Depositary
n a simple term means a place where something is deposit for storage
and security.
In terms of capital markets, Depository as an
institution that works like bank. Depository maintains an account for
investors securities (share, debentures, mutual fund etc) hold by
them in a dematerialised or an electronic form. Investor used to hold
the securities in the form of physical certificate which has their
own disadvantages and to take a control over the irregularities of
the capital market for the protection of an investor's interest,
Depository system has been introduced in India where securities could
be handled in an electronic form by the process of dematerialisation.
One of the main function of the Depository is to
transfer the ownership of shares from one investor's account to
another investor's account whenever the trade takes place. It helps
in reducing the paper work involved in trade, expedites the transfer
and reduces the risk associated with physical shares such as damaged,
theft, interceptions and subsequent misuse of the certificate or fake
securities.
Another important function of depository is that it
eliminate the risk associated with holding the securities in a
physical form like loss,damage,theft or delay in deliveries etc.
