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Study of Depository Services

Study of Depository Services

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Published by: hittu- on May 02, 2010
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08/18/2013

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INTRODUCTION
1
 
INTRODUCTION OF STUDY
Depository
A depository is an organization which holds securities of investors in electronic form at the requestof the investors through a registered Depository Participant. It also provides services related totransactions in securities.In India ,Depository Act defines a depository to mean “a company formed and registered under Companies Act,1956 and which has been granted a certificate of registration under sub section(IA)of section 12 of Securities and Exchange Board of India Act,1992”
DEPOSITORY SYSTEM
It is a system whereby the transfer and settlement of scripts take place not through the traditionalmethod of transfer deeds and physical delivery of scripts but through modern system of effectingtransfer of ownership of securities by means of book entry on the ledgers or the depository without physical movement of scripts.The new system thus eliminates paper work, facilitates automatic and transparent trading in scripts,shortens the settlement period and ultimately contributes to the liquidity of investment in securities.This system is also known as ‘
Scriples trading system
,
CONSTITUENTS OF DEPOSITORY SYSTEM
There are essentially four players in the depository system:-
1.The Depository Participant2.The Beneficial Owner/Investor 3.The issue4.The Depository
2
 
FACILITIES OFFERED BY DEPOSITORY SYSTEM:
The following are some of important facilities offered by depository system:-
1.Dematerialization2.Rematerialisation3.Electronic settlement of trade4.Electronic credit of securities allotted in public, rights and bonus issue.5.Pledging or hypothecation of dematerialized securities.6.Freezing of demat account.
ADVANTAGES OF DEPOSITORY SYSTEM:
The system is expected to offer the much awaited custodial services to Indian and Foreign investorstogether. It is likely to bring about the following benefits to various investors, issuing companies aswell as nation:
(A)
Advantages to the Investors
:
Quick transfer of funds and securities.
Elimination of all risks associated with physical certificates.
Minimized chances of fraud, theft of securities.
Statement of accounts.
(B)Advantages to the issuer:
Costs of registration & transfer of shares get reduced which were earlier incurred bythe issuer company.
Saving in cost involved at the time of public issues.
Easy to attract foreign investors without any cost of issuance in overseas market.
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