FREQUENTLY ASKED QUESTIONS

1 FREQUENTLY ASKED QUESTIONS ON DEPOSITORY SYSTEM Disclaimer:TheseFAQsarenottheinterpretat ionoflawbutprovide onlyasimplisticexplanationofterms/concep tsrelatedtothe , , pleaserefertotheActs/Regulations/Guideli nes/Circularsappearing under the Legal Framework Section. Understanding Depository System 1. What is a Depository? Adepositoryisanorganizationwhichholdssec urities(likeshares, debentures,bonds,governmentsecurities,mu tualfundunitsetc.)of investorsinelectronicformattherequestoft heinvestorsthrougha transactions in securities. is the minimum net worth required for a depository? The minimum net worth stipulated by SEBI for a depository is crore. is a depository similar to a bank? Itcanbecomparedwithabank, bank - depository analogy is given in the following table: BANK DEPOSITORY - AN ANALOGY BANK DEPOSITORY Holds funds in an account Holds securities in an account Transfers funds between accounts on the instruction of the account holder Transfers securities between accounts on the instruction of the BO account holder Facilitates transfer without having to handle money Facilitates transfer of ownership without having to handle securities Facilitates safekeeping of money Facilitates safekeeping of securities 4.

2 How many Depositories are registered with SEBI? (NSDL)andCentralDepositoryServices(India )Limited(CDSL)are registered with SEBI. Their addresses are: National Securities Depository Limited (NSDL) Trade World, A wing, 4th & 5th Floors, Kamala Mills Compound, Lower Parel, Mumbai 400013 Tel: (022) 2499 4200 (60 lines) Fax: (022) 24976351 Email: Central Depository Services (India) Limited (CSDL) Phiroze Jeejeebhoy Towers, 16th Floor, Dalal Street Mumbai 400001 Phone: 91-22-22723333 Fax: 91-22-22723199/22722072 Email: is a Depository Participant (DP)? ADPisanagentofthedepositorythroughwhichi tinterfaceswiththe investor and provides depository services. can be a DP? Publicfinancialinstitutions,scheduledcom mercialbanks,foreignbanks operatinginIndiawiththeapprovaloftheRese rveBankofIndia,state financialcorporations,custodians,stock-b rokers,clearingcorporations/ clearinghouses,NBFC sandregistrartoanissueorsharetransferage nt complyingwiththerequirementsprescribedby SEBI canberegisteredas depository services can be availed through a DP.

3 Is an Issuer? "Issuer" means any entity such as a corporate / state or central government Organizationsissuingsecuritieswhichcanbe heldbydepositoryin electronic form. is an ISIN? ISIN(InternationalSecuritiesIdentificati onNumber)isaunique12-digit alphanumericidentificationnumberallotted forasecurity( INE383C01018).Equity-fullypaidup,equity- partlypaidup,equitywith differentialvoting/dividendrightsissuedb ythesameissuerwillhave different ISINs. is dematerialization (demat)? Dematerializationistheprocessbywhichphys icalcertificatesofan investorareconvertedtoanequivalentnumber ofsecuritiesinelectronic form. is Rematerialization (remat)? Rematerializationistheprocessofconvertin gsecuritiesheldinelectronic form in a demat account back in physical certificate form. is a Registrar and Transfer Agent (RTA)?

4 Issueranddepositoryforprovidingservicess uchasdematerialization, rematerialization, initial public offers (IPO) and corporate actions. is registered owner of Securities? Whensecuritiesofacompanyareheldinphysica lformbyaninvestor,his/ hernameisrecordedinthebooksofthecompanya sa'RegisteredOwner' , thedepositorybecomes'Registeredowner"int hebooksofthecompany and investor's name is removed from books of the company. is a Beneficial Owner (BO)? Allthebenefitsofthedematerializedsharesa regiventotheactualinvestor sincethedepositoryholdsthesecuritiesinaf iduciarycapacityonbehalfof theinvestorswhohaveopenedademataccountwi ththedepository. Hence, the actual investor is the "Beneficial Owner" (BO) of the securities. many DPs are registered with SEBI? AsonDecember21,2012,atotalof866 DPs(289 NSDL,577 CDSL)are registered with SEBI.

5 In the capital market? AspertheavailablestatisticsatBSEandNSE, ,inviewoftheconvenienceof tradingindematerialisedmode,itisadvisabl etohaveabeneficialowner (BO) account for trading at the exchanges. However,tofacilitatetradingbysmallinvest ors(maximum500shares, irrespectiveoftheirvalue)inphysicalmodet hestockexchangesprovidean additionaltradingwindow,whichgivesonetim efacilityforsmallinvestors these shares has to demat such shares before further selling. can I avail the services of a Depository? aninvestorwantstoavailtheservicesoffered bythedepository,the investor has to open an BO account with a DP. are the services provided by a Depository? Followingservicesareprovidedbyadepositor ytothebeneficialownersbut of course, through a depository participant: Opening a demat account; Dematerialization, form, Rematerialization, in a BO account into physical form; Maintainingrecordofsecuritiesheldbythebe neficialownersinthe electronic form; Settlementoftradesbydeliveryorreceiptofs ecuritiesfrom/inBO accounts; Settlement of off-market transactions between BOs; Receivingelectroniccreditinrespectofsecu ritiesallottedbyissuers under IPO or otherwise on behalf of demat account holders.

