A REPORT ON

DEPOSITORY SYSTEM

Submitted to

EDELWIESS BROKING LIMITED, AMRAVATI

In partial fulfilment of the requirement for the Certification of Summer

Internship Program

IN

MASTER OF BUSINESS ADMINISTRATION

(2019-2020)

Submitted by

Miss. Vaijayanti B. Waswani

Under the guidance of

Tausef Khan

(Branch Manager, Amravati)

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 CERTIFICATE

This is to certify that the project entitled

DEPOSITORY SYSTEM

is a bonafide work and it is submitted to the

EDELWIESS BROKING LIMITED, AMRAVATI

By
Miss. Vaijayanti B. Waswani

For partial fulfillment of the requirement for the Certification of Summer

Internship Program during the academic year 2019-2020.

Tausef Khan
(Branch Manager)

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 LIST OF CONTENT
Sr. Page
Content
No. No.
Report Page 1
Certificate 2
List of content 3
Acknowledgement 4
Abstract 5
1 History of Depository System 6
2 What is Depository? 6
3 Need for Depository 7
4 Depository in India 7
5 Constituent of Depository system 8
6 What is Dematerialization? 10
7 What is ISIN 10
8 Dematerialization process 10
9 Rematerialization process 12
10 Market transfer 13
11 Benefit of Depository System 14

12 Drawbacks of Depository System 15

13 Reference 16

14 My learning from SIP 17

15 Conclusion 19

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 ACKNOWLEDGEMENT

The internship opportunity I had with EDELEWISS BROKING LTD

was a great chance for learning and professional development.
Therefore, I consider myself as a very lucky individual as I was provided
with an opportunity to be a part of it. I am also grateful for having a
chance to meet so many wonderful people and professionals who led me
though this internship period and gives practical knowledge.
Bearing in mind precious I am using this opportunity to express my
deepest gratitude and special thanks to the MR. TAUSIF KHAN (Senior
Manager) who in spite of being extraordinarily busy with his duties, took
time out to hear, guide and keep me on the correct path and allowing
me to carry out my project at their esteemed organization. I express my
deepest thanks to my mentor MR.SUHAS WAGH,for taking part in useful
decision & giving necessary advices and guidance. Special thanks to
MR.SAMARSINGH KANKURE (Relationship Manager), MR.RAVISH
BEHARE and MR. SAGAR INGLE for his valuable guidance and support,
which helped me in giving a shape to my study & clear understanding of
every aspect of the stock market proved to be very beneficial for me.Last
but not the least I would like to thank my colleagues in edelweiss broking
ltd, who have also contributed in the project by giving me valuable
feedback from time to time.

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 ABSTRACT

A depository system is a place to deposit something for safekeeping as

bank in which funds and securities are deposited by others under the
terms of depository agreement. The principle function of depository is
to dematerialize securities and enable their transaction in book entry
form. The securities are transferred by debiting transferor’s
depository account and crediting the transferee’s depository account.

The main objective is to study the trading and settlement procedure in

the exchange with online procedure and manual procedure that
existed before online trading. Another objective of study the grater
benefit of depositories. The study of dematerialization of shares
procedures, demat account, transfer of securities and trading and
settlement of demat securities. The study of services provided by
NSDL.

The inception of depository system in the Indian Capital Market has

been only during the 90’s. However, when it has finally arrived it was
a welcome change for the investor who were bogged down with many
a problem of scrip-based trading. The role played by the companies in
encouraging its shareholder to convert their stock into electronic
form. Their attitude of being receptive to changing condition, and to
go in for “demat” is a step in the right direction.

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 History
 The first depository was set up way back in 1947 in Germany.
 In India it is relatively new concept introduced in 1996 with the
enactment of The Depositories Act, 1996.
 Their operation are carried out in accordance with regulation made by
SEBI , bye-laws and rules of Depositories Act and SEBL ( Depositories
and participants ) Regulation Act , 1996

What is Depository?
 A depository is an organization which holds securities (like shares,
debentures, bonds, government securities, mutual fund units etc.)
of investors in electronic format their quest of the investors
through a registered Depository Participant. It also provides
services related to transactions insecurities. (SEBI)

 According to Section2(e) of the Depositories Act,1996, ‘Depository

means a company formed and registered under the Companies
Act,1956 and which has been granted a certificate of registration
under section 12 (1A) of the Securities and Exchange Board of
India Act, 1992.’

 A depository is an organization which holds securities of a

shareholder in an electronic form and facilitates the transfer of
ownership of securities on the settlement dates. (B.V. Pathak)

 This system is also known as script less trading system or paper

less trading system.

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Need for Depository
Before introduction of depository system, the problem face by investor
and corporate in handling large volume of paper were as follow:
 Bad deliveries
 Fake certification
 Loss of certificate in transit
 Mutilation of certificates
 Delays in transfer
 Long settlement cycle
 Mismatch of Signature
 Delay in refund and remission of dividend etc.

Depository in India
 At present there are two Depository are register with SEBI.

 NSDL (National securities Depository limited) – It was registered

by the SEBI on June 7, 1996 as India’s first depository to facilitate
trading and settlement of securities in the demat form. It is
promoted by IDBI, UTI, NSE.

 CDSL (Central Depository services (India) Limited) - It commence

its operation in Feb 1999 and promoted by stock exchange
Mumbai.

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Constituent of Depository System
There are basically four participants.
1. The Depository participant
2. The Depository
3. The Issuing Company
4. The Beneficial Owner

Depository participant
 A Depository participant is the agent of the depository through
which it interfaces with the investor.
 A DP can offer depository services only after it gets proper
registration from SEBI.

Who can be a Depository participant?

In terms of Depository Act ,1996, SEBI (Depositories & Participants )
Regulation 1996 , only the following entities are eligible to become a
Depository Participant.
 Financial institution
 Banks including approved foreign banks
 Custodian
 Stockbrokers
 A clearing corporation or clearing house of the stock exchange
 A non – banking finance company
 A registrar to an issue or shares transfer agent

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Depository
 A firm wherein the securities of an investor are held in electronic
form.
 Function as a custodian of securities of its client.

Issuer
 The company which issue security.
 Agreement by issuer.

Beneficial Owner
 A person whose name is recorded as such with a depository.
 Real owner of the securities.

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What is dematerialization?
Dematerialization is the process by which physical certificates of an
investor are converted to an equivalent number of securities in
electronic form and credited into the BO’s account with his DP.

What is an ISIN?
ISIN (International Securities Identification Number) is a unique 12 digit
alpha-numeric identification number allotted for a security (E.g.-
INE383C01018). Equity-fully paid up equity-partly paid up, equity with
differential voting / dividend rights issued by the same issuer will have
different ISINs.

Dematerialization Process
 Stock exchange will notify through advertisement
 Open demat account with depository participant (DP)
 Application in a DRF (Demat Request Form) along with share
certificate: To dematerialize physical securities, one must fill in a
DRF which is available with the DP and submit the same along
with physical certificates that are to be dematerialized. Separate
DRF must be filled for each ISIN.

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The complete process of dematerialization is outlined
below:
 Surrender certificates for dematerialization to your DP.
 DP intimates to the Depository regarding their quest through the
system.
 DP submits the certificates to the registrar of the Issuer Company.
 Registrar confirms the dematerialization request from depository.
 After dematerializing the certificates, Registrar updates accounts
and informs depository regarding completion of
dematerialization.
 Depository updates its accounts and informs the DP.
 DP updates the demat account of the investor.

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Rematerialization Process
If one wishes to get back his securities in the physical form, he must fill
in the RRF (Remat Request Form) and request this DP for
Rematerialization of the balances in his securities account. The process
of Rematerialization is outlined below:

 Make a request for Rematerialization.

 Depository participant intimate’s depository regarding their quest
through the system.
 Depository confirms Rematerialization request to the registrar.
 Registrar updates accounts and prints certificates.
 Depository updates accounts and downloads details to depository
participant.
 Registrar dispatches certificates to investor.

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Market Transfer
In case of purchase: -
 The broker will receive the securities in his account on the payout
day.
 The broker will give instruction to its DP (Depository Participant)
to debit his account and credit BO's (Beneficiary Owner) account.
 BO will give ‘Receipt Instruction’ to DP for receiving credit by
filling appropriate form. However, BO can give standing
instruction for credit to his account that will obviate the need of
giving Receipt Instruction every time.

