How many of the following are permitted to become depository participants?
(A) Banks
(B) Stock brokers
(C) Clearing corporations
(D) Non-banking finance corporations
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Four
A depository participant is the intermediary between the investor and the depository. It maintains the accounts of demat shares.
(A) Banks — Correct. Banks may become DPs. If the investor deals through a bank, the bank acts as a DP and completes the formalities.
(B) Stock brokers — Correct. A broker through whom the investor trades can also act as the investor’s DP.
(C) Clearing corporations — Correct. Clearing corporations are permitted, along with financial institutions.
(D) Non-banking finance corporations — Correct. A non-banking finance corporation can also act as a DP for investors who trade through it.
NCERT (Pre-rationalised Edition): “Depository … The Central Depository Services Limited (CDSL) is the second depository to commence operations and was promoted by the Bombay Stock Exchange and the Bank of India. Both these national level depositories operate through intermediaries who are electronically connected to the depository and serve as contact points with the investors and are called depository participants. 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. If the investor is buying and selling the securities through the broker or the bank or a non-banking finance corporation, it acts as a DP for the investor and complete the formalities.” |