Skip to content

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

Ms. Iyer wants to know how interest on a fixed-coupon corporate bond held in her demat account is generally credited. Which statement is correct?

The issuer pays the interest to beneficial owners as on the record date, based on the list of holders and bank details supplied by the depository. The depository and DP only facilitate the data; they do not pay from their own funds, and no physical certificate is needed.

  1. AThe depository pays the interest to her directly out of its own funds
  2. BThe DP pays the interest from its own reserves on each coupon date
  3. CThe issuer pays interest to holders as on the record date, using beneficial owner details furnished by the depositoryCorrect
  4. DInterest is paid only if she submits the physical bond certificate to the issuer

Explanation

For dematerialised debt, the depository provides the issuer's registrar with the list of beneficial owners as on the record date, and the issuer pays interest to them, typically through bank details linked to the account. Depositories and DPs do not pay interest from their own funds, and no certificate is required.

Did you get it right without looking?

One question tells you little. A timed set on Special Services - Debt Instruments and Government Securities shows your real accuracy, how long you take and where you lose marks.

Practise Special Services - Debt Instruments and Government SecuritiesFree diagnostic mock

More Special Services - Debt Instruments and Government Securities questions