Depository and custody

107 terms · each links to a full explanation with a worked example and the exam traps

Aggregate Escrow Demat AccountA separate demat account an AIF opens solely to hold demat units for investors who have not yet given their demat details; units move out to the investor within 5 working days once details arrive.
Agreement numberThe optional identifier a pledgor quotes across multiple pledge instructions drawn under a single loan agreement, letting the DP link related pledges to one underlying contract with a lender.
Annual Maintenance ChargesThe yearly fee a depository participant charges to keep your demat account running, linked to the value of your holdings. In a Basic Services Demat Account it can be nil for small holdings.
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.
Basic Services Demat AccountA low-cost demat account for a small investor who holds only one demat account and whose holdings stay within Rs 2 lakh of debt and Rs 2 lakh of non-debt securities — its annual charge can be nil.
Beneficial ownerThe investor who owns dematerialised securities for every practical purpose — the depository is the registered owner on the company's books, but the dividends, bonus, rights and votes are the investor's.
Beneficial owner accountThe ownership demat account investors open with a DP to hold and trade securities in electronic form, distinct from a broker's clearing member account, which only holds securities in transit.
Book entryRecording ownership and transfer of securities as electronic entries in a depository's records, instead of on paper certificates that move physically between parties.
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.
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.
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.
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.
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.
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.
Check digitThe 12th and final character of an ISIN, computed by the modulus 10 Double-Add-Double method, which mathematically validates that the ISIN is genuine.
Clearing member accountThe special demat account a broker or custodian opens to settle exchange trades, through which clients' sold shares go to the clearing corporation and bought shares arrive; also called the pool account.
Client Master ReportThe depository-system report of a demat account's recorded details - holders, address, bank, contact and other static data - sent to the client on account opening and used as proof of account details.
Closure dateThe date entered on a Pledge Request Form indicating the intended duration of a pledge or hypothecation, after which the pledgee's DP must confirm creation of the pledge, except in NSDL where this rule does not apply.
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.
Consideration AmountThe value of an off-market transfer or pledge invocation captured in the depository system from the transferor's DIS, on which stamp duty is calculated and collected before the transfer executes.
Custodial agreementThe legally binding contract between an AIF and its custodian, fixing the scope of custody services, the parties' mutual obligations and the commercial 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.
Custodian independence testThe SEBI rule barring a custodian from serving a mutual fund if its sponsor or associates control 50% or more of the custodian's voting shares, or 50% or more of its directors.
DefacingMarking a physical certificate "Surrendered for Dematerialisation" with the DP name, DP-ID and Client-ID, and punching two holes at the top, before it is sent to the Issuer or R&T Agent — a safeguard against misuse.
Demat accountAn account with a depository participant of NSDL or CDSL that holds your shares and other securities in electronic form. Since April 1, 2019, shares must be in demat form to be transferred.
Demat Debit and Pledge InstructionA limited, optional authorisation letting the broker (or broker-DP) debit a client's demat account only for settlement delivery, margin pledges, exchange MF orders and open-offer tenders - in place of a PoA.
DematerialisationConverting securities held as physical certificates into book-entry holdings: the certificates are defaced, mutilated and surrendered to the issuer, and an equivalent quantity is credited to the holder's demat account.
Dematerialised unitsAIF unit capital held in electronic form with a depository: every scheme must now issue units in demat only, each carrying its own ISIN against which the NAV is uploaded.
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.
Depository Participant chargesThe fee NSDL or CDSL charges, through a Depository Participant, every time shares are debited from a demat account on a sale — plus GST, and irrespective of how many shares are sold.
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.
De-statementizationConverting mutual fund units held as a physical Statement of Account into electronic form in a demat account, via a Mutual Fund De-statementization Request Form the DP submits to the AMC or RTA.
Distinctive Number databaseThe depositories' central record, under SEBI's June 2015 circular, of the distinctive numbers of listed companies' equity shares — physical and demat — to reconcile issued, listed and demat capital.
DP agreementThe contract between a depository participant and a Category III AIF as beneficial owner, setting out each side's rights and duties for depository services such as dematerialisation.
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.
DRF-GSThe demat request form for government securities, submitted with the physical G-Sec certificates and an RBI Form of Transfer, or with an SGL credit advice to move SGL holdings into the depository.
DRNThe unique number the DP system generates once a dematerialisation request is entered, used to track that request through the Issuer or R&T Agent until it is confirmed or rejected.
easiCDSL's internet facility for viewing a demat account — real-time holdings, instruction status, past transactions and daily portfolio valuation — with no ability to submit debit or credit instructions.
easiestCDSL's internet facility (Electronic Access to Securities Information and Execution of Secured Transaction) through which BOs and CMs submit debits, credits, freezes, pledges and confiscations.
EncumbranceAny charge or restriction over securities in favour of another party - a pledge, lien, non-disposal undertaking or similar - which the depository records and which stops the securities being freely transferred.
Execution dateThe date on which a depository instruction is to take effect: a DIS debit waits till the end of that day for balance and then fails; for allotments and corporate actions, the day credits are made.
