An Outline- Depository Participant
A depository is a type of establishment or association which holds securities of investors as debentures, securities, shares, government securities, mutual funds and so forth in e-form if they request through a registered depository participant. It additionally offers services related to the transactions in securities.
The similarity among Bank and Depository is clarified beneath-
| Bank | Depository |
| It holds money in an account | It holds securities in an account |
| On the demand of account holder, it transfers funds between their accounts | On the demand of account holder, it transfers securities between their accounts |
| It works with transfers without handling money | It works with transfers of ownership without handling securities |
Primary Function of Depository
It functions as a connection between the listed companies and their investors when shares are issued. Listed Companies take help of the agents to issue shares, these agents are called depository participants or DPs. A DP can be a bank, monetary foundation, a broker, or any institution qualified according to the SEBI standards and who is liable for the last transfer of shares made from the depositors to the investors. The financial backer gets an affirmation from the depository when the transaction is completed.
Services offered by Depositories
- Dematerialization (generally known as demat) where the physical certificate of the investor is converted into equal worth of securities in e-form.
- Rematerialization, known as Remat, is a course of changing over securities held in e-form from a demat account back to the physical certificate.
- Securities’ transfer, change of beneficiary
- Settlement of trades when an exchange takes place, related to the depository.
- Presenting Securities as a collateral for loan against shares
- Corporate activity benefits are straightforwardly transferred to the customer's Demat and Bank account.
Why is a Depository required?
A depository wipes out the risk of holding securities in the physical form. After the depository framework came, such risk which may cause burglary, loss or damage have been incredibly decreased since the shares are transacted online. They likewise decrease the paperwork engaged with such transactions and secure the transaction of shares from any such risk or delay.
Kinds of Depositories
According to the Depository Act of 1996 two depositories are set up in India, in particular National Securities Depository Limited (NSDL) which is encouraged by the National Stock Exchange, Industrial Development Bank of India, and Unit Trust of India and various others. The other one is the Central Depository Services Limited (CDSL) which is encouraged by the Bombay Stock Exchange, State Bank of India, and various other banks of India.
Depository Participant
A DP is a depository agent. They are the mediators between the depositors and the investors. The connection between the DPs and the depository is represented by an understanding made between them according to the https://en.wikipedia.org/wiki/Depositories_Act 1996. The DP might be a financial foundation, commercial banks, foreign banks working in India with the permission of RBI, clearing houses, stockbrokers and so on.
Depositories and Depository participants both are managed under the domain of SEBI on the rules outlined by them. DP can be functional solely after getting registered with SEBI post getting suggested by the NSDL and CDSL.
Process for becoming Depository Participant
- The candidate trying to get registered will file an application to the board for seeking registration in Form E, through a depository in which the candidate proposes to go about as a member, alongside the charges of INR 15,000.
- Depository then, at that point, forward this application to the board not later than 30 days of its receipt alongside the proposal that candidate conforms to the prescribed qualification as determined in guidelines.
- After receiving the application, the board might ask the candidate or depository to which candidate is going to become a member, to outfit additional data or be present physically, whenever needed for granting certificate. The board can even oddball the application if it sees that it isn't furnished in all regard and furthermore doesn't comply with the predetermined guidance.
- With the end goal of granting registration certificate, the board considers each of the issues which is pertinent to do the activities of a Depository Participant as examined beneath-
- the candidate ought to have a place in one of the accompanying classifications:
- A public financial establishment
- Foreign bank working in India with RBI’s permission.
- Clearing corporation of a stock exchange
- State Financial Corporation
- A stockbroker who possesses a registration certificate by the board
- Any others described in the guideline
- The candidate ought to be fit and rational individual
- The candidate ought to be qualified to get accepted as a member to the depository through which it has filled the application to the board.
- If the board is contended that the candidate is qualified for the registration certificate, they provide the registration certificate in Form F subject to the payment of registration fee as recommended in the guidelines.
- A public financial establishment
- Foreign bank working in India with RBI’s permission.
- Clearing corporation of a stock exchange
- State Financial Corporation
- A stockbroker who possesses a registration certificate by the board
- Any others described in the guideline
As depository frameworks upgrade the liquidity of securities in the market, they have diminished the risk of robbery, misrepresentation, and damages; accordingly, financial backers are keener on investing through this mode. Along these lines, candidates who are looking for or keen on beginning their business as DP, Estabizz can assist them in getting enrolled with SEBI and setting up any remaining documents as required. Those who are willing can mail their questions on our mail-id info@estabizz.com . Detailed information is available on our site www.estabizz.com
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