executed through internet and the basis of most part of
the entire infrastructure of a depository is constituted in electronic form. In this article I will try
to give all outcanenjoy while trading in stock market.
Advantages o f depository system
Benefits to investor
∑ This system will eliminate paper work
∑ The risk of bad deliveries, fraud and misplaced, mutilated
∑ The electronic media will shorter settlement time.
∑ Investors will change portfolio more frequently.
∑ The distribution of dividends, interest and other benefits will be speedier.
∑ Cost of transfer is less as the share transfer
∑ Faster payment in case of sale of shares.”

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Department of Management Studies, united Bank 🏦 of American.
services. Common entities on the buy side include insurance companies, hedge funds, unit trusts,
mutual funds and private equity funds.
Private or boutique investment banks: are concerned with private and confidential information
and transactions that might not be revealed to the public. They are usually smaller banking
entities that specialize in one or more areas of investment products. Others in this sector focus
their services on one type or one specific group of industries. These private entities carry out a
variety of functions. Some may act as investment advisors while others specialize in the trade of
certain assets and commodities. There are also those that offer services to specific social groups
and industries. Examples of private investment banks include; Almeida Capital, Atlantic-Pacific
Capital, J.P. Morgan Cazenovia, Triago, China International Capital Corporation and CITIC
Securities.
Public, Full-service or Bulge bracket investment banks: enlist a wider variety of market
activities that include research, underwriting, mergers and acquisitions, trading, merchant
banking, investment management and securities trading services. These bulge bracket banks are
enormous investment institutions that cover all or most industries. They serve a wide variety
ofclient types and offer most if not all possible types of investment banking services in
theirportfolio. Major institutions that fall under this umbrella today are Bank of America Merrill
Lynch, Barclays Capital, Citigroup, JPMorgan Chase and Morgan Stanley.
Investment Banking Services
Corporate Financial & Advisory: The management and underwriting of public and private
securities. Identification of investors for new ventures or for the expansion of established
business. Handling of public and private companies mergers, acquisitions and
restructuring.Undertaking of industry research or project feasibility studies. Undertaking of share
valuationsfor various purposes. Private placements of debt and equity.
Underwriting – Guarantee that all the issued shares will be sold. If there is any portion that is
unsold, the underwriting institutions themselves will take it up.
Portfolio and Investment Services: Nominee and registration services including
custodianshipof all types of securities. Trading of stocks, shares, Government bonds and money
marketsecurities. Management of corporate and private portfolio, trusts and pension funds.
Shareregister and share registration services. Management of investment portfolios. Management
ofinvestment and unit trusts and property trust funds. Fund management funds.
Corporate Banking: Management of syndicated and consortium facilities in local and
foreigncurrencies. Provision of trade financing facilities. Syndication and provision of
guaranteefacilities. Management and underwriting of commercial papers. Provision and
arrangement ofshort, medium and long-term loans in Malaysia and overseas. Provision of
bridging finance andproject finance. Provision of factoring and leasing facilities. Capital market
issues. Blockdiscounting of hire-purchase agreements.
Syndicated Loan: When the value of loan required by a company is too large, it is possible that
the company may be unable to obtain it from one single financial institution. Investment bank
will help to arrange the loan from several financial institutions. Such loans are called syndicated
loan. The aim of the syndicated loan is to reduce risks and exposure of each of the syndicate
participants.
Fund-Based Activities: Acceptance of call and fixed deposits. Term loans Investment banks
also offer a number of other services which are provided by commercial banks. Investment banks.”

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