Depository Services

Depository

 A depository is an organization where the

securities of an investor are held in electronic
form, at the request of the investor through the
medium of a Depository Participant

 If an investor wants to utilize the services offered

by a depository, he has to open an account with
the depository through its Depository Participant.
This is similar to opening an account with any of
the branches of a bank in order to utilize the
services of that bank.
What is dematerialization?
 It is process of converting securities from physical
form into electronic form.
Depositories in Indian context

 Central Depository Services (India) Limited

- Promoted by BSE, BoI, BoB, SBI and HDFC
Bank.
 National Securities Depository Limited (NSDL)
- Promoted by UTI, IDBI and NSE
 Securities and Exchange Board of India (SEBI) is
the regulating authority.
Depository-Bank-An Analogy

Bank Depository
 Holds funds in  Holds securities in
accounts accounts
 Transfers funds  Transfers securities in
between accounts accounts
 Transfers without  Transfers without
handling cash handling physical
 Safekeeping of money securities
 Safekeeping of
securities
Who is a Depository Participant?

 A Depository Participant (DP) is an agent of the

depository and is authorized to offer depository
services to investors.

 According to SEBI guidelines, financial institutions,

banks, custodians, stockbrokers, etc. can become
DP with a depository.
Role of a DP
 A DP is interface between customer and
depository.
 A customer opens an account with a DP and
commences operations.
 Balances are maintained with the depository and
are available through the DP.
 DP will intimate customers status of holdings or
transactions from time to time.
Services offered by DP
 Account Opening & Maintenance
 Dematerialisation of Securities
 Transfer of Securities
 Pledging of Securities
 Rematerilisation of Securities
Account Types
Beneficiary Account

These are ownership accounts, for use of

Individuals, Corporates, HUFs etc.

Pool Account

These are commercial accounts , for use of broker,

for transfer of securities to and fro, from Exchange
or Clearing Corporation.
All the securities received in the pool account should be
transferred to the respective beneficial accounts within 24 hrs.
Can any security be dematerialized?
 Only securities eligible for demat.
 Only securities registered in the name of account
holder.
 Name(s) and order of name appearing on the
certificate should match with that of account
holders. However, initial of first / middle name is
acceptable.
 Signature should match with that in the records of
registrar.
How are securities dematerialized?

 Physical securities are to be submitted to DP,along

with DRF.
 Each security certificate should be defaced by the
client. Defacing of certificate to be done by putting
a stamp ‘Surrendered for Dematerialization’.
Demat Requisition Form
Demat Requisition Form
Dematerialization process
 Client submits DRF and
physical certificates to
DP.
 DP intimates to
depository and sends
certificates with DRF to
R&T agent.
 R&T agent confirms
dematerialization to
depository.
 NSDL credits securities
to beneficial owner.
Dematerialization Process

 How many copies of DRF are made and who all get
them?

 3 Copies
 Client / Account Holder
 Depository participant
 R & T agent
Trading & Settlement

 Market Trade
Trade done through a broker on the exchange. Has
to be settled through the exchange
 Off Market Trade
Trade done between two parties without the
involvement of a broker. Has to be settled
mutually between the two parties, shares moves
from one account to another
Delivery Instruction Slip
Settlement of Market Trade

 Seller gives delivery

instructions to DP to move
securities to broker’s
account.
 Securities are transferred
to clearing corporation from
brokers account.
 On pay out securities are
moved from Clearing
corporation to buying
broker’s account.
 Buying broker credits
buyer’s account.
Off Market Trade

 Seller gives Delivery

Instruction to his DP.
 Securities are transferred
from seller’s DP to Buyer’s
DP.
 Buyer gets credit
automatically into his
account
Pledge

Securities held in a depository account can be

pledged to avail of loan/credit facility. Pledge of
securities in NSDL depository requires that both
the borrower (pledgor) and the lender (pledgee)
should have account in NSDL Depository.
Corporate Action

 Corporate events which affect the rights,

obligations and / or interests of beneficial account
holders.
 These events can have monetary and non-
monetary repercussions.
Corporate Action
Monetary
 On the record date NSDL, downloads clients
details and send it to the registrar.
 The Registrar disburses the benefit to the
beneficial holder as per the details obtained
from NSDL
Non Monetary
 On the record date, NSDL downloads clients
details and send it to the registrar
 The Registrar give credit to the beneficial holder
as per the details obtained from NSDL
Who can open a demat account?

