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

A client holds a debt security in demat form and asks the DP when the interest on it will be credited. Who is responsible for paying the interest or coupon to the holder on the due date?

The issuer of the debt security is responsible for paying interest and redemption proceeds. The depository only provides the list of beneficial owners on the record date, so the issuer can pay the correct holders; neither depository nor DP pays from its own funds.

  1. AThe depository, from its own funds
  2. BThe Depository Participant, from its own funds
  3. CThe issuer of the security, with the depository providing the beneficial owner detailsCorrect
  4. DThe stock exchange where the security is listed

Explanation

The issuer is liable to pay coupon and principal. The depository supplies the issuer or its registrar with the list of beneficial owners as at the record date so payments reach the right holders. Depositories and DPs do not pay from their own funds.

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