A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities.
A depository interacts directly with the participants registered with the Stock Exchange. If an investor wants to avail the services offered by the depository, the investor has to open an account through a participant. This is similar to opening an account with a bank in order to utilize the bank's services.
- Having a De-Mat account is mandatory to trade in the secondary market.
- Having a De-Mat account is a vital and a mandatory requirement to apply for an IPO.
- A CDS account is the safest way to hold securities, especially compared to holding physical certificates. De-Mat accounts eliminate the risk of counterfeiting, loss and theft which could be inherent when dealing with physical certificates.
- This averts the costs involved in the process of applying for new share certificates in case of loss/theft.
- De-Mat accounts facilitates fungibility for the securities. Once the shares are deposited in the De-Mat account it can be traded or transferred as partial quantities, not the total lot held in the physical certificate.
- It is the most convenient way to hold securities since any number of listed securities (inclusive of equity, corporate debt and closed ended funds) can be dematerialized and held in one account.
- De-Mat account is a useful method of consolidation of portfolios.
- Increases the efficiency in transfer of securities, since the paperwork involved is reduced and the process is streamlined.
- Transmission of shares can be done smoothly through opening of joint CDS accounts. In the event of one of the holders is passed away, the shares will be transferred to the CDS account holders of the surviving parties with a minimal documentation requirement.
- Change of the shareholder name, address or bank details can be notified to all listed companies with one single instruction submitted through any CDS Participant with whom the shareholder is registered.
- De-Mat accounts provides transparency for the securities transactions since the investors has the ability to monitor their transactions through the CDS SMS alert service.
- Opportunity of benefiting through more value added services such as CDS eStatement facility, which facilitates updating the investors of their monthly transactions and balances in a fast, secure and convenient manner.
- Account holders have the ability to register and view their CDS account and get entitled for a range of services via the CDS eConnect facility.
- De-Mat accounts protects the investor rights by speeding up the share issuance process arising out of splits, scrip dividends or consolidation of securities be facilitating automatic credit of shares into the De-Mat accounts.
- De-Mat accounts provides the opportunity for the shareholders to participate in the corporate actions such as sub-divisions and scrip dividends and receive shares to their CDS accounts instantaneously.