Q.Explain the following term/concept:
Depository system

The depository system holds securities electronically and allows their easy transfer without paper certificates.

Earlier, investors held shares and debentures as physical certificates, which caused problems such as theft, forgery, damage, delays in transfer and bad deliveries. The depository system was introduced to remove these difficulties by holding securities in electronic form.

Under this system, an organisation called a depository (in India, NSDL and CDSL) keeps the investor's securities in a demat account. The investor operates this account through a Depository Participant (DP), which acts as an agent linking the investor with the depository. When securities are bought or sold, they are simply credited to or debited from the demat account by book entry, just like a bank handles money in a savings account. This makes trading quic …