ROLE OF DEPOSITORIES

A

abhishreshthaa

Abhijeet S
OBJECTIVE OF DEPOSITORIES:

  • Forgery of certificates.

  • Tearing and mutilation of scripts due to reckless handling.

  • Loss of certificates by postal authorities /registrars / investors

  • Less Liquidity prevalent in the markets with poor consumer confidence.

  • To liberate the Indian securities market from the paperwork grid.

  • To reduce the paper handling cost in the capital market.
  • To standardise the Indian settlement practice.

  • To increase the growth potential of Indian capital market.

  • To implement an achievable clearing, settlement, and depository solution which is not expensive to develop and maintain.


FUNCTIONS

  • Depository performs the following functions through depository participants (DPs):

  • Enables the surrender and withdrawal of securities to and from the depository

  • Maintains investor holdings in the electronic form.
    (dematerialisation and re-materialisation).

  • Effects settlement of securities traded on the exchanges. Carries out settlement of trades not done on the stock exchange (off-market trades)

  • 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.
 
Before knowing about its meaning, it becomes to difficult to understand about Depositories:

Definition of Depositories Participant

In India, a Depository Participant (DP) is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act.
 
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