What Is A Depository Participant?
An investor, new to the stock market, needs to approach a depository participant to open a demat account for purchasing shares.
This is a series of explainers to educate and inform new investors. In association with Dun & Bradstreet India as knowledge partner.
Depository Participant: Definition, Meaning & Basics
Depository participants are the agents of a depository such as NSDL or CDSL. They are given license to operate by a depository, under the provisions of The Depositories Act, 1996.
An investor, new to the stock market, needs to approach a depository participant to open a demat account. Shares purchased by the investor are held in that account with the depository participant, but the investor remains the sole beneficial owner of the shares. Whenever there is a buy or sell transaction, the depository participant credits or debits the demat account accordingly.
A depository participant offers several services, such as pledge and unpledge of shares, corporate action handling, etc. Brokers also provide services of depository participant for the purpose of settlement of shares.
Depository participants earn income by charging fees to their clients for services such as account opening, transfer of shares and pledging of shares. Some may also charge an annual maintenance charge.
Typically, banks, financial institutions and broking firms act as depository participants.