Skip to content

NISM-Series-VI: Depository Operations · Depository and its Business Partners

Depository Participants (DPs): Role and Eligibility for NISM Depository Operations

Updated 11 October 2026 · Fact-checked

A depository participant (DP) is a SEBI-registered intermediary that acts as the depository's agent and links investors to the depository. Banks, stock brokers, custodians, clearing members, NBFCs and certain financial institutions can apply. A DP opens demat accounts, processes demat requests and transfers, and records pledges. It must also keep its agreement with the depository.

Understand Depository Participants (DPs): Role and Eligibility

A depository holds securities in electronic form. It does not deal with the public directly. It would be impractical for NSDL or CDSL to open millions of accounts and take instructions from each investor. So it works through agents. These agents are depository participants (DPs).

Think of the depository as the head office and the DP as the branch. The investor, called the beneficial owner (BO), signs an account opening form and an agreement with the DP. The DP then opens the demat account in the depository's system. The investor gives instructions to the DP, and the DP passes them to the depository.

Who can become a DP? Under the SEBI (Depositories and Participants) Regulations, 2018, the applicant must fall in a category the regulations permit. Examples include a bank, a public financial institution, a financial institution, a custodian of securities approved by SEBI, a stock broker, a clearing member of a clearing corporation, an NBFC and a registrar and transfer (R&T) agent. A company qualifies only if it falls in one of the permitted categories. The applicant must also meet the net worth and other conditions SEBI prescribes. Net worth limits differ by category and can be revised, so confirm the figure in your current workbook. Do not guess a number in the exam.

Registration has two parts. The entity must hold a SEBI certificate of registration as a DP. It must also sign an agreement with the depository whose services it will use. A DP can be linked to more than one depository. One entity can therefore be a DP of both NSDL and CDSL.

Once registered, the DP acts as the depository's agent for investor services. Its work includes opening and closing accounts, accepting demat and remat requests, executing delivery instructions, recording pledges, passing on statements and corporate benefits, and keeping records. The DP is answerable to SEBI and the depository, and it must treat investor data and instructions with care.

Key formulas to remember

DP status
DP = SEBI-registered intermediary + agreement with depository, acting as the depository's agent
Both the SEBI certificate and the depository agreement are needed. Having only one is not enough.
Who deals with whom
Investor (BO) ↔ DP ↔ Depository
The BO deals with the DP. The depository deals with the DP. The depository does not normally deal with the BO directly.
Eligible entity types (examples)
Bank, public financial institution, financial institution, custodian, stock broker / clearing member, NBFC, R&T agent, and other categories permitted by the regulations
A company qualifies only if it falls in a permitted category. The entity must also meet SEBI's net worth and other conditions. Check the current workbook for exact amounts.
Number of depositories
One DP can register with more than one depository
A DP can offer both NSDL and CDSL accounts. Each demat account sits with one depository through one DP.

How to solve Depository Participants (DPs): Role and Eligibility questions

Questions on DPs usually test who the DP is, who can become one, and what it does. Use this order to avoid trap options.

  1. 1Read the question and decide the theme: eligibility, registration, role, or relationship (agent versus principal).
  2. 2If it is about eligibility, ask whether the entity falls in a category the regulations permit, such as a bank, public financial institution, financial institution, custodian, stock broker, clearing member, NBFC or R&T agent. Reject an option that treats any company as eligible without regard to its category.
  3. 3If it is about registration, check for both parts: SEBI registration and an agreement with the depository.
  4. 4If it is about role, remember the DP is the depository's agent and the investor's service point. Match the activity with the DP: accounts, demat/remat, transfers, pledge, statements, corporate benefits.
  5. 5Eliminate options that make the depository, the issuer, the RTA or the stock exchange perform a DP task, or that make the DP a legal owner of the investor's securities.
  6. 6Watch for words like 'only', 'always' and 'never'. Pick the option that matches the rule exactly.
  7. 7For numbers such as net worth, pick the figure only if you clearly remember it from the workbook. Otherwise use elimination.

Quickest way: Agent and gateway test

When to use it: Use this when the question asks about the DP's role or relationship in a single line.

  1. Ask: is this an investor-facing service? If yes, the DP does it.
  2. Ask: is this the central electronic record? If yes, the depository does it.
  3. Ask: does the option say the DP owns the securities? If yes, reject it. The BO is the beneficial owner.
  4. For eligibility, ask: does the entity fall in a category the regulations permit? Banks, financial institutions, brokers, clearing members, custodians, NBFCs and R&T agents are in. An entity outside the permitted categories is out.

