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CMA Intermediate · Financial Management and Business Data Analytics · Capital Market

Which statement about the dematerialised holding of securities in India is correct?

Demat securities are transferred by electronic debit and credit entries between accounts, so no physical transfer deed is needed. Investors can use either NSDL or CDSL through a participant, and the investor, not the depository, is the beneficial owner.

  1. AShares held in demat form are transferred by a delivery instruction or electronic debit and credit of the account, without any physical share transfer deedCorrect
  2. BA demat account can be opened only with NSDL, not with CDSL
  3. CPhysical share certificates must always be retained alongside demat holdings as proof
  4. DThe depository becomes the beneficial owner of the securities held in the account

Explanation

In the depository system, transfers occur by electronic book entries, debiting one account and crediting another, so no transfer deed is needed. Accounts can be opened through DPs of either NSDL or CDSL. The depository is the registered owner while the investor is the beneficial owner, so the last option is wrong.

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