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Question
Write notes on Importance of Depository system.
Solution
The importance of the depository system is explained as follows:
- Eliminates huge volume of paperwork: A significant amount of paperwork was required for the trading, transfer, and transmission of securities in systems that were paper- or scrip-based. Everything in the depository system is done electronically. As a result, the depository system reduces the huge amount of paperwork associated with systems that rely on paper (scrip).
- Use of state of the art technology: Modern technology is used in the depository system to enable quick transfers and transmissions of securities. The investors' demat accounts are automatically and instantly credited with dividends, interest, and other perks, as well as bonus shares and rights shares. Depository systems therefore provide opportunities for paperless trading.
- Eliminates storage and handling of certificates: Maintaining records of transfer documents or documentation pertaining to the sale and purchase of shares is not necessary in a depository system. The computer has all of the records of the transfers of securities as well as other relevant data saved and kept. As a result, handling and storing certificates is eliminated by the depository system.
- Reduces cost and efforts involved in the storage and handling of physical securities: The depository system reduces the expense and labor associated with handling and storing certificates. Additionally, stamp duty, postage, courier, registration, and other costs are saved by using this technique. Electronic records of all transactions pertaining to the purchase, sale, and transfer of securities are kept and preserved by the depository, an electronic system.
RELATED QUESTIONS
In physical mode, securities are held in ______ form.
Select the correct answer from the options given below and rewrite the statement.
In Depository System, securities are held in ______ form.
Depository Act was passed in __________.
Select the correct answer from the options given below and rewrite the statement.
______ has to pay charges to maintain Demat Account.
Match the pairs.
| Group ‘A' | Group ‘B' |
| a) Bad Delivery | 1) 1956 |
| b) Depository Act | 2) A 12 digit number/code. |
| c) ISIN | 3) Connects Government and Bank. |
| d) Depository participant | 4) Second Depository in India. |
| e) CDSL | 5) The Issuer Company. |
| f) Depository | 6) Problem faced in physical mode. |
| g) Beneficial owner | 7) A 10 digit number/code. |
| 8) Connects Depository and Investor. | |
| 9) First Depository in the world. | |
| 10) Coustodian of securities in electronic form. | |
| 11) Problem faced in electronic mode. | |
| 12) 1996 | |
| 13) Government Organisation. | |
| 14) The Investor. |
Write a word or a term or a phrase which can substitute the following statement.
The Agent of the Depository.
State whether the following statement is true or false.
India has a multi Depository System.
Find the odd one.
Answer in one sentence.
Give examples of action termed as corporate action.
Correct the underlined word and rewrite the following sentence.
Electronic mode of holding securities is risky.
Correct the underlined word and rewrite the following sentence.
Banking system leads to a scrip less capital market.
Correct the underlined word and rewrite the following sentence.
India has a single Depository system.
Explain any four advantages of Depository system to Investor.
Justify the following statement.
Depository system is very similar to the Banking system.
State benefits of the depository to Investors.
Justify the following statement.
Depository System has a very important role to play in the successful functioning of the capital market.
Explain any four advantages of depository system to the company.
Explain the following term/concept:
Depository system
