2.8What is a depository?
1What is it?
A depository is an organisation that holds shares electronically on behalf of investors and keeps records of who owns what.
2Why does it exist?
It is the official record of ownership. When shares move from seller to buyer, the depository updates the records.
3Real-life example
Like the land registry office that records who owns which plot. Here it records who owns which shares.
4Stock market example
You do not deal with the depository directly. You deal with a Depository Participant (DP), which is usually your broker or bank.
5Diagram
- 1You
- 2DP (your broker/bank)
- 3Depository (NSDL or CDSL)
- 4Official record of your shares
6Quick revision
- Depositories hold shares electronically.
- India has two: NSDL and CDSL.
- You access them through a DP.
7Knowledge check
Q1. What is a DP?Show answer
A Depository Participant, an agent (often your broker) that connects you to a depository.
Q2. What does a depository keep records of?Show answer
Who owns which securities.
Q3. How many depositories does India have?Show answer
Two: NSDL and CDSL.