Skip to main content

MODELS OF DEPOSITORY

Image
By

Dematerialization: It is a process of conversion of physical share certificate into electronic form. So, when a shareholder uses the dematerialization facility, a company takes back the shares, through depository system and equal number of shares is credited in his De – mat account in electronic form. 

The investors can dematerialize only those shares certificate that are already registered in their name and belong to the list of securities admitted for dematerialized at the depositories. This method is cost effective and simple and has been adopted in India.

An Investor will have to first open an account with a Depository Participant and then request for Dematerialization of his share certificate through the Depository Participant so that the dematerialized holdings can be credited into that account. This is very similar to opening a bank account.  

Dematerialization of shares is optional and an investor can still hold shares in physical form. However, he/ she has to Demat the shares if he/she wishes to sell the same through stock exchanges. Similarly, if an Investor purchases shares from stock exchange, he/she will get the delivery of shares in Demat form.  

Immobilization: Where physical share certificates are kept in vaults with the depository for safe custody. All subsequent transactions in these securities take place in book entry form. The actual owner has the right to withdraw his physical securities as and when desired. The immobilization of fresh issue may be achieved by issuing a jumbo certificate representing the entire issue in the name of depository, as nominee of the beneficial owners.

Comments

Post a Comment

Popular posts from this blog

BANKING BACKGROUND AND ITS GROWTH:

By
BANKING BACKGROUND AND ITS GROWTH For having a healthy economy there has to be a sound and effective banking system. The banking system of India should be able to meet new challenges posed by the technology and any other internal and external factors. For the past three decades several significant achievements have been observed in Indian banking system especially towards credit facilities. In fact, Indian banking system has reached gradually to remote places of the country also. The government’s regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks in India. The first bank in India (although conservative/rigid) was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct stages. Stage-I:  Early phase from 1786 to 1969 of Indian Banks. Stage-II: Nationalization of Indian Banks and unto 1991 prior to Indian banking sector reforms. Stage-III:   New ...
3 comments
Read more

MORTGAGE BACKED SECURITIES

By
Mortgage – backed securities (MBS) are bonds secured by home and other real estate loans. They are created when a number of these loans, usually with similar characteristics, are pooled together. These securities assure a fixed return which is derived from the performance of the specific assets. They are issued with a maturity period of 3 to 10 years and backed by pooled assets like mortgages, credit card receivables, etc.  Example: A bank offering home loan might round up Rs.20 crore worth of such loans. That pool is then sold to a Government Agency or a government sponsored – enterprise (GSE), or to others to be used as the collateral for the new MBS.  Features of assets to be securitized: The assets to be securitized shall have the following features:- (a) The cash flows generated from the assets should be received periodically in accordance with a Pre – determined schedule. (b) The actual cash flows generated from the assets should be predictable. (...
Post a Comment
Read more

HEDGE FUNDS

By
Hedge means Fence, Barrier & Hurdle (other meaning – Protection & Security). In other words, it is a process of reducing and controlling future risk by taking some steps in advance.  Hedge fund refers to an alternative investment vehicle that is designed to protect investment portfolios from market uncertainty, while generating positive returns in both up and down markets. Hedge funds are unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non – securities and derivatives) to provide certain periodic and standardized pricing and valuation information to investors.  In short, it is an alternative investment that is designed to protect the Capital (investment amount) of an investor from market uncertainty and generate positive returns from the market fluctuations.  What is Hedging Concept?  Case Study: STEEL INDUSTRY  Facts: An...
Post a Comment
Read more