28-05-2014, 03:51 PM
MEANING OF DEPOSITORY
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On the simplest level, depository is used to refer to any place where something is deposited for storage or security purposes. More specifically, it can refer to a company, bank or an institution that holds and facilitates the exchange of securities. Or a depository can refer to a depository institution that is allowed to accept monetary deposits from customers.
•The term depository is defined as “a central location for keeping securities on deposit”. It is also defined as “a facility for holding securities, either in certificated or uncertificated form to enable book entry transfer securities”.
•It is understood from the above two definitions that the depository is a place where securities are stored, recorded in the books on behalf of the investors.
•Therefore, a depository can be defined as, “an institution which transfers the ownership of securities in electronic mode on behalf of its members”.
OBJECTIVES OF DEPOSITORY SYSTEM
The Main objectives of the study are to evaluate the performance of the Depository system in India with reference to NSDL.
1) To know the historical development of Depository system in the world as well as in India.
2) To study the Organizational frame work, Operational policies, Problems and Prospects and financial performance of NSDL.
3) To present legislative measures of dematerialization and to understand the present status of dematerialization in India.
4) To analyze services rendered and quality among the DPs and opinions of investors with regard to the functioning of NSDL.
5) To identify the Investors ‘expectations from the DP companies and to exhibit the Investor’s perceptions on the services offered by the DP companies and examine the SERVQUAL SCORES among DP companies.
6) To make appropriate and relevant recommendations to the management of the organization under study.
ROLE OF DEPOSITORY SYSTEM
1. In the depository system, the ownership and transfer of securities takes place by means of electronic book entries.
2. Bad deliveries could be eliminated since shares are registered in the electronic form that cannot be mutilated easily.
3. Elimination of all risks associated with physical certificates
4. Dealing in physical securities has associated security risks of theft of stocks, mutilation of certificates, and loss of certificates during movements through and from the registrars etc. Such problems do not arise in the depository environment.
5. No stamp duty for transfer of any kind of securities in the depository.
6. This waiver extends to equity shares, debt instruments and units of mutual funds etc in the depository. Thus, cost can be reduced.
7. Immediate transfer and registration of securities In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the company's registrar for registration. Having purchased securities in the physical environment, the investor has to send it to the company's registrar so that the change of ownership can be registered and this usually takes many months. So long as the shares are with the company or its agent for transfer, the investor could not sell it in the market even the price is very attractive and this increases his opportunity cost. To overcome this problem, investors used to keep shares without effecting ownership transfer but this is risky because they will not get their entitlements for dividend, bonus, rights etc, if any, and the share in question will become bad delivery if one book closure is missed.
8. Faster settlement cycle: The exclusive demat segments follow rolling settlement cycle of T+2 i.e. the settlement of trades will be on the 5th working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor.
9. Faster disbursement of non-cash corporate benefits: NSDL provides for direct credit of non-cash corporate entitlements like rights, bonus etc. to an investor's account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit.