DEPOSITORY SYSTEM IN INDIA : AN APPRAISAL

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DEPOSITORY SYSTEM IN INDIA : AN APPRAISAL

Journal Title: International Journal of Research in Social Sciences - Year 2011, Vol 1, Issue 1

Abstract

A Depository is an organization where the securities of share holders are held in the electronic format the request of the share holder through the medium of a depository participant. In September, 1995 the Government have accepted in principle the proposed law for settling up of depositories and of a central depository for immobilization of physical certificates. The central depository is to be set up as trust to hold the physical custody of shared and effect transfers by book entries without the need to deal and transfer the physical certificates between parties. This is to be sponsored by public financial institutions and banks and will have a minimum net worth of Rs. 50-100 crores as proposed by the SEBI. This central depository can be connected to a number of share depositories for effecting transfer in book entries. The Foreign financial institutions agencies, NRI’s and OCBs have for long required the depository of this type for facilitating their trade in the Indian stock markets. These foreign security firms who were linced by the SEBI are operating in India, but physical custody of the Indian securities has to be handled by Indian custodian such as a bank which taken converted into depository participants. The guidelines and regulations in aspect of the operations of depository participants will help smooth operations among participants and their operations with the central depository. A national securities depository corporation was set up in November, 1996. The Central Depository system aims at immobilization of physical certificates. This is done by means of book entries with central depository who keeps custody of all physical certificates as a first step. As a next step, new issues will be made as book entries only and not as physical certificates. Book entries transfers will lead to quicker transfers and at lower costs. It meets the increasing work load of investment activity and dealings to increasing volume of transfer work. In the Depository system, the Depository extends its services to investors through intermediaries called depository participants (DP) who as per SEBI regulations could be organizations involved in the business of providing financial services like banks, broker, custodians and financial institutions. Realizing the potential in this market all the custodians in India and a number of banks, financial institutions and major brokers have already joined as DPs and they are providing services in a number of cities. Many more organizations are in various stages of establishing connectivity with Depositories. The admission of the DPs involve an evaluation by Depository of their capability to meet with the strict services standards of Depository and a further evaluation and approval by SEBI. Towards, the end of the twentieth century three was two interesting prognostications about India’s potential. The first was by a professor of business management in the United States (Rosenweig, 1998). He estimated that by 2025, India would be the third largest economy in the world (After the US and China). The second projection was by a well-known Indian Economist (Parikh, 1999). It was projected that India would reach a per capita income of U.S. $ 30,000 or higher by 2047, making it one of the fastest growing countries in the world.

Authors and Affiliations

Ms. Kiran Chaudhary and Mr. Ramesh Kumar Malik

Keywords

Depository System An Appraisal

EP ID EP19749
DOI -
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