A depository can be defined as an institution where the investors can keep their

financial assets such as equities, bonds, mutual fund units etc in the demateri
alised form and transactions could be effected on it. In India, there are two de
positories namely, the
* National Securities Depository Limited(NSDL) promoted primarily by IDBI, t
he Unit Trust of India and the National Stock Exchange, and the
* Central Depository promoted by the Stock Exchange, Mumbai.

Role of Depository
===================
1)Provides Custodial Facilities
2)Dematerialisation of shares
3)Rematerialization of shares
4)freezing of shares
5)Transactional services to its clients to effect buying, selling, transfer of s
hares
6)Paperless Securities have made life easier for Stock exchanges & its clearing
agents,stock broking firms, equity issuing companies, share transfer agents etc
7)maintenance of accounts of investors
8)Off market transfers
9)Inter depository transfers
10)Hypothecation of demated shares
11)Nominations facilities

Benefits of Depository System (NEED)

=====================================
* In the depository system, the ownership and transfer of securities takes place
by means of electronic book entries.
* Bad deliveries could be eliminated since shares are registered in the electron
ic form that can not be mutilated easily.
* Elimination of all risks associated with physical certificates
* Dealing in physical securities has associated security risks of theft of stock
s, mutilation of certificates, and loss of certificates during movements t
hrough and from the registrars etc. Such problems do not arise in the depository
environment.
* No stamp duty for transfer of any kind of securities in the depository.
* This waiver extends to equity shares, debt instruments and units of mutual fun
ds etc in the depository. Thus, cost can be reduced.
* Immediate transfer and registration of securities In the depository environmen
t, once the securities are credited to the investors account on pay out, he
becomes the legal owner of the securities. There is no further need to send it t
o the company's registrar for registration. Having purchased securities in th
e physical environment, the investor has to send it to the company's registrar s
o that the change of ownership can be registered and this usually takes many
months. So long as the shares are with the company or its agent for transfer, t
he investor could not sell it in the market even the price is very attract
ive and this increases his opportunity cost. To overcome this problem, investors
used to keep shares without effecting ownership transfer but this is risky
because they will not get their entitlements for dividend, bonus, rights etc, if
any, and the share in question will become bad delivery if one book closur
e is missed.
* Faster settlement cycle: The exclusive demat segments follow rolling settlemen
t cycle of T+2 i.e. the settlement of trades will be on the 5th working day
from the trade day. This will enable faster turnover of stock and more liquidity
with the investor.
* Faster disbursement of non cash corporate benefits: NSDL provides for direct c
redit of non cash corporate entitlements like rights, bonus etc to an inve
stor's account, thereby ensuring faster disbursement and avoiding risk of loss o
f certificates in transit.
* Low brokerage for trading in dematerialised securities Brokers provide this be
nefit to investors as dealing in dematerialised securities reduces their back
office cost of handling paper and also
* Eliminates the risk of being the introducing broker: Elimination of problems r
elated to address Change, Transmission etc
* In case of change of address or transmission of demat shares, investors are sa
ved from undergoing the entire change procedure with each company or reg
istrar. Investors have to only inform their DP with all relevant documents and t
he required changes are effected in the database of all the companies, where
the investor is a registered holder of securities.
* Elimination of problems related to selling securities on behalf of a minor. A
natural guardian is not required to take court approval for selling demat
securities on behalf of a minor.