Meaning of depository is basically a place where something is deposited for storage or safeguarding. In our capital market, this term has a lot of relevance where they hold securities in dematerialized (Demat*) form. There are two central depositories in India viz. CDSL (Central Depository Service India Ltd.) & NSDL (National Securities Depositories Ltd.). The depository participants maintain accounts with depository who in turn maintains sub-accounts of their customers. The depositories transfer securities from sellers to buyers on receipt of instructions from stock exchanges with documentation.
*In demat form all physical share certificates were converted in to electronic form and the same deposited in to Shareholders Demat Account.
Introduction of depository system eliminated the problem of bad delivery, objections, needless delay in share transfer, and duplication of share certificates which were existed in earlier system. Moreover, depository system functions in paperless environment wherein immediate transfer of shares is facilitated.
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