A Depository refers to “An organization that facilitates holding of securities in the electronic form and enables DPs to provide services to investors relating to transaction in securities”.
A Depository Participant (DP) can be a financial organization like banks, brokers, financial institutions, custodians, etc., acting as an agent of the Depository to make its services available to the investors.
There are two depositories in India, namely NSDL and CDSL.
Why open a DP account
Safe & Convenient
It is a a Safe and Convenient way of holding securities (equity and debt instruments both).
Transactions involving physical securities are costlier than those involving dematerialised securities (just like the transactions through a bank teller are costlier than ATM transactions). Therefore, charges applicable to an investor are lesser for each transaction.
Securities can be transferred at an instruction immediately.
Securities can be sold at any time during the trading hours (between 9 AM to 3:30 PM on all working days), and payment can be received in a very short period of time.
Elimination of Risks
Risks like forgery, thefts, bad delivery, delays in transfer etc, associated with physical certificates, are eliminated.
Any change in address or bank account details can be electronically intimated to all companies in which investor holds any securities, without having to inform each of them separately.
Shares arising out of bonus, split, consolidation, merger etc. are automatically credited into the demat account of the investor. Shares allotted in public issues are directly credited into demat account of the applicants in quick time.