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Page 1 DEPOSITORY Chapter 6 How is a depository similar to a bank? A Depository can be compared with a bank, which holds the funds for depositors. An analogy between a bank and a depository may be drawn as follows: BANK Holds funds in an account. Transfers funds between accounts on the instruction of the account holder. Facilitates transfers without having to handle money. Facilitates safekeeping of money. DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder. Facilitates transfers of ownership without having to handle securities. Facilitates safekeeping of shares. Which are the depositories in India? What are the benefits of participation in a depository? There are two depositories in India which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The benefits of participation in a depository are: Immediate transfer of securities No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc. Reduction in paperwork involved in transfer of securities Reduction in transaction cost Ease of nomination facility Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately Transmission of securities is done directly by the DP eliminating correspondence with companies Convenient method of consolidation of folios/accounts Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/ consolidation/merger etc. ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Who is a Depository Participant (DP)? Does one need to keep any minimum balance of securities in his account with his DP? What is an ISIN? What is a Custodian? How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? Do dematerialised shares have distinctive numbers? Can electronic holdings be converted into Physical certificates? Can one dematerialise his debt instruments, mutual fund units, government securities in his demat account? The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs. No. The depository has not prescribed any minimum balance. You can have zero balance in your account. ISIN (International Securities Identification Number) is a unique identification number for a security. A Custodian is basically an organisation, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients: Maintaining a client’s securities account Collecting the benefits or rights accruing to the client in respect of securities Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. Yes. The process is called Rematerialisation. If one wishes to get back your securities in the physical form one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account. Yes. You can dematerialise and hold all such investments in a single demat account. ¦ ¦ ¦ Introduction to Financial Markets 35 Page 2 DEPOSITORY Chapter 6 How is a depository similar to a bank? A Depository can be compared with a bank, which holds the funds for depositors. An analogy between a bank and a depository may be drawn as follows: BANK Holds funds in an account. Transfers funds between accounts on the instruction of the account holder. Facilitates transfers without having to handle money. Facilitates safekeeping of money. DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder. Facilitates transfers of ownership without having to handle securities. Facilitates safekeeping of shares. Which are the depositories in India? What are the benefits of participation in a depository? There are two depositories in India which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The benefits of participation in a depository are: Immediate transfer of securities No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc. Reduction in paperwork involved in transfer of securities Reduction in transaction cost Ease of nomination facility Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately Transmission of securities is done directly by the DP eliminating correspondence with companies Convenient method of consolidation of folios/accounts Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/ consolidation/merger etc. ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Who is a Depository Participant (DP)? Does one need to keep any minimum balance of securities in his account with his DP? What is an ISIN? What is a Custodian? How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? Do dematerialised shares have distinctive numbers? Can electronic holdings be converted into Physical certificates? Can one dematerialise his debt instruments, mutual fund units, government securities in his demat account? The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs. No. The depository has not prescribed any minimum balance. You can have zero balance in your account. ISIN (International Securities Identification Number) is a unique identification number for a security. A Custodian is basically an organisation, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients: Maintaining a client’s securities account Collecting the benefits or rights accruing to the client in respect of securities Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. Yes. The process is called Rematerialisation. If one wishes to get back your securities in the physical form one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account. Yes. You can dematerialise and hold all such investments in a single demat account. ¦ ¦ ¦ Introduction to Financial Markets 35 DEPOSITORY Chapter 6 How is a depository similar to a bank? A Depository can be compared with a bank, which holds the funds for depositors. An analogy between a bank and a depository may be drawn as follows: BANK Holds funds in an account. Transfers funds between accounts on the instruction of the account holder. Facilitates transfers without having to handle money. Facilitates safekeeping of money. DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder. Facilitates transfers of ownership without having to handle securities. Facilitates safekeeping of shares. Which are the depositories in India? What are the benefits of participation in a depository? There are two depositories in India which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The benefits of participation in a depository are: Immediate transfer of securities No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc. Reduction in paperwork involved in transfer of securities Reduction in transaction cost Ease of nomination facility Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately Transmission of securities is done directly by the DP eliminating correspondence with companies Convenient method of consolidation of folios/accounts Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/ consolidation/merger etc. ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Who is a Depository Participant (DP)? Does one need to keep any minimum balance of securities in his account with his DP? What is an ISIN? What is a Custodian? How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? Do dematerialised shares have distinctive numbers? Can electronic holdings be converted into Physical certificates? Can one dematerialise his debt instruments, mutual fund units, government securities in his demat account? The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs. No. The depository has not prescribed any minimum balance. You can have zero balance in your account. ISIN (International Securities Identification Number) is a unique identification number for a security. A Custodian is basically an organisation, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients: Maintaining a client’s securities account Collecting the benefits or rights accruing to the client in respect of securities Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. Yes. The process is called Rematerialisation. If one wishes to get back your securities in the physical form one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account. Yes. You can dematerialise and hold all such investments in a single demat account. ¦ ¦ ¦ 34 Page 3 DEPOSITORY Chapter 6 How is a depository similar to a bank? A Depository can be compared with a bank, which holds the funds for depositors. An analogy between a bank and a depository may be drawn as follows: BANK Holds funds in an account. Transfers funds between accounts on the instruction of the account holder. Facilitates transfers without having to handle money. Facilitates safekeeping of money. DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder. Facilitates transfers of ownership without having to handle securities. Facilitates safekeeping of shares. Which are the depositories in India? What are the benefits of participation in a depository? There are two depositories in India which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The benefits of participation in a depository are: Immediate transfer of securities No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc. Reduction in paperwork involved in transfer of securities Reduction in transaction cost Ease of nomination facility Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately Transmission of securities is done directly by the DP eliminating correspondence with companies Convenient method of consolidation of folios/accounts Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/ consolidation/merger etc. ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Who is a Depository Participant (DP)? Does one need to keep any minimum balance of securities in his account with his DP? What is an ISIN? What is a Custodian? How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? Do dematerialised shares have distinctive numbers? Can electronic holdings be converted into Physical certificates? Can one dematerialise his debt instruments, mutual fund units, government securities in his demat account? The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs. No. The depository has not prescribed any minimum balance. You can have zero balance in your account. ISIN (International Securities Identification Number) is a unique identification number for a security. A Custodian is basically an organisation, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients: Maintaining a client’s securities account Collecting the benefits or rights accruing to the client in respect of securities Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. Yes. The process is called Rematerialisation. If one wishes to get back your securities in the physical form one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account. Yes. You can dematerialise and hold all such investments in a single demat account. ¦ ¦ ¦ Introduction to Financial Markets 35 DEPOSITORY Chapter 6 How is a depository similar to a bank? A Depository can be compared with a bank, which holds the funds for depositors. An analogy between a bank and a depository may be drawn as follows: BANK Holds funds in an account. Transfers funds between accounts on the instruction of the account holder. Facilitates transfers without having to handle money. Facilitates safekeeping of money. DEPOSITORY Hold securities in an account Transfers securities between accounts on the instruction of the account holder. Facilitates transfers of ownership without having to handle securities. Facilitates safekeeping of shares. Which are the depositories in India? What are the benefits of participation in a depository? There are two depositories in India which provide dematerialization of securities. The National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The benefits of participation in a depository are: Immediate transfer of securities No stamp duty on transfer of securities Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc. Reduction in paperwork involved in transfer of securities Reduction in transaction cost Ease of nomination facility Change in address recorded with DP gets registered electronically with all companies in which investor holds securities eliminating the need to correspond with each of them separately Transmission of securities is done directly by the DP eliminating correspondence with companies Convenient method of consolidation of folios/accounts Holding investments in equity, debt instruments and Government securities in a single account; automatic credit into demat account, of shares, arising out of split/ consolidation/merger etc. ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ Who is a Depository Participant (DP)? Does one need to keep any minimum balance of securities in his account with his DP? What is an ISIN? What is a Custodian? How can one convert physical holding into electronic holding i.e. how can one dematerialise securities? Do dematerialised shares have distinctive numbers? Can electronic holdings be converted into Physical certificates? Can one dematerialise his debt instruments, mutual fund units, government securities in his demat account? The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs. No. The depository has not prescribed any minimum balance. You can have zero balance in your account. ISIN (International Securities Identification Number) is a unique identification number for a security. A Custodian is basically an organisation, which helps register and safeguard the securities of its clients. Besides safeguarding securities, a custodian also keeps track of corporate actions on behalf of its clients: Maintaining a client’s securities account Collecting the benefits or rights accruing to the client in respect of securities Keeping the client informed of the actions taken or to be taken by the issue of securities, having a bearing on the benefits or rights accruing to the client. In order to dematerialise physical securities one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN number. Can odd lot shares be dematerialised? Yes, odd lot share certificates can also be dematerialised. Dematerialised shares do not have any distinctive numbers. These shares are fungible, which means that all the holdings of a particular security will be identical and interchangeable. Yes. The process is called Rematerialisation. If one wishes to get back your securities in the physical form one has to fill in the Remat Request Form (RRF) and request your DP for rematerialisation of the balances in your securities account. Yes. You can dematerialise and hold all such investments in a single demat account. ¦ ¦ ¦ 34 Unit Code: 7 Unit Title: Mutual Fund Session-1 : Basics of Mutual Fund Location: Class Room, AMC, Mutual Fund Branch Office Learning Outcome Knowledge Evaluation Performance Evaluation Teaching and Training Method Session-2 : Active/Passive Fund · · · · Define MF Benefits of MF How to calculate NAV Procedure of NFO · · Find NAV of few MF Schemes Study NFO Interactive lecture: Calculate Returns of the Schemes. Activity: Find best suited scheme for each student · · Working and operations of Mutual Fund Distinguish Open – ended & Close ended · Tools and Techniques of Active and Passive Fund · Benefits of Active / Passive Funds Interactive lecture: Risk and Returns of MF Activity: Role plays portfolio manager · Find Mutual Fund Scheme: less Risk and High Returns What is the Regulatory Body for Mutual Funds? What are the benefits of investing in Mutual Funds? What is NAV? Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds. All the mutual funds must get registered with SEBI. There are several benefits from investing in a Mutual Fund: Small investments: Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Professional Fund Management: Professionals having considerable expertise, experience and resources manage the pool of money collected by a mutual fund. They thoroughly analyse the markets and economy to pick good investment opportunities. Spreading Risk: An investor with limited funds might be able to invest in only one or two stocks/bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing a number of sound stocks or bonds. A fund normally invests in companies across a wide range of industries, so the risk is diversified. Transparency: Mutual Funds regularly provide investors with information on the value of their investments. Mutual Funds also provide complete portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type. Choice: The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a scheme depending upon his risk/return profile. Regulations: All the mutual funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor. NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. The NAV of a mutual fund are required to be published in newspapers. The NAV of an open end scheme should be disclosed on a daily basis and the NAV of a close end scheme should be disclosed at least on a weekly basis. MUTUAL FUNDS Chapter 7 Introduction to Financial Markets 37Read More
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