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NISM Certifications · NISM-Series-VI: Depository Operations

Depository and its Business Partners: NISM Series VI Guide

A depository holds securities in electronic form and records their transfer by book entry. It works through business partners: depository participants (DPs), issuers, registrars and share transfer agents, clearing corporations and others. In NISM-Series-VI you must know who does what, which agreement links whom, and what the Depositories Act and SEBI rules require.

What this chapter covers

This chapter is the base of the Depository Operations paper. It explains what a depository is, why shares moved from paper to electronic form, and how NSDL and CDSL are set up. It then covers the DP, the entity that deals directly with the investor, and the other parties that connect to a depository.

The chapter also covers the legal frame. The Depositories Act and the SEBI rules for depositories and participants decide who can act as a depository or DP and what duties they carry. Expect questions that ask who does what, or which rule applies in a given situation.

Later chapters on account opening, dematerialisation, transfers, pledge and corporate actions all assume you know these roles. If you are unsure whether a task belongs to the depository, the DP, the issuer or the registrar, those chapters will feel confusing. Study this one first and keep it clear.

The paper has 100 questions with negative marking of 25% of the marks assigned to a question, and the pass mark is 60%. This chapter is mostly definitions, roles and rules, so you can score accurately here if you learn the exact wording. A wrong answer costs marks, and the trap options in this chapter usually swap one party's role for another's. Clear knowledge of this chapter also makes the operational chapters easier, so the effort pays back across the whole paper.

Depository and its Business Partners: topics in the order to study them

  1. 1Depository System and Dematerialisation BasicsStart here because it defines a depository, book-entry transfer, dematerialisation and the benefits over paper, which every other topic uses.
  2. 2NSDL and CDSL: Structure and FunctionsOnce you know what a depository is, learn the two that operate in India and what each one does.
  3. 3Depository Participants (DPs): Role and EligibilityThe DP is the investor's gateway to the depository, so learn its role and who can become one after the depositories are clear.
  4. 4Depository Business Partners and AgreementsWith depositories and DPs understood, you can place the other parties and see which agreement connects which two.
  5. 5Regulatory Framework: Depositories Act and SEBI RegulationsStudy the law last, so each rule attaches to a role you already know, which makes the conditions easier to remember.

How to prepare Depository and its Business Partners

This chapter rewards clear role maps and exact wording, not long calculations. Build the map first, then memorise the rules on top of it.

  1. Read the chapter once in study order without memorising. Your aim is to see how investor, DP, depository, issuer and registrar connect.
  2. Draw a one-page map of the parties. Mark the agreement or link between each pair, such as depository to DP and depository to issuer.
  3. Make a short list of definitions: depository, beneficial owner, participant, dematerialisation, rematerialisation, book-entry. Use the workbook's wording.
  4. Learn NSDL and CDSL side by side in a two-column list. Note how they are alike, then what is different.
  5. Write down each eligibility and regulatory rule with its exact condition. Do not round off or guess limits you have not seen in the workbook.
  6. Practise MCQs on this chapter. For each wrong answer, note which party or rule you confused and fix that line in your notes.
  7. Revise the map and the rule list a day later and again before the exam.

Common mistakes in Depository and its Business Partners

  • Mixing up the roles of the depository and the DP

    Fix: Remember that the depository keeps the system and records, while the DP is the investor-facing agent. Check which one the question names.

  • Confusing the registered owner with the beneficial owner

    Fix: Write both definitions side by side. The depository appears as registered owner in the issuer's records. The investor is the beneficial owner.

  • Attaching an agreement to the wrong pair of parties

    Fix: Use your party map. For every agreement, say aloud the two parties who sign it and what it permits.

  • Treating NSDL and CDSL as identical

    Fix: Keep a short comparison list from the workbook and revise the points where they differ, such as ownership and background.

  • Guessing eligibility or legal conditions

    Fix: Learn only the conditions stated in the workbook, word for word. If you do not recall a limit, eliminate options rather than guess, since wrong answers carry negative marks.

Last-day revision: Depository and its Business Partners

  • A depository holds securities in electronic form and transfers them by book entry.
  • Dematerialisation converts physical certificates into electronic holdings. Rematerialisation does the reverse.
  • India has two depositories: NSDL and CDSL.
  • The investor reaches a depository only through a DP.
  • A DP acts as the agent of the depository and offers its services to investors.
  • The beneficial owner is the investor who has the economic interest in the securities; the depository is the registered owner in the issuer's records.
  • An investor opens a demat account with a DP by signing an agreement with it.
  • A DP enters into an agreement with the depository to become a participant.
  • An issuer or its registrar signs an agreement with the depository to admit its securities.
  • The Depositories Act and SEBI regulations decide who may act as a depository or DP.
  • Learn each party's role first, then the rule that governs it.
  • Check whether the question asks for the depository, the DP or the issuer before choosing an option.

Depository and its Business Partners practice questions

Depository and its Business Partners in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Depository and its Business Partners: frequently asked questions

What is a depository in simple terms?

A depository is like a bank for securities. It holds them in electronic form and moves them between accounts by book entry. In India, NSDL and CDSL are the two depositories.

Can an investor deal directly with NSDL or CDSL?

No. The investor opens a demat account through a depository participant, which acts as the link to the depository. For exam questions, the DP is the investor's point of contact.

How should I study the Depositories Act for this paper?

Read it after you know the parties and their roles. Focus on what the Act allows, who must be registered and what duties follow. Learn the wording from the workbook rather than outside sources.

Is there negative marking in NISM-Series-VI?

Yes. A wrong answer costs 25% of the marks assigned to that question. The paper has 100 questions, 100 marks and 2 hours, and the pass mark is 60%. Skip a question if you cannot narrow the options down.