Depositories and their role in the Indian

Capital Market
Depositories are integral institutions in the Indian Capital Market and their
functionality can be compared to banking entities.
Their role comes into play from the time an investor makes a decision on
investing. In India, there are two depositories namely National Securities
Depository Limited (NSDL) or Central Depository Services (India) Limited
(CDSL) that are registered with SEBI.

What functions depositories perform in India?

Both NSDL ans CDSL, facilitate dematerialization of shares i.e. held the shares in
electronic form. So, in a way depository is held accountable for safe-keeping of
your portfolio of securities.
On instruction of the account holder,depositories also facilitate transfer of
securities from one account to the other. So, transfer of ownership of securities is
effected by depositories.
With all the details concerning your personal details, scrips as well the number of
units of each scrip held by the individual, several corporate actions or
transactions such as the issue of bonus shares or annual dividend are executed
via depositories acting as an important intermediary in the entire process.
So, the depository other than acting as a safe-keeper of your securities provides
services pertaining to the transaction in securities.
Depositories provide investor services through Depository
Participant
The two depositories in India provide their services to large investor base through
depository participants.
As per SEBI rules, banks, financial institutions as well as trading members
registered with SEBI are eligible to act as depository participants (DP).
Services offered by depositories
Providing their services through depository participants, the depositories offer
the major service of dematerialization of shares. With dematerialization is
eliminated the risk of false or fake securities, bad delivery etc.
Facilitates share transfer from one DP account to the other on an immediate
basis without levy of stamp duty.
Nomination facility is made easy.
Any change in address of correspondence that is registered with the DP
automatically gets registered with all the companies in which an individual holds
share
Facilitates holding of different securities such as debt, equity or government
securities in a single account.
So, depositories hence provide a convenient and easy way of consolidation of
accounts/folios