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DEPOSITORIES (INTRODUCTION)

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In order to provide a safe and efficient system of trading and settlement problems and in order to provide the regulatory framework for the depositories, the Depositories Act, 1996 was enacted. 

There are two depositories functioning in India i. e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). A depository is like a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholders. 

As per Depositories Act, 1996, “Depository means a company formed and registered under the Companies Act, 2013 and which has been granted a certificate of registration under Section 12(1A) of the Securities and Exchange Board of India Act, 1992”. 

It is an organization which is responsible to maintain investor‟s securities in the electronic form is called the depository. In India, there are two such organizations viz. NSDL and CDSL. The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. An investor wishing to utilize the services offered by a depository has to open an account with the depository through a Depository Participant. 

In short, a depository can be treated as a “Bank” for securities.

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