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

Which of the following correctly describes the legal basis and the nature of the depository system in India?

The Depositories Act, 1996 provides the framework for depositories in India. A depository is registered with SEBI and holds investors' securities in electronic book-entry form, transferring ownership by entries. It is not an RBI-regulated body, nor does it require securities to stay physical.

  1. AThe Depositories Act, 1996 enabled depositories, and the depository is registered with SEBI and acts as a custodian of securities in book-entry formCorrect
  2. BThe Companies Act alone created depositories, which are regulated by the RBI
  3. CThe Depositories Act, 1996 requires all securities to remain in physical form unless the stock exchange permits otherwise
  4. DDepositories are departments of stock exchanges and need no separate registration

Explanation

The Depositories Act, 1996 provides for the establishment and regulation of depositories, which are registered with SEBI and hold securities in electronic form. Securities are fungible and ownership is transferred by book entry. The other options misstate the regulator, the form of holding or the separate registration requirement.

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