A depository is an entity which helps an investor to buy or sell securities such as stocks and bonds in a paper-less manner. Securities in depository accounts are similar to funds in bank accounts.

What are its main functions?

A depository works as a link between the listed companies which issue shares to shareholders. It issues these shares through agents associated with it called depository participants or DPs. A DP can be a bank, financial institution, a broker, or any entity eligible as per SEBI norms and is responsible for the final transfer of shares from the depository to investors. The investor, at the end of a transaction receives a confirmation from the depository.

Benefits of Depository System:

  1. No danger of loss of share certificates since the shares are credited to your account.
  2. No possibility of bad deliveries.
  3. Elimination of all rise associated with physical certificates such as loss, theft, forgery, mutilation etc.
  4. No need to affix share transfer stamp as it is a paperless trading.
  5. No postal / courier charges.
  6. Less brokerage charges.
  7. After the settlement, pay in and pay out are on the same day for paperless trading which means you get your securities and cash immediately.
  8. Script less trading helps allocate corporate benefits faster.
  9. Facilitates pledging and hypothecation of your securities.
  10. Eliminates the problem of odd lot shares.
  11. Facility to lock your account if you are abroad.