Page 2 - Lesson Note 4

1. A depository participant (DP), either a bank, broker, or financial services company, may be

identified.

2. An account opening form and documentation (PAN card details, photograph, and power of

attorney) may be completed.

3. The physical certificate is to be given to the DP along with a dematerialization request form.

4. If shares are applied in a public offer, simple details of DP and demat account are to be given
and the shares on allotment would automatically be credited to the demat account.

5. If shares are to be sold through a broker, the DP is to be instructed to debit the account with

the number of shares.

6. The broker then gives instruction to his DP for delivery of the shares to the stock exchange.

7. The broker then receives payment and pay the person for the shares sold.

8. All these transactions are to be completed within 2 days, i.e., delivery of shares and payment
received from the buyer is on a T+2 basis, settlement period.

Depository

Just like a bank keeps money in safe custody for customers, a depository also is like a bank and

keeps securities in electronic form on behalf of the investor. In the depository a securities

account can be opened, all shares can be deposited, they can be withdrawn/ sold at any time

and instruction to deliver or receive shares on behalf of the investor can be given.

It is a technology driven electronic storage system. It has no paper work relating to share

certificates, transfer, forms, etc. All transactions of the investors are settled with greater speed,
efficiency and use as all securities are entered in a book entry mode.

In India, there are two depositories. National Securities Depositories Limited (NSDL) is the first

and largest depository presently operational in India. It was promoted as a joint venture of the

IDBI, UTI, and the National Stock Exchange. The Central Depository Services Limited (CDSL) is