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Depository FAQs

General Questions

Q. What is a depository?
A. A depository is an entity that holds securities/shares of its account holder in electronic form though a registered Depository Participant (DP). It holds no physical certificates but communicates with companies, or their agents, by electronic means. It can be compared with a bank, which holds funds for its depositors. Following table explains the bank-depository analogy:

BANK DEPOSITORY
Holds funds in an account Hold securities in an account
Transfers funds between accounts on the instruction of the account holder Transfers securities between accounts on the instruction of the account holder
Facilitates transfer without having to handle money Facilitates transfer of ownership without having to handle securities
Facilitates safekeeping of money Facilitates safekeeping of securities

Q. How many depositories are there in India?
A. At present India has only two depositories registered with SEBI - National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Arihant is a depository participant with both the depositories in India namely NSDL and CDSL. We offer quick, efficient and secure way of holding your shares electronically. To know more click here.

Q. Who is a Depository Participant?
A Depository Participant (DP) is an agent of the depository who is authorised to offer depository services to investors. A DP can offer depository services only after it gets proper registration from SEBI.  Banking services can be availed through a branch whereas depository services can be availed through a DP. Financial institutions, banks, custodians and stockbrokers complying with the requirements prescribed by SEBI/ Depositories can be registered as DP.

Any investor wishing to utilise the services of a Depository, can do so by opening a depositary (Demat) account with a Depositary Participant. 

Q. What is Dematerialisation of shares?
A.
Dematerialisation (or Demat) is the process of conversion of a share certificate from its present physical form (share certificate) to electronic form.

Q. Is dematerialisation compulsory?
A. According to the Depositories Act, 1996, an investor has the option to hold shares either in physical or electronic form. However, SEBI has notified that it is compulsory to settle all the trades done, on any stock exchange and in almost all listed securities, in Demat form only. Although, trades upto 500 shares can be settled in physical form, physical settlement is virtually not taking place for the apprehension of bad delivery on account of mismatch of signatures, forgery of signatures, fake certificates, etc.
Moreover, as per the available statistics at BSE and NSE, 99.9% settlement of shares takes place in demat mode only. Therefore, in view of the convenience in settlement through demat mode, it is advisable to have a beneficiary owner (BO) account to trade at the exchanges.

Q. Who is a Beneficial Owner (BO)?
A."Beneficial Owner" is a person in whose name a demat account is opened with NSDL/CDSL for the purpose of holding securities in the electronic form and whose name is recorded as such with NSDL/CDSL.

Q. What are the benefits of using depository services?
A. Following are the benefits of availing depository services:

  • A safe and convenient way to hold securities
  • Immediate transfer of securities. No odd lot problem, even one share can be sold
  • No stamp duty on transfer of securities
  • Offers scope of paperless trading through state-of-art technology
  • Avoids the time consuming and complex process of transferring shares in the name of buyers
  • Eliminates risk associated with physical certificates such as bad deliveries, fake securities, delays in processing, fraudulent interception in postal transit, thefts etc.
  • Reduces paperwork involved in transfer of securities
  • Reduces transaction cost
  • Address record is held with DP that gets registered with all companies in which the investor holds securities electronically, thereby eliminating the need to correspond with each of them separately

Q. What services do depositories give?
A. Normally depositories offer the following services:

  • Dematerialisation: conversion of physical certificates into electronic form.
  • Rematerialisation: conversion of securities in demat form into physical certificates.
  • Electronic settlement: of trades in stock exchanges.
  • Transfer of shares: transfer of shares from one DP account to other, using a delivery instruction slip.
  • Pledging/hypothecation: availing loan against electronic shares held by DP.
  • Electronic credit of securities allotted in public issues, rights issue.
  • Receipt of non-cash corporate benefits such as right/bonus, in electronic form.
  • Freezing of demat accounts, so that the debits from the account are not permitted.
  • Nomination facility for demat accounts.
  • Services related to change of address.
  • Availing stock lending/borrowing facility.

Arihant offers all of the above services to the investors. In addition, we also have an online depository facility wherein you can check all your DP account transactions and holdings online – anytime, anywhere.

Q. What is an ISIN (International Securities Identification Number)?
A. "ISIN" is the unique identification number given to a security of an issuer at the time of admitting such security in the depository system. Different securities issued by the same issuer will have different ISINs.

Account Opening

Q. How can services of a depository be availed?
A. To avail the services of a depository an investor is required to open an account with a depository participant of any depository.

Q. How do I open an account with Arihant?
A. Arihant is a depository participant with both the apex depositories of Indian – NSDL and CDSL. Opening an account with us is quick, simple and convenient. Go to your nearest Arihant Investment Center and request for a DP account opening form. Fill the form and sign across all the required places. Once your form is submitted along with the required documents, your account will be opened.
Note: Besides, production of PAN card in original at the time of opening of account has been made mandatory effective from April 01, 2006.

