Certificate of registration
The SEBI registration without which a depository cannot deal in securities, no entity may act as a DP, and no FPI may invest. It is valid unless SEBI suspends or cancels it.
In plain language
In the depository system, no one gets to operate on goodwill. Each key player first needs a certificate of registration from SEBI.
The Depositories Act uses this certificate to define a depository itself. A depository is a company formed and registered under the Companies Act. It must also have been granted a certificate of registration under section 12(1A) of the SEBI Act, 1992. A Depository Participant (DP) can offer depository services only after it gets a certificate of registration from SEBI as a DP.
The certificate is SEBI's way of saying two things. The applicant meets the eligibility rules. And it is fit to be trusted with investors' securities. Once granted, a DP's certificate stays valid unless SEBI suspends or cancels it. The fees must be paid on time.
For a depository, registration is only the first gate. It must also get a certificate of commencement of business before it starts work.
How it works
Depositories (Chapter 2).
| Step | Rule |
|---|---|
| Eligibility | A company with minimum net worth of Rs 100 crore, plus systems, network and infrastructure requirements |
| Certificate of registration | From SEBI; a depository can deal in securities only after getting it |
| Certificate of commencement of business | Apply to SEBI within one year of receiving the certificate of registration; granted if systems and safeguards against manipulation of records are adequate, net worth is at least Rs 100 crore and the bye-laws are SEBI-approved |
Depository Participants (Chapter 3).
- Application route: to SEBI through the depository, which forwards it within 30 days if it finds the applicant suitable.
- What SEBI considers: adequate infrastructure and systems, safeguards and trained staff, whether the applicant is fit and proper, and whether the grant is in the interests of investors.
- Condition of grant: redress beneficial owners' grievances within 30 days of receiving a complaint and keep the depository informed.
- Validity (3.1.4): valid unless suspended or cancelled. To keep it in force, the DP pays the fee for every five years from the sixth year, one month before the expiry of the block already paid for.
- Suspension: contravening the Act, bye-laws, agreements or regulations; failing to furnish information, or furnishing false or misleading information; not co-operating in an inspection; failing to follow SEBI directions; or failing to pay the annual fee.
- Cancellation: guilt of fraud, conviction for an offence involving moral turpitude, or repeated defaults of the kinds that justify suspension.
Several DP categories must themselves already hold a SEBI certificate of registration: a custodian, a stockbroker and an R&T Agent.
FPIs (Chapter 12). An FPI obtains its certificate of registration through a Designated Depository Participant. After due diligence, the DDP grants registration on the NSDL FPI portal, which generates the certificate.
Documents (Chapter 4). A registered partnership firm's certificate of registration is among the documents for opening partners' accounts. For a name change by a corporate other than a company, the SEBI or other statutory certificate of registration is required.
A worked example
Illustrative entities and dates; the rules and net worth figures are the workbook's.
A new depository. Bharat Securities Depository Ltd, with a net worth of Rs 140 crore, receives its certificate of registration from SEBI on 1 July 2026.
- It cannot start operating yet. It must apply for a certificate of commencement of business by 30 June 2027 (within one year).
- SEBI checks that net worth is still at least Rs 100 crore (Rs 140 crore passes), that its bye-laws are SEBI-approved and that its data systems are protected.
A new DP. Sahyadri Broking, a stockbroker that already holds a SEBI certificate of registration as a broker, applies to become a DP through CDSL on 2 March 2026.
- CDSL must forward the application to SEBI within 30 days, by 1 April 2026, if it finds Sahyadri suitable.
- SEBI grants the certificate on 1 June 2026. One condition: resolve investor complaints within 30 days.
- The first five years run to 31 May 2031. To keep the registration in force for the next block, Sahyadri pays the fee one month before that block ends, by 30 April 2031.
If things go wrong. Suppose Sahyadri refuses to co-operate with a SEBI inspection in 2028. That is a ground for suspension. If it keeps repeating such defaults, SEBI can cancel the certificate.
Why NISM asks about it
Chapter 2 (Introduction to Depository, 10% weightage) ties the definition of a depository to the certificate and sets out registration and commencement of business. Chapter 3 (Depository and its Business Partners, 12%) covers DP registration, conditions of grant, validity, suspension and cancellation. Chapter 12 (FPI, 2%) covers FPI registration through a DDP. Expect "from whom does a DP obtain its certificate of registration?" (SEBI, applying through the depository), the one-year commencement window, and grounds for suspension versus cancellation.
