Consider the following statements about depositories:
(A) A depository keeps securities in electronic form on behalf of the investor, just as a bank keeps money in safe custody.
(B) The depository participant serves as an intermediary between the investor and the stock exchange.
(C) Clearing corporations and non-banking finance corporations are permitted to become depository participants.
(D) In a depository, all securities are entered in a book entry mode.
(E) National Securities Depositories Limited (NSDL) is the second depository to commence operations in India.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (C) and (D) only
(A) A depository keeps securities in electronic form on behalf of the investor, just as a bank keeps money in safe custody. — Correct. Just as a bank keeps money in safe custody, a depository keeps securities in electronic form for the investor.
(B) The depository participant serves as an intermediary between the investor and the stock exchange. — Incorrect. The depository participant is the intermediary between the investor and the depository, NSDL or CDSL. It maintains the accounts of demat shares.
(C) Clearing corporations and non-banking finance corporations are permitted to become depository participants. — Correct. Financial institutions, banks, clearing corporations, stock brokers and non-banking finance corporations may all become depository participants.
(D) In a depository, all securities are entered in a book entry mode. — Correct. A depository is an electronic storage system in which all securities are entered in a book entry mode. So transactions are settled with greater speed.
(E) National Securities Depositories Limited (NSDL) is the second depository to commence operations in India. — Incorrect. NSDL is the first and largest depository in India. CDSL is the second.
NCERT (Pre-rationalised Edition): “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 In the depository a securities account can be opened, all shares can be deposited, they can be withdrawn/ sold at any time and instruction to deliver or receive shares on behalf of the investor can be given.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. …” “…The depository participant (DP) serves as an intermediary between the investor and the Depository (NSDL or CSDL) who is authorised to maintain the accounts of dematerialised shares. Financial institutions, banks, clearing corporations, stock brokers and non-banking finance corporations are permitted to become depository participants. …” |