Depository system is very similar to the banking system.

Answer: The statement is justified.

A depository holds securities in electronic form just as a bank holds money. The similarities are:

• Safekeeping: A bank keeps funds of customers; a depository keeps securities in demat form.
• Opening an account: An account is opened with a bank branch; a demat account is opened with a Depository Participant (DP), which acts like a branch of the depository.
• Transfer without physical handling: Funds are transferred by debit and credit entries; securities are transferred between demat accounts by delivery instruction slips or online.
• Statements: A bank issues a passbook / statement; a DP issues a transaction and holding statement.
• Account balance is fungible: Money in a bank account and securities in a demat account have no distinctive identity.
• KYC and nomination: Both require KYC documents and allow nomination.
• Pledge: Securities in demat form can be pledged just as deposits can be given as security.

Thus a depository is a ‘bank of securities’, and the depository system works very much like the banking system.