What is Depository System? What are the features of Depository System in India?

Depository System A depository is an organization which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. India has adopted the Depository System for securities trading in which book entry is done electronically and no paper is involved. The physical form of securities is extinguished and shares or securities are held in an electronic form. Features of Depository System in India: Multi-Depository System: The depository model adopted in India provides for a competitive multi-depository system. A depository should be a company formed under the Companies Act, 2013 and should have been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992. Presently, there are two depositories registered with SEBI, namely: National Securities Depository Limited (NSDL) Central Depository Services Limited (CDSL) Depository services through depository participants: The depositories can provide their services to investors through their agents called depository participants. These agents are appointed subject to the conditions prescribed under SEBI (Depositories and Participants) Regulations, 2018 and other applicable conditions. Dematerialisation: The model adopted in India provides for dematerialisation of securities. This is a significant step in the direction of achieving a completely paper-free securities market. Dematerialization is a process by which physical certificates of an investor are converted into electronic form and credited to the account of the depository participant. Fungibility: The securities held in dematerialized form do not bear any notable feature like distinctive number, folio number or certificate number. Once shares get dematerialized, they lose their identity in terms of share certificate, distinctive numbers and folio numbers. Thus, all securities in the same class are identical and interchangeable. For example, all equity shares in the class of fully paid-up shares are interchangeable.