NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to Depository
Under the Depositories Act, 1996, which feature of a depository is correct regarding transfer of securities held in its system?
Transfers are made by book entry, where the transferor's demat account is debited and the transferee's account is credited. No physical certificate moves, which removes risks such as loss, forgery and delay associated with paper-based transfers.
- ATransfer is effected by book entry, debiting one account and crediting anotherCorrect
- BTransfer requires physical delivery of a certificate to the depository
- CTransfer requires the issuer to print a new certificate each time
- DTransfer is valid only after a stamp duty receipt is attached to each transaction
Explanation
A key benefit of a depository is that ownership changes through electronic book entries, with the seller's account debited and the buyer's credited. This removes the need for physical certificates and the delays and risks of paper transfer.
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