In case of sale: -
BO will give delivery instruction through Delivery Instruction Slip (DIS)
to DP to debit his account and credit the broker’s account. Such
instruction should reach the DP’s office at least 24 hours before the
pay-in, failing which, DP will accept the instruction only at the BO’s risk.

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Benefits of Depository System
To Investors
 Eliminate paper work and no physical movement of certificates
 Risk of bad deliveries, fraud and misplaced, mutilated and loss of
share certificates will not exist
 Shorten settlement time and save and increase velocity
 Possible to change portfolio with more frequency
 Less cost
 Faster payment

To Companies
 Companies will able to know the of beneficial owners and their
holding
 No rush for transfer at the time of dividend or bonus.
 Less number of investors complaints about signature difference,
time lapse during the transfer and mutilated certificates
 Possible to send notices and annual reports without delay

To Capital Market
 More transparency in trading, clearing and settlement due to
highly automated interlinked system.
 Efficient back office due to highly atomized process
 Investors’ confidence improved
 Could invite foreign investors

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Drawbacks of Depository System
• Multiple depositories –high cost
• Clearing and Settlement Corporation
- CC as a part of depository to have interface with the various stock
exchanges is missing
•Initially people had now shown their interest due to
- Lack of awareness
- Fear of being caught in the tax net
- Initially compulsion was not there –optional
•Initially problems related to dual rates

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References
Gordon, E., &Natarajan, K. (2016). FinancialMarketsandServices
(TenthReviseded.). Mumbai: HimalayaPublishingHousePvt.Ltd.
Pathak, B.V. (2014). TheIndianFinancialSystem: Markets,
InstitutionsandServices (N. RakshitEd.Fourthed.). Delhi, Cheannai:
DorlingKindersley (India)Pvt.Ltd,
licenseesofPearsonEducationinSouthAsia.

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MY LEARNING FROM SIP
I learned a great deal about the stock market and its
functioning during my two months of internship. Earlier I had
very little knowledge about the stock market and how it works.
I had no knowledge about how to invest in the stock market. I
was only aware about the existence of the Bombay Stock
Exchange, I was not even aware of the National Stock
Exchange i.e. Nifty.

During my internship I learned a great deal about the stock

market and how to invest in it. I also gained knowledge about
two basic types of trading in stocks i.e. delivery and intraday.
In delivery you must hold the stock for more than one day and
in intraday you have bought and sell the stocks on the same
day. I also gained fair knowledge of how brokerage is
calculated, and the different brokerage plans that the company
must cater to the needs of clients. The clients can choose the
plans according to his investment pattern and volume. I also
gained fair knowledge of various other forms of trading like
Future and Options (F&O), derivatives, Debt market,
Currency, Commodities etc.

My major learning was constant interaction with different

people and trying to sell demat account to them. I had to put
my best foot forward in order to convince people to invest in
the market. There was also constant pressure from my team
leader to generate business for the company. I was given stiff
targets by our team leader which I had to achieve. I was made
to work under constant pressure which I believe will help me
in the future. I got to know firsthand what pressure all is
about and how to work under constant pressure, how to
answer all the queries raised by the client.
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During my internship period I also had the opportunity to test
my selling skills and my ability to convince people. During my
internship I got experience about how to talk people and
convert them into clients for the company. I got to test my
skills to be patient and my ability to listen what the client
wants and how I would be able to convert the prospect into
client.

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CONCLUSION
The two months that I have spent in my internship period
would be a golden period of my life in which I learned a great
deal about the stock market and its functioning. Earlier I had
very little knowledge about the stock market but now I can say
that I have fair knowledge about the company and the stock
market. I got fair knowledge about how to work in a corporate
environment and how to absorb pressure.
I learned things that are not found in books and those can only
be learned when you are out in the field, talking to people. I
believe this will help me in the future. The best part was the
training sessions that were taken by senior persons in the
company to let us know about the various products of the
company and how to approach the customers with these
products.
Overall, I would say that the two months of my internship was
full of learning and wonderful experience will I will always keep
in mind through my life.

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