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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

A new investor, Mr. Sanjay Kulkarni, wants to understand the structure of the Indian depository system. Which of the following correctly describes it?

In India, depositories like NSDL and CDSL work through depository participants, who act as their agents and interface with investors. The investor opens a demat account with a DP, and the depository holds the securities electronically. Investors do not open accounts directly with the depository.

  1. AInvestors deal with depository participants, who are agents of the depository and provide the interface to the investor; the depository holds securities in electronic formCorrect
  2. BInvestors open accounts directly with NSDL or CDSL, which deal with every client on a day-to-day basis
  3. CInvestors deal with the issuer company, which maintains the depository account on behalf of the depository
  4. DInvestors deal with the clearing corporation, which acts as the DP for all retail clients

Explanation

Depositories such as NSDL and CDSL operate through DPs, who act as their agents and are the link to investors. Investors do not open accounts directly with the depository. Clearing corporations handle settlement, not retail demat accounts.

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