DEPOSITORY
One of the major drawbacks was/is that the securities were/are held in the form of certificates. This led to problems in physical storage and transfer of securities.
There was also the risk of bad delivery for the buyer. The transaction costs were also higher due to physical movement of paper and the incidence of stamp duty. National Securities Depository Ltd. (NSDL) was set-up in 1996 as India’s first depository.
A depository is an entity which holds the securities in electronic form on behalf of the investor.
This is done through dematerialization of holdings at the request of the investor.
Dematerialization is a process by which physical certificates of the investor are destroyed and an equivalent number of securities are credited to the account ofthe investor.
This also enables transfer of securities by book entries. The risk of bad deliveries is also eliminated. The transaction costs are also reduced due to less flow of paper and transfer of securities through deposit01’Y. does not attract stamp duty.
Further, the depository also handles all the corporate actions like exercising for rights, collection of dividends, credit for bonus, exercising of warrants, conversion option, etc., on behalf of the investor
One of the major drawbacks was/is that the securities were/are held in the form of certificates. This led to problems in physical storage and transfer of securities.
There was also the risk of bad delivery for the buyer. The transaction costs were also higher due to physical movement of paper and the incidence of stamp duty. National Securities Depository Ltd. (NSDL) was set-up in 1996 as India’s first depository.
A depository is an entity which holds the securities in electronic form on behalf of the investor.
This is done through dematerialization of holdings at the request of the investor.
Dematerialization is a process by which physical certificates of the investor are destroyed and an equivalent number of securities are credited to the account ofthe investor.
This also enables transfer of securities by book entries. The risk of bad deliveries is also eliminated. The transaction costs are also reduced due to less flow of paper and transfer of securities through deposit01’Y. does not attract stamp duty.
Further, the depository also handles all the corporate actions like exercising for rights, collection of dividends, credit for bonus, exercising of warrants, conversion option, etc., on behalf of the investor