6 Receivingnoncashcorporatebenefitssuchasa llotmentofbonus andrightssharesoranyothernon-cashcorpora tebenefitsgivenby the issuers in electronic form on behalf of its demat account holders, Pledgingofdematerializedsecurities&facil itatingloansagainst shares, Freezing of the demat account for debits, credits, or both are the benefits of availing depository services? The benefits are enumerated below: A safe and convenient way to hold securities, Immediate transfer of securities, No stamp duty on transfer of securities, Eliminationofrisksassociatedwithphysical certificatessuchasbad delivery, fake securities, delays, thefts etc. Reduction in paperwork involved in transfer of securities, Reduction in transaction cost, No odd lot problem, even one share can be traded, Nomination facility, ChangeinaddressrecordedwithDPgetsregiste redwithall companiesinwhichinvestorholdssecuritiese lectronically eliminating the need to correspond with each of them separately, TransmissionofsecuritiesisdonebyDPelimin atingcorrespondence with companies, Automaticcreditintodemataccountofshares, arisingoutof bonus/split/consolidation/merger etc.

7 Holdinginvestmentsinequityanddebtinstrum entsinasingle account. Account Opening can one open an account? FirstaninvestorhastoapproachaDPandfillup anaccountopeningform. Theaccountopeningformmustbesupportedbyco piesofanyoneofthe approveddocumentswhichserveasproofofiden tityandproofofaddress original at the time of account opening from April 01, 2006. Allapplicantsshouldcarryoriginaldocument sforverificationbyan authorized official of the DP, under his signature. InvestorhastosignanagreementwithDPinadep ositoryprescribed standardformat,whichgivesdetailsofrights anddutiesofinvestorandDP. DPshouldprovidetheinvestorwithacopyofthe agreementandschedule systemandgiveauniqueaccountnumber,whichi salsocalledBOID (BeneficialOwnerIdentificationnumber)and usedforallfuture transactions.

8 A demat account be opened directly with depository? opened only through a DP of depository. a demat account be opened in the name of joint holder? ' and two joint holders. a demat account be opened in the name of trust? registeredunderthePublicTrustAct1860/Soc ietiesRegistrationAct/B aprivateorunregisteredtrustthenadematacc ountshallbeopenedinthe trustees,thentheywillhavetodecideinwhose namethedemataccount will be opened. a demat account be opened in the name of HUF? ,sharescanbeheldinthenameofexistingKarta on behalf of HUF. (NRI)needanyReserveBankofIndia (RBI) permission to open a demat account? , creditsanddebitsfromdemataccountmayrequi regeneralorspecific permissions as the case may be, from designated authorized dealers.

9 Nomination compulsory for a demat account? SEBI hasmandatedthatnominationshouldberecorde dforademat account holder(s) should give a written and signed declaration to the effect. multiple accounts be opened by an investor? ,investorhas tostrictlycomplywithknowyourclient(KYC)n ormsincludingproofof identity,proofofaddressrequirementsassti pulatedbySEBI andalso time of opening of demat account. differentownershippatternssuchassecuriti esownedindividually and securities owned jointly with others? certificateisintheindividualnameandanoth ercertificateisjointlywith somebody, two different accounts would have to be opened. samecombinationofnames,butthesequenceofn amesis 'A'asfirstholderand'B'as secondholderandothersetofcertificateswit h'B'asfirstholder and 'A' as the second holder?

10 Inthiscasetheinvestormayopenonlyoneaccou ntwith'A'&'B'asthe accountholdersandlodgethesecuritycertifi cateswithdifferentorderof toeffectchangeintheorderofnamesaswellasd ematerialisethe securities. BO account charges maintenance of a BO account? SEBI hasrationalisedthecoststructurefordemate rialisationbyremoving accountopeningcharges,transactioncharges (forcreditorbuy transactionsofsecurities),custodycharges andaccountclosingcharges. ,investors are required to pay the charges towards, - Dematerialisation and Rematerialisation of their securities - Annual account maintenance charges - Transactions fees (only for sell transactions) The DP may revise the charges by giving 30 days notice in advance. Further,SEBI hasalsoadvisedtheDPstosubmittotheirDepos itorytheir tariff/chargestructureeveryyearlatestby3 0thAprilandchangesmade therein,alongwiththedateofeffecttoenable theinvestorstohavea information received by the depositories is put up on their websites.