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

Mr. Deepak Menon notes that the two depositories operating in India, NSDL and CDSL, both hold securities in electronic form. Which statement about their role in the capital market is correct?

Depositories such as NSDL and CDSL hold securities in dematerialised form and facilitate transfer of ownership through book entries. They do not underwrite issues, set market prices or lend money; those functions belong to merchant bankers, exchanges and lenders respectively.

  1. AThey hold securities in dematerialised form and enable transfer through book entriesCorrect
  2. BThey underwrite public issues of companies
  3. CThey fix the prices of securities traded on exchanges
  4. DThey lend funds to investors against shares

Explanation

Depositories maintain ownership records of securities in electronic form and effect transfers by book entry. Underwriting, price discovery and lending are done by other entities.

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