In share market there is a very common term depository, you may have heard that. But, do we really know what is a depository, in-depth? or, how many depositories are there in India? Let us dig a bit deep on this topic.
What is a depository?
The depository is an organization/institution that holds and assists in the trading of securities. It works in a paperless manner.
Securities such as stocks, shares, and bonds in depository accounts, are similar to the funds in bank accounts. Actually, the depository is a link between the shares of listed companies and shareholders.
The Securities and Exchange Board of India (SEBI) is responsible for the registration, regulation, and inspection of the depository.
Advantages of depository:
There are many advantages of depositories. Below we can list some of them.
- First of all, it eliminates the risk associated with holding physical securities. In depositories, all securities are in digital form and these are accessible from anywhere. So, it reduces the chance of damaging securities in a paperless way.
- It also reduces the paperwork involved in share trading. Because, now, everything is done by digital or electronic media assisted and managed by SEBI.
- Furthermore, it made share trading easier, using electronic media. Since, from a traders perspective, everything can be done with a click of a computer mouse.
- Finally, foreign investors (FIIs) can also involve themselves in trading without being physically present in India. In addition to that, they get all details of share, via electronic media. Due to these facilities, Foreign investors (FIIs) are now more confident in Indian stock market.
Name of depositories in India:
The Depository Act of 1996 established two depositories in India.
- The other is, Central Depository Services Limited (CDSL). CDSL is promoted by the Bombay Stock Exchange (BSE).
Please leave your queries in the comment section and let us know your views regarding this article.