Common mistakes in Depository Participants (DPs): Role and Eligibility

  • Thinking an investor can open a demat account directly with NSDL or CDSL

    Students know the depository holds the records, so they assume it deals with the investor.

    Fix: Remember the chain: investor, DP, depository. The account is opened through a DP.

  • Treating the DP as the owner or registered holder of the investor's securities

    The DP handles the account, so it seems to control the holdings.

    Fix: The BO is the beneficial owner and holds the beneficial interest. The depository is the registered owner in the issuer's records, but in name only. It has no voting rights or beneficial interest (Depositories Act, 1996, Section 10). The DP is only an agent and service provider.

  • Remembering only the SEBI registration and forgetting the depository agreement

    Students focus on the regulator and ignore the contract.

    Fix: Write 'SEBI certificate + depository agreement' in your notes. Questions often test both together.

  • Quoting a net worth figure from memory without being sure

    Net worth limits differ by category, so numbers get mixed up.

    Fix: Learn the principle that SEBI prescribes net worth by category. State a figure only if it is in your current workbook.

  • Assuming a DP can serve only one depository

    Students link a DP with one name, like NSDL or CDSL.

    Fix: A DP may register with more than one depository. A given account, however, is held with one depository.

  • Assigning issuer or RTA tasks to the DP

    Demat and corporate action processes involve several parties.

    Fix: The DP receives the request and passes it on. The issuer or RTA confirms demat. The DP does not issue shares or declare benefits.

Worked examples

Example 1

Which of the following is correct about a depository participant? (a) It is the registered owner of securities held in the investor's demat account (b) It acts as an agent of the depository and provides the interface to investors (c) It is appointed by the issuer to keep the register of shareholders (d) It need not be registered with SEBI if it is a bank

Show the solution
  1. Option (a) is wrong. The depository is the registered owner in name only, with no voting rights or beneficial interest. The investor (BO) holds the beneficial interest. The DP is neither the registered owner nor the beneficial owner.
  2. Option (c) describes the registrar or the issuer's own register work. It is not the DP's role.
  3. Option (d) is wrong. A DP must hold SEBI registration whatever type of entity it is.
  4. Option (b) matches the rule: the DP is the depository's agent and the investor-facing service point.

Answer: (b)

Example 2

Mr. Rao wants to start a demat account. Explain who he should approach, and what the entity must have before it can open the account.

Show the solution
  1. Mr. Rao should approach a DP, not the depository directly. The depository works through DPs.
  2. The DP must be an entity of a type SEBI permits, such as a bank, broker, custodian or similar intermediary.
  3. It must hold a SEBI certificate of registration as a DP.
  4. It must have an agreement with the depository whose services it offers.
  5. The DP then takes his account opening form and signs a BO agreement with him. It opens the account in the depository system.

Answer: He should approach a SEBI-registered DP that has an agreement with the depository. The DP will open the account on the depository's behalf.

Exam tips

  • Link every DP question to the chain investor, DP, depository. Use it to reject options.
  • Learn the eligible categories as a list: bank, public financial institution, financial institution, custodian, stock broker or clearing member, NBFC and R&T agent. A company qualifies only if it falls in a permitted category.
  • Remember both requirements: SEBI registration and depository agreement. Options with only one are usually traps.
  • Watch the word 'agent'. The DP is the depository's agent, not the owner of securities or the issuer's representative.
  • NISM-Series-VI carries 25% negative marking and a 60% pass mark. A wrong answer costs 25% of the marks for that question. Guessing is worthwhile once you have confidently eliminated one or two options.

Practice questions from Depository and its Business Partners

Depository Participants (DPs): Role and Eligibility in other exams

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

Depository Participants (DPs): Role and Eligibility: frequently asked questions

Who can become a depository participant in India?

A DP must be an entity in a category the SEBI regulations permit, such as a bank, public financial institution, financial institution, custodian, stock broker, clearing member, NBFC or R&T agent. A company qualifies only if it falls in one of these categories. It must meet SEBI's net worth and other conditions, hold SEBI registration and sign an agreement with a depository.

What is the net worth requirement for a depository participant?

SEBI prescribes net worth requirements, and they differ by category of applicant. They can be revised, so use the figure in your current NISM workbook. Do not rely on old notes.

What does a DP do in the depository system?

A DP acts as the depository's agent and the investor's service point. It opens and closes demat accounts, processes demat and remat requests, executes delivery instructions, records pledges and provides statements. It also passes on corporate benefits through the depository system.

Can a depository participant be registered with both NSDL and CDSL?

Yes. A DP can register with more than one depository by signing an agreement with each. A single demat account, however, is held with one depository through one DP.