CHAPTER - 4
What are Depositories, Depository Participants & their role?
If you buy something, you get a receipt in exchange for the same. So, for example, if you make an FD in a bank, you get an FD receipt. Similarly, if you buy a share, you get a share certificate as proof that you own those shares.
Until the year 1996, the physical share certificates were provided as proof of ownership of shares. But, with the initiation of the demat account, the shares are held in a dematerialized or digital form. Demat account act as a bank account wherein the shares are stored.
A depository holds the shares in dematerialized form on request by a shareholder. In India, there are two depositories – NSDL & CDSL
There is no difference between the two depositories; SEBI regulates both.
But, you cannot open a demat account directly with any of the depositories. For opening a demat account with a depository, you need to go through a Depository Participant (DP) who acts as a depository agent. E.g., Dealmoney is a depository participant registered with CDSL. SEBI also regulates a DP.