First holderThe first-named holder of a joint demat account: all communications, dividend and interest warrants, annual reports and meeting notices go to them, though beneficial ownership vests in all joint holders.
Four-or-more-holder accountA special-procedure demat account for four or more joint holders of the same physical certificate, opened only to dematerialise the holding, restricted from crediting instructions, and closed once demat is complete.
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.
FungibilityIn the depository, securities of the same class carry no distinctive or certificate numbers — every unit is identical to every other and interchangeable, so title is counted in numbers, not in serial numbers.
HypothecationA charge over demat securities where the lender needs the borrower's concurrence to appropriate them — the same book entries as a pledge, with one extra confirmation, and a term used only in NSDL.
IDeASInternet-based Demat Account Statement: NSDL's viewing facility, launched January 1, 2004, showing demat balances and transactions online, not real time, with a delay of at most 30 minutes.
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.
Indemnity BondThe bond a DP executes in favour of the Issuer or R&T Agent when physical certificates confirmed as electronically dematerialised are lost in transit before reaching the Issuer/R&T Agent.
Indivisible securities ruleWhen a nominated percentage split cannot be exactly divided at the ISIN level among multiple nominees, the DP divides what is divisible and gives the remaining indivisible securities to the nominee named first.
Inter-depository transferA transfer of securities from an account in one depository (NSDL or CDSL) to an account in the other, possible because SEBI regulations require the two depositories to be inter-connected.
Invocation Request FormThe form a pledgee submits to its DP to invoke a pledge after the pledgor defaults, moving the securities from the pledgor's pledged balance to the pledgee's free balance without the pledgor's confirmation.
ISINThe 12-character code (ISO 6166) that identifies one specific security in the depository system — country prefix, nine-character basic number and a check digit, as in INE475C01012.
IssuerThe company or body corporate that issued the securities — one of the institutions in the depository system, and the party that signs the tripartite agreement admitting its securities for dematerialisation.
Jumbo lotA single certificate covering an entire rematerialisation request, one of two delivery options a client can choose on the RRF — the other being separate certificates in ordinary market lots.
Legal Entity IdentifierA 20-character alphanumeric code that DPs must capture in a non-individual's demat account, under an RBI direction, to identify parties to large-value payment transactions of Rs 50 crore and above.
LienA creditor's right to keep possession of a debtor's goods or securities until the debt is repaid, unless a contract says otherwise; in the depository, liens are recorded as encumbrances.
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.
Mass shifting facilityThe depository facility that lets a DP move a whole group of client accounts from one DP module or location to another in one go - for example when it opens a new centre - without clients re-opening accounts.
Minor correction in nameA limited fix to how a name is written in a demat account — spelling, expansion of initials, or abbreviation — accepted on an ink-signed request and one identity document, and distinct from an actual change of name.
Multi-depository systemThe Depositories Act, 1996 arrangement under which more than one depository can operate in India, so that no single depository holds a monopoly over the market — currently NSDL and CDSL.
Multilingual CASCDSL's Consolidated Account Statement made available in multiple Indian languages, aimed at wider accessibility for retail investors in rural and semi-urban areas.
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.
Non Disposal UndertakingAn undertaking, typically by a promoter to a lender, not to transfer or alienate specified shares - a negative lien that can be recorded in the depository system as an encumbrance.
NotifierThe person — a joint holder, nominee, legal representative or family member — who tells an intermediary of an investor's death and supplies the death certificate and PAN, starting the demise-reporting process.
NSDLNational Securities Depository Limited, India's first depository, incorporated on 12 December 1995 by IDBI, UTI and the NSE, and one of the two depositories the Depositories Act, 1996 has produced.
Objection memoThe document by which an Issuer or R&T Agent flags a defect in a dematerialisation request, giving the DP 15 days to resolve the objection or supply further information before the request can be rejected.
Odd lotA holding of physical securities smaller than the market's standard tradable lot — a problem the workbook says dematerialisation eliminated by reducing the tradable lot to one unit.
Off-market transactionA transfer of securities between two demat accounts on terms agreed between the parties, settled directly through the depository without a clearing member or clearing corporation.
One ISIN ruleSEBI does not allow a company more than one ISIN for its equity shares unless the amount called and paid differs or the shares carry differential voting rights — all shares under an ISIN must be pari passu.
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.
OSVThe "Original Seen and Verified" offline process by which an intermediary confirms a death certificate, used where it cannot be verified online through the issuing government authority's website.
Partial partition of HUFA split of an HUF's demat holding where only some coparceners seek partition — the Karta transfers securities to those members, their accounts become individual accounts, and the HUF account continues for the rest.
Password UserA SPEED-e access mode that lets a demat account holder submit delivery instructions online but only to a maximum of six pre-notified Clearing Member accounts, unlike a Smart Card/e-Token user who faces no such cap.
PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
Pledged balanceThe status a pledgor's securities show once the pledgee has confirmed the pledge — distinct from the pledgor's free balance, but still legally owned by the pledgor until invocation.
