Designated Depository Participant
Also written DDP · Designated Depository Participant (DDP)
A 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.
In plain language
A foreign fund that wants to invest in Indian shares and bonds cannot simply open a demat account. It must first be registered as a Foreign Portfolio Investor (FPI). SEBI does not process that registration itself. It delegates the job to a Designated Depository Participant (DDP).
The DDP is not an ordinary DP. It must also be a SEBI-registered custodian and an RBI-authorised Authorised Dealer Category-1 bank with an international presence - the kind of institution that can assess a foreign applicant and then look after its securities.
Once appointed, the DDP does the due diligence, grants the FPI registration and issues the certificate on behalf of SEBI, and remains the FPI's custodian throughout.
How it works
From Chapter 12 (Foreign Portfolio Investors):
Background. SEBI's FPI Regulations, 2014 (notified January 7, 2014; regime from June 1, 2014) merged FIIs, sub-accounts and QFIs into a single FPI class, with operational guidelines for DDPs issued January 8, 2014. The SEBI (FPI) Regulations, 2019 (September 23, 2019) and operational guidelines of November 5, 2019 replaced them.
Role. DDPs carry out due diligence and grant registration to FPIs and issue the registration certificate. No person may deal in securities as an FPI without a certificate granted by the DDP on behalf of SEBI. The application, on SEBI forms with the fee, goes to the DDP - through the Common Application Form (CAF) on NSDL's FPI portal, FPI Monitor, which also covers PAN allotment and KYC for bank and demat accounts. After due diligence, the DDP grants registration on the portal, which generates the certificate.
Eligibility to be approved as a DDP. SEBI considers an application only if the applicant:
| Condition | |
|---|---|
| (a) | is registered with SEBI (the workbook's wording: "a registered DDP registered with SEBI"; the alternative route below speaks of registration as a participant) |
| (b) | is a custodian of securities registered with SEBI |
| (c) | is an Authorised Dealer Category-1 bank authorised by RBI |
| (d) | has multinational presence through branches or agency relationships with regulated overseas intermediaries |
| (e) | has systems to comply with FATF Standards, PMLA 2002 and SEBI circulars |
| (f) | is fit and proper under Schedule II of the SEBI (Intermediaries) Regulations, 2008 |
| (g) | meets any other SEBI criteria |
SEBI may also approve an India-regulated entity with sufficient custodial experience, in the interest of market development, if it is registered as a participant and custodian and has a tie-up with an AD Category-1 bank.
Engagement. Each FPI must engage a DDP, and at all times the DDP and the custodian of the FPI must be the same entity.
A worked example
Illustrative - names invented; the steps are the workbook's.
Maple Pension Plan, a pension fund resident in a country whose regulator signs the IOSCO MMoU, wants to invest in Indian listed equity.
- It approaches Bank X, which is a SEBI-registered DP and custodian, an RBI-authorised AD Category-1 bank, with branches in several countries - so it qualifies as a DDP.
- Maple fills the Common Application Form on NSDL's FPI Monitor. The same form serves for FPI registration, PAN allotment and KYC for bank and demat accounts.
- Bank X, as DDP, checks the eligibility conditions - not a resident Indian, not an NRI/OCI, IOSCO/bilateral MoU jurisdiction, not on the UN sanctions list or an FATF-flagged jurisdiction, fit and proper.
- As a pension fund, Maple falls in Category I.
- Bank X grants registration on the portal; the certificate is generated; PAN is allotted through the portal's link with the Income Tax Department.
Could Maple register through Bank X but keep its securities with Custodian Y? No. The DDP and the FPI's custodian must be the same entity at all times. If Maple wants Custodian Y, Custodian Y must also be its DDP.
Why NISM asks about it
Chapter 12 (Foreign Portfolio Investors, 2% weightage) is short but almost entirely examinable definitions. Its review questions ask exactly this: the DDP and the ___ of the FPI shall be the same entity (custodian of securities), and which conditions an applicant must meet to be a DDP (all of: multinational presence, AD Category-1 bank, SEBI-registered custodian). Chapter 4 adds that for FPI accounts the DP must obtain SEBI registration details and the registration certificate.
Common exam traps
- The DDP grants FPI registration on behalf of SEBI - the applicant does not apply to SEBI directly.
- DDP and custodian must be the same entity - not the stock broker, banker or RTA.
- All three: DP, SEBI-registered custodian and AD Category-1 bank, plus multinational presence.
- The alternative route (India-regulated entity with custodial experience) still needs registration as participant and custodian and a tie-up with an AD Category-1 bank.
- FPI regime began June 1, 2014; the current regulations are of 2019, and the 2014 regulations are repealed.
- The CAF covers three things: FPI registration, PAN, and KYC for bank and demat accounts.
Where this is taught
- Series II-A · Chapter 11: Depository Servicesintroduced here
- Series VI · Chapter 12: Foreign Portfolio Investors(FPI)introduced here
- Series III-C · Chapter 11: SEBI (Foreign Portfolio Investors) Regulations, 2019introduced here
Related 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.
- Category-I FPIThe first of the two classes of Foreign Portfolio Investor under SEBI's 2019 FPI Regulations: governments and related investors, pension and university funds, and appropriately regulated entities and funds.
- Category-II FPIThe residual class of Foreign Portfolio Investor under SEBI's 2019 FPI Regulations: everyone not eligible for Category I, such as corporate bodies, family offices, individuals, charities and unregulated funds.
- 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.
- 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.
- Common Application FormThe single electronic form on NSDL's FPI Monitor portal covering FPI registration with SEBI, PAN allotment and KYC for opening a bank and demat account, replacing three separate applications.
- Certificate of registrationThe 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.
- FPI MonitorThe NSDL electronic portal (www.fpi.nsdl.co.in) where FPI applicants file the Common Application Form, DDPs grant registration and the FPI Registration certificate is generated.
- SWAGAT-FISingle Window Automatic and Generalised Access for Trusted Foreign Investor: government and government-related investors and public retail funds, freed from the FPI aggregate 50% NRI/OCI/RI limit.
- Foreign Portfolio InvestorAn entity established or incorporated outside India that proposes to invest in India, registered under the SEBI (Foreign Portfolio Investors) Regulations, 2019 as Category I or II.
- Foreign Portfolio InvestmentInvestment by a person resident outside India in an Indian company that stays under 10% of paid-up capital — above that, the same holding counts as Foreign Direct Investment instead.