Q. Why should I give my bank account details at the time of account opening?
A. It is for protection of your interest. Your bank account number will be mentioned on the interest or dividend warrant you are entitled to so that such warrant cannot be encashed by anyone else. Further, a DP cannot open the account if bank account number is not given.

Q. Can I open more than one account with Arihant Demat?
A. Yes, you can open more than one demat account with Arihant Capital Markets Ltd. There is no restriction on the number of accounts you can open with the same Depository Participant (DP).

Q. Do I have to keep my account with the same DP as my broker does?
A. No. Depository / DP can be chosen by you as per your convenience irrespective of the DP of the broker.

Q. What is a DP ID?
A. A DP Id is the number of the depository participant allotted by the depository.

Q. What is 'Standing Instruction' given in the account opening form?
A. In a bank account, credit to the account is given only when a 'paying in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of 'standing instruction' is given. If you say 'Yes' [or tick] for standing instruction, you need not submit 'Receipt in' slip every time you buy securities.

Q. Do I need to have any minimum balance of securities in my account?
A. No you not require maintaining any minimum balance of securities in your Demat account.

Q. Can I close my demat account with one DP and transfer all securities to my account with another DP?
A. Yes, you can submit an account closure request to your Arihant DP in prescribed form. We will henceforth transfer all your securities, as per your instruction, and close your demat account.

Operations

Q. What is the procedure for dematerialisation?
A. To dematerialise any physical securities, the investor will have to open a demat account with any of the DP. Thereafter, all he/she has to fill in a DRF (Demat Request Form) and submit the same with the shares/securities certificates to the DP for dematerialisation. DP sends these certificates to the Issuer/Registrar who deface/destroy these certificates and credit equivalent number of securities in the demat account maintained with the NSDL or CDSL.

Q. Can my electronic holdings be converted back to certificates?
A. Yes, it can be done through 'Rematerialisation' which is the term used for converting electronic holdings back into physical certificates.

Q. Can someone else operate my account on my behalf on the basis of a power of attorney?
A. Yes, if you authorize any person to operate your account by executing a power of attorney (POA) and submit it to us, that person can operate the account on your behalf. If you have given POA earlier and now wish to operate the account yourself, the POA has to be revoked by you in writing.

Q. How confidential are the depository account details?
A. There are strict systems and procedures established to protect the confidentiality of investor information at the depository to ensure that the personal information about the client and his holdings is not accessible to any unauthorised person.

At Arihant, we understand the importance of client’s security and maintain the same. Our Depository section is operated separately and no one has access to your depository account details except the authorised personnel.

Q. How can I view my DP holdings?
A. At Arihant we understand your needs and that is why we offer you a 24/7 online access to your DP account wherein you can check your holdings online – anytime, anywhere. You need a username and password to access the same.

In addition, we also send you a monthly statement of holdings and a transaction statement of your demat account, which details out your current balances and various other transactions done in your account.

Q. How to I avail online DP access facility?
A. You can request your nearest Arihant Investment Center to activate your online DP access facility. Alternatively, when you open a demat account with Arihant, you can request for the same and a username and password will be issued to you.

Q. What is to be done if there are any discrepancies in the statement of holdings?
A. In case of any discrepancy in your statement of holdings, you can contact our depository department at 0731-3048944 or email us your query. If the discrepancy cannot be resolved at the DP level, you may approach NSDL or CDSL whichever depository holds your securities.

Q. Can I freeze my account?
A. The depository system provides the facility to freeze the depository accounts for any debits or for both debits and credits. In an account which is "freezed for debits", no debits will be permitted from the account, till the time it is defreezed. This is the additional security feature for the benefit of the investors.

Dematerialisation

Q.  Can I dematerialise all my depository eligible securities through the same account?
A. Yes, you can choose to have all your securities deposited in a single account provided that the securities have the same holders.

Q. How long does a dematerialisation process take?
A. Dematerialisation of your share certificate normally takes about 30 days. If it takes longer than this contact Arihant DP at 0731-3048944 or if your problem is still not resolved contact the investor grievance cell of NSDL or CDSL.

Q. Can odd lot of shares be dematerialised?
A. Yes, in demat form the market lot is one share and, therefore, there is no question of odd lot.

Q. How do I demat shares with Pre-Marital / Maiden names?
A. In such cases you need to submit a certified true copy of the marriage certificate along with the Demat Request Form (DRF), when you give your shares for dematting. Also provide an attested new specimen signature.