Common exam traps
- Registration is not commencement. A depository needs both certificates, and must apply for commencement within one year of registration.
- SEBI grants, the depository forwards. A DP applies to SEBI through the depository, which forwards within 30 days.
- Valid until suspended or cancelled. There is no fixed expiry, but fees are paid in five-year blocks from the sixth year, one month before each block ends.
- Suspension vs cancellation. Non-co-operation, false information and unpaid fees lead to suspension. Fraud, moral turpitude and repeated suspension-type defaults lead to cancellation.
- Rs 100 crore is the depository's net worth. DP net worth figures are different (Rs 3 crore to Rs 5 crore for stockbrokers under the 2022 amendment).
- FPIs register through a DDP, not directly with SEBI and not through any ordinary DP.
- Stale references in the workbook. Chapter 2 quotes the depository definition as a company "registered under the Companies Act, 1956" and refers to eligibility under "the SEBI Act 1996". The SEBI Act is of 1992 (as the same definition says), and the Companies Act, 2013 has replaced the 1956 Act.
Where this is taught
Free preparation for NISM Series III-ARelated terms
- CustodianThe SEBI-registered entity that holds a fund's securities in accounts of its own and settles its trades, so the assets sit somewhere other than with the manager who decides what to buy.
- DepositoryAn institution that holds investors' securities in electronic form and provides the services needed to transact in them — the securities equivalent of a bank holding money rather than cash.
- Depository participantThe SEBI-registered agent through whom an investor reaches a depository — NSDL and CDSL cannot open investor accounts themselves, so every demat account is opened and operated through a DP.
- Designated Depository ParticipantA SEBI-approved custodian and DP, also an AD Category-1 bank, that registers Foreign Portfolio Investors on SEBI's behalf after due diligence - and must be the same entity as the FPI's custodian.
- Certificate of commencement of businessThe second SEBI approval a depository needs before it can operate — granted within a year of registration, only once SEBI is satisfied the depository's systems, safeguards and Rs 100 crore net worth are adequate.
- Net worth certificateA chartered accountant-certified statement of an intermediary's net worth, computed from audited books, submitted to the depository in the format its bye-laws prescribe — an annual filing obligation for every DP.
- Capital market intermediariesRegistrars and Transfer Agents, Custodians and Depositories: the firms that service both the primary and secondary market, as distinct from brokers, merchant bankers and mutual funds, which trade or manage money.
- HLCCFMThe informal body that coordinated SEBI, RBI, the Department of Economic Affairs and the Ministry of Corporate Affairs before the Financial Stability and Development Council replaced it in 2010.
- Bye-LawsThe depository's own rulebook governing its operations, its participants, issuers and beneficial owners, which must conform to the Depositories Act and be approved by SEBI before it takes effect.
- CDSLCentral Depository Services (India) Limited — one of India's two depositories, promoted by leading Indian banks and the Bombay Stock Exchange, registered in February 1999 and operational from 22 March 1999.
- Cancellation of certificateSEBI's power to permanently withdraw a Depository Participant's certificate of registration, used only for fraud, conviction for moral turpitude, or repeated defaults of the kind that could otherwise trigger suspension.
- DP-IDThe unique identification number a depository issues to a Depository Participant once its system connectivity is activated in the live environment, allowing it to start functioning.
- ImmobilisationHolding physical securities in a central depository vault while transferring them by book entry — the model India did not adopt, choosing dematerialisation, which destroys the certificate, instead.
- Authorised Dealer Category-1 bankThe RBI authorisation an entity must hold to be eligible as a Designated Depository Participant for FPIs, alongside SEBI registration as a custodian.
- Limited ParticipantA stockbroker admitted by NSDL as a DP with net worth between Rs 1 crore and Rs 3 crore, permitted to operate only with restrictions on business or for a limited period.
- Operating InstructionsThe depository's own detailed operational rulebook, listed in Chapter 2's legal framework beside the Depositories Act and SEBI regulations, and invoked for procedural specifics like defacement and account forms.
- Surveillance PolicyThe internal monitoring framework NSDL requires each DP to build, sized to its own business and client base, to generate alerts that catch suspicious client transactions.
- In-principle registrationThe three-month transitional registration an individual Investment Adviser must apply for on crossing 300 clients or Rs 3 crore of annual fees, while converting to a non-individual adviser.
- Investment adviser depositThe deposit a SEBI-registered Investment Adviser must keep with a scheduled bank, marked as lien for a SEBI-recognised body, to pay dues from an arbitration or conciliation case against the adviser.