DEPOSITORY

Introduction to Depositories

A depository electronically holds securities—shares, bonds, mutual funds, derivatives—on behalf of investors, facilitating dematerialization, transfer, and settlement. SEBI regulates depositories under the Depositories Act, 1996, ensuring transparency and safety in securities markets. By eliminating paper certificates, depositories streamline corporate actions (dividends, bonus issues) and pledging, reducing settlement risk .

India’s Two Depositories

National Securities Depository Limited (NSDL)

• Established: 1996

• Net Worth Requirement: Minimum ₹100 crore

• Custody Statistics (Apr 30, 2025): 93,508 million share units; ₹3,86,23,471 crore value 

Central Depository Services (India) Limited (CDSL)

• Established: 1999 

• DP Network: Over 630 DP service centres 

• PAN Compliance & Frozen Accounts Reports: Monthly publications on CDSL’s portal 

Both depositories operate under SEBI’s supervision, offering identical core services; investors choose DPs based on access, fees, and service quality.

Role of Depository Participants

Depository Participants (DPs) are intermediaries—banks, brokers, NBFCs—registered with SEBI to facilitate investor access to depository services. They:

1. Open Beneficial Owner (BO) accounts

2. Execute settlement of trades

3. Process corporate actions

4. Handle pledging and hypothecation requests

DPs must meet eligibility norms (net worth, infrastructure) and adhere to SEBI’s code of conduct.

Registration of a Depository with SEBI

Under SEBI (Depositories & Participants) Regulations, 2018, depository registration involves:

1. Application Submission: Form A to SEBI, including promoters’ credentials 

2. Compliance Review: SEBI scrutinizes net worth, infrastructure, governance 

3. Information Clarifications: Furnish additional documents as requested

4. Grant of Certificate: Upon satisfaction, SEBI issues registration certificate

5. Annual Fee & Renewal: Continuous compliance and fee payment; refusal leads to de-registration procedures 

Registration of Depository Participants

To become a DP under NSDL/CDSL:

1. Form E (NSDL) / Form A (CDSL): Submit prescribed application with KYC, net worth proof, board approvals

2. Eligibility Criteria:

   • NSDL: Minimum net worth ₹3 crore (₹1 crore for limited category) 

   • CDSL: Minimum net worth ₹2 crore

3. Board Objections & Clarifications: Address queries from SEBI/Board

4. Certificate Grant: On meeting requirements

5. Validity & Renewal: Registration valid for five years; renewal involves Form F submission, fee payment 

6. Non-Renewal Consequences: Refusal invokes cessation guidelines 

Flow of DP Registration

Recent Trends & Demat Account Growth

• 185.3 million Demat accounts by 2024—a 33% YoY jump, adding 46 million accounts 

• Slowest growth in March 2025: 1.05% increase to 192.4 million accounts, reflecting market volatility

• Urban vs. Rural Penetration: Tier-2/3 cities see rapid adoption; digital onboarding and eKYC have been catalysts 

• Global Comparison: India leads with 17.11 crore Demat accounts, surpassing Russia’s 14 crore