Question 31 of 33
Q.Justify the following statement.
Depository system is very similar to the banking system.
Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2026Subjective· 4mImportance★★★★★
94% · 31/33 Questions
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Start your 14-day free trial to unlock the full solution →Yes — a depository works like a bank: it holds securities electronically in accounts and transfers them by book entry, exactly as a bank holds and transfers money.
The statement 'Depository system is very similar to the banking system' is justified because the two systems work on the same basic principles, only the item held is different — money in a bank, securities in a depository.
| Banking system | Depository system |
|---|---|
| Holds money in a bank account. | Holds securities in a demat account. |
| Money is deposited and withdrawn. | Securities are credited and debited. |
| Transfer of money by cheque or transfer entry. | Transfer of securities by book entry, without physical certificates. |
| Account operated through a bank branch. | Account operated through a Depository Participant (DP). |
| Bank issues a passbook or statement of account. | Depository issues a statement of holdings and transactions. |
| No physical movement of cash needed for transfers. | No physical movement of share certificates needed. |
Points of similarity:
- In both, the holder must first open an account (a bank account or a demat account).
- Both hold the asset safely on behalf of the holder and provide periodic statements.
- Both allow easy, quick transfer by simply making entries in the books, avoiding the physical handling of cash or certificates. …
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