Trading and Settlement

Q. Can I buy and sell shares through Arihant Demat Account?
A. No, shares can be bought and sold only through your trading account with any of the stockbrokers. Arihant Demat Account helps in delivering the shares against a sell transaction or receiving the shares for a buy transaction in your demat account. It only acts as a bank of your securities that does safekeeping of your shares in electronic format. You can open a trading account with Arihant Capital Markets Ltd to avail of seamless trading and settlement.

Q. What happens when I buy, sell or transfer shares?
A. For any transaction to be effected, clear instructions have to be given to your Depository Participant, in the prescribed forms, provided at the time of opening the DP account. These instructions have to be authorised and should reach the DP well in time for settlement. Your account is immediately debited or credited after settlement.

So when you sell shares, immediately on receipt of intimation of execution of trade from your broker, you should issue debit instructions to your DP with whom you maintain your demat account, for delivery of security either directly to the Clearing Corporation/Clearing House or to the broker's clearing account, as advised by your broker. At Arihant, your shares should be transferred to Arihant’s clearing account.

For receipt of shares or securities in your DP account, you can give one-time standing instruction to your DP for receiving securities in your account. This standing instruction can be given at the time of opening of account or later. Once the standing instruction is given, when you purchase shares, your shares are automatically credited to your Demat account, the details of which you have mentioned in your account opening form along with the proof. However, these shares are transferred only when you have made payment of your purchases.

Q. Can shares in a public issue be allotted in electronic form?
A. You can get shares allotted in a public issue (or IPO) in electronic form. You need to mention details of your DP account details like your DP name, DP account number and DP ID in your application form. If you are allotted the shares, it will automatically be credited in your demat account.

Q. What is an On Market and Off Market transaction?
A. Any transaction for sale and purchase of securities through a broker on the stock exchange to be settled through Clearing Corporation / Clearing House is generally termed as On Market transaction.

Off Market transaction is one which is settled directly between two BOs with or without using the broker and where no Clearing Corporation / Clearing House is involved.

Q. What settlement details are required on the delivery instruction slip and when delivery is to be given to a broker?
A. On every stock exchange various settlements are effected every day such as weekly settlement, daily settlement, auction settlement etc. Each of these settlements is identified by the combination of the market type and the settlement number. You are required to mention the appropriate settlement details on the delivery instruction slip while transferring the shares to your broker's account. These settlement details are available on the contract note issued by your broker.

Q. When I buy shares, in what time should I receive the securities from my broker?
A. The broker is expected to transfer the securities to you within two working days or four calendar days after securities are received in his pool account, provided you have made the requisite payment to the broker.

Pledging of Securities

Q. What is pledging of shares and what are its benefits?
A. Pledging of shares enables you to obtain loans against your dematerialised shares. So you get liquidity without having to sell your shares.
You can pledge your shares and you can either get the option to make further investments using your pledged securities or you may even get money against your pledged securities that can be utilised to finance your personal needs.

A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue to be reflected in your DP account but the concerned securities are "blocked" and you cannot use it for any transactions. As and when the pledge is to be removed, based on confirmations received from you and the pledgee (your DP), the blocked securities will be released to "Free Balance" of your account.

Q. Can I dematerialise shares, which are pledged with a bank, which is a DP as well?
A. Yes, you can, with the permission of the bank with whom such shares are pledged.

Q. Who receives corporate benefits on the pledged securities?
A. The pledgor continues to remain the beneficial owner of the pledged securities and will, therefore, receive all the corporate benefits during the period of pledge.

NRI

Q. Can an NRI open a Demat account with Arihant?
A. Arihant offers demat services to NRIs. As a NRI you, need to mention the type (‘NRI’ as compared to ‘Resident’) and the sub-type (‘Repatriable’ or ‘Non-Repatriable’) in the account opening form collected from the Depository Participant.

Q. Does an NRI need any RBI permission to open demat account?
A. No permission is required from RBI to open a demat account. Holding securities in demat only constitutes change in form and does not need any special permission. Permission taken (where required) at the time of acquiring the securities is adequate.

Q. What type of bank accounts are to be given at the time of account opening and subsequently (by   way of change of details)?
A. The bank details recorded by the Depository Participant may be used by the issuer of securities to directly credit the dividend or interest. The following bank accounts may be given:

  • For non-repatriable - NRO [dividend/interest is repatriable]; NRSR [dividend/interest is not repatriable]
  • For repatriable - NRE.

Q. Can securities purchased under repatriable and non-repatriable category be held in a single demat account?
A. No. As a NRI you must open a separate demat accounts for holding ‘repatriable’ and ‘non-repatriable’ securities.

Q. Can a NRI nominate?
A. Yes, NRI can nominate directly. But, the power of attorney holder cannot nominate on behalf of NRI.