 Individuals,NRIs,Minors,HUFs,Trusts (Regd),
Corporates can open demat account.

 Proprietary firms,partnership firms and

unregistered trusts cannot open a demat account
as the Companies Act,1956 prohibits these entities
from becoming shareholders of companies
Basic documents for account opening

 Registration form
 Photograph/s with signatures across it
 Proof of residence
Passport,Voter’s ID card,Driving license,Ration card
 Proof of identity
Passport,Voter’s ID card,Driving license,PAN card
 Bank Account Proof
Bank statement,cancelled cheque
Charges for Depository Account

 Account opening charges  Nil

 Annual service charges  Rs.250/-
(charged pro rata)
 Custody / Holding charges  Nil
 Transaction Credit  Nil
 Transaction Debit  0.05% of transaction
value
(Minimum Rs.15/-
Maximum Rs.100/-)
Charges for Depository Account

 Pledge creation charges  Rs.30/- per instruction

 Pledge closure charges  Nil
 Dematerialisation charges  Rs.5/-per certificate,Rs.25/-
(per request for postal charges)
 Rematerialisation charges  Rs. 15/-per certificate, Rs.25/-
(per request for postal charges)
 Rejection / Failure charges  Rs.20/- per entry.
Notes to schedule of charges

 Exclusive depository customers will pay in advance

Rs.1000/- per account,adjustable against service charges.
 All the above charges are exclusive of service tax.
 Charges / service standards are subject to revision at the
depository participant’s sole discretion.
 Annual service charges are non refundable and are levied
upfront on a pro rata basis.
 Value of transaction will be in accordance with rates provided
by depository.
 Transaction charges are payable monthly.

…contd.
Notes to schedule of charges

 In case of non maintenance of adequate balance in the trading or

demat account, service for the account is temporarily discontinued.
 Request for resuming service is charged Rs. 250/- .
 Any service not quoted above ,will be charged separately.
Frequently Asked Questions
Is it compulsory for every 5paisa customer to open a
depository account with IIL?

Yes. This is so because we give our clients exposure to trade

against the stocks held in their demat account provided we
have a POA
How many different DP accounts can I have?

You can have as many DP accounts as you want.

Do I need to keep a minimum stock balance in a DP account?

No. There can be a zero stock balance in a DP account.

Do I need to open different DP accounts for shares held
in my name with variations.
For example, the shares are in my name as follows:
 Rohit Gupta
 R Gupta
 Rohit G

No. If the identity that all the three names belong

to the same person, then customer can have one DP
account.
If Mr. A has a joint holding with Mr. B . There are
some shares with A as first holder and B as the
second holder and vice versa. Can Mr.A and Mr.B
dematerialise shares into a single joint account?

Yes.They can dematerialise shares in a single joint

using transposition form.
Can someone else operate my account on my
behalf on the basis of a power of attorney?

Yes. If you authorize any person to operate your

account by executing a power of attorney and
submit it to DP, that person can operate the
account on your behalf.
Why should I give my bank account details at the
time of account opening?

It is for protection of your interest. Your bank

account number will be mentioned on the interest or
dividend warrant you are entitled to so that such
warrant cannot be encashed by any one else.
Further, a DP cannot open the account if bank
account number is not given.
Can I operate a joint account on "either or
survivor" basis just like a bank account?

No. The demat account cannot be operated on

"either or survivor" basis like the bank account.
Thank You