PledgeeThe lender in a pledge or hypothecation — the party who confirms the pledgor's request through its own DP, and who is recorded as beneficial owner of the securities only on invocation.
Pledge Request FormThe standardised form on which a pledgor initiates a pledge, carrying mandatory undertakings from both pledgor and pledgee to comply with the Indian Contract Act and give reasonable notice before invocation.
Pledge sequence numberThe unique number the DP system generates for each pledge or hypothecation request, identifying that transaction for confirmation, closure and invocation even when many pledges exist between the same parties.
Pledge setup balanceThe transient balance a pledgor's securities are shown under, in the depository system, between the pledgor submitting a Pledge Request Form and the pledgee confirming it.
PledgorThe borrower in a pledge or hypothecation — the beneficial owner who offers demat securities as collateral, initiates the transaction through its own DP, and keeps ownership and corporate benefits until default.
Registered ownerThe depository itself, recorded in the issuer's books as the holder of dematerialised securities — while the investor, recorded by the depository as Beneficial Owner, retains all the actual rights and benefits.
RematerialisationThe reverse of dematerialisation — the demat account is debited and the issuer prints fresh physical certificates for the same quantity, to be despatched within 30 days.
Re-pledgeA further pledge of securities already pledged to a Trading or Clearing Member, moving the same margin pledge down the TM-to-CM-to-CC chain without the shares ever leaving the original client's demat account.
RestatementizationThe reverse of De-statementization — converting mutual fund units held electronically back into a paper Statement of Account or certificate, on the Beneficial Owner's own Restatementization Request Form.
Rights and Obligations documentThe document a DP must hand every client, and get an acknowledgement for, before acting for them — its form and content set jointly by SEBI and the DP's own Operating Instructions.
RRNThe reference number generated when a Rematerialisation Request Form is accepted — an abbreviation the workbook reuses, confusingly, for a second, different number in mutual fund restatementization.
SIMPLENSDL's facility letting a password-based SPEED-e user submit a Client-to-Clearing-Member Pool Account transfer instruction from a GPRS-enabled mobile phone.
Smart Card / e-Token UserThe hardware-authenticated way of accessing NSDL's SPEED-e facility, required for any Clearing Member and carrying no cap on the number of accounts an ordinary user can instruct.
SPEED-eNSDL's internet-based facility, launched in September 2001, letting demat account holders and Clearing Members submit delivery instructions directly online instead of on paper.
SPICEThe SPEED-e facility letting a Clearing Member, holding a client's Power of Attorney, submit auto pay-in instructions on the client's behalf, with no paper delivery instruction from the client.
Static databaseThe frozen snapshot of physical shareholder records — names, folio numbers, certificate numbers, distinctive numbers and PAN — that depositories use to validate every fresh dematerialisation request against.
Suspense Escrow Demat AccountA separate demat account a listed company opens to hold securities nobody has claimed — chiefly Letter of Confirmation cases not dematerialised within 120 days — purely on the rightful holders' behalf.
Temporary illiquidityThe workbook's name for the period a rematerialisation request makes securities untradeable — starting the moment the DP accepts the request, not the moment the account is actually debited.
Temporary ISINA new ISIN, frozen for debit, in which a listed company's shares from rights, bonus, merger or capital reduction are first credited, so they cannot be transferred until trading approval is received.
Ten-nominee ruleThe cap of ten nominees a demat account holder may name for a single-holding account, each given a percentage share of the securities that must together add up to 100 percent.
Title transfer collateral arrangementThe now-prohibited practice of transferring a client's securities into a Trading or Clearing Member's own demat account for margin purposes, replaced from August 2020 by the margin pledge mechanism.
TransferThe legal change of ownership of a security in the issuer's records — a step that, before depositories, needed endorsement, a transfer instrument and stamp duty, and today happens by book entry alone.
Transit accountAn NSDL-only holding account, such as a settlement or intermediary account, that must be cleared of balances well before a book closure or record date so the right beneficial owner gets the corporate benefit.
Transmission cum dematerialisationThe combined procedure letting a surviving joint holder remove a deceased holder's name from a physical certificate and dematerialise it in one step, by submitting the Transmission Form together with the DRF.
Transposition cum dematerialisationThe combined procedure letting an investor reorder joint holders' names to match a certificate and dematerialise it into the same account, instead of opening a fresh account for the different name sequence.
UCC mappingThe SEBI-mandated linking of a client's trading-member-allotted Unique Client Code to their demat account, so exchanges and depositories can jointly detect diversion of client securities.
Unilateral closureThe facility letting a pledgee alone close a pledge, with no confirmation or rejection needed from the pledgor or the pledgor's DP.
Unpledge Request FormThe prescribed form on which a pledgor asks its DP to close a pledge and release the securities, which the DP must retain for at least five years along with the PRF and IRF.
Vault ManagerThe SEBI-registered intermediary that stores and safekeeps gold deposited for trading in Electronic Gold Receipts, and coordinates their creation, transfer and extinguishment with the depository.