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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Debt Instruments and Government Securities

A client asks how interest on a corporate debenture held in demat form is paid to him on the record date. Which is the correct position for the DP's explanation?

Interest is paid to the beneficial owner whose name appears in the depository's records on the record date. The depository is only the registered owner, and the DP is just an intermediary, so neither receives the interest entitlement.

  1. AInterest is paid to the person whose name appears in the depository's records as beneficial owner on the record dateCorrect
  2. BInterest is paid to the DP holding the account
  3. CInterest is paid to the person who held the security in the previous year
  4. DInterest is paid to the depository as the registered owner

Explanation

The issuer or its RTA obtains the beneficial owner list from the depository as at the record date and pays interest to those holders. The depository is only the registered owner, while the beneficial owner is entitled to the benefits. The DP is merely an intermediary and not the recipient.

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