Explain the following term / concept : Depository system

Answer: The depository system is the system of holding and transferring securities in electronic (dematerialised) form through a depository and its Depository Participants, instead of physical share certificates.

• In India it is governed by the Depositories Act, 1996 and regulated by SEBI.
• The two depositories are NSDL and CDSL; investors deal with them through Depository Participants (banks, brokers, etc.) by opening a demat account.
• Transfer of securities is done by book entry, which removes problems of loss, theft, forgery and delay in transfer of certificates.
• It makes trading on stock exchanges quick, safe and paperless.