Understanding Depository System
What is a Depository?
A depository is an organisation, which holds securities of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities.
How is a depository similar to a bank?
It can be compared with a bank, which holds the funds for depositors. A Bank – Depository Analogy is given in the following table:
| BANK | DEPOSITORY |
|---|---|
| Holds funds in an account | Hold securities in an account |
| Transfers funds between accounts on the instruction of the account holder |
Transfers securities between accounts on the instruction of the account holder |
| Facilitates transfer without having to handle money | Facilitates transfer of ownership without having to handle securities |
| Facilitates safekeeping of money | Facilitates safekeeping of securities |
