What is a depository participant?
The SEBI-registered agent of a depository through which you open and run a demat account.
A depository participant (DP) is the firm through which you open and run a demat account. India has two depositories, NSDL and CDSL, which hold securities in electronic form. Investors do not deal with them directly: they deal with a DP, which is the depository's SEBI-registered agent. Your bank or stock broker is usually your DP.
Think of the depository as a bank for securities and the DP as its branch. The DP opens your account, carries out your instructions, sends you statements and handles your requests. The one thing you can take straight to the depository is a grievance.
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Who is who in a demat account
- Depository
- Holds securities in electronic book entry form and records who owns them. Once shares are dematerialised, the depository is the registered owner in the company's books, holding them as a custodian.
- Depository participant (DP)
- An agent of the depository registered with SEBI, through which investors get depository services.
- Beneficial owner (BO)
- The investor whose securities sit in the demat account. All benefits of ownership, such as dividends, bonus and rights, go to the BO.
- Issuer and RTA
- The company issuing the securities and its registrar and transfer agent, which connects the issuer to the depository for demat requests and corporate actions.
Who can register as a DP
Regulation 35 of the SEBI (Depositories and Participants) Regulations, 2018, as amended up to November 22, 2025. The applicant must also be eligible for admission by the depository, have adequate systems and trained staff, and be a fit and proper person.
| Category | Extra condition in the regulation |
|---|---|
| Public financial institution | None stated |
| Scheduled bank, or a foreign bank operating in India with RBI approval | None stated |
| State Financial Corporation, or a financial services institution promoted by any of the above | None stated |
| SEBI-registered custodian | None stated |
| Clearing corporation or clearing house of a stock exchange | None stated |
| SEBI-registered stock broker | Net worth of ₹5 crore (raised in steps after the 2022 amendment); a self-clearing member meeting the Stock Brokers Regulations net worth also qualifies |
| Non-banking finance company | Net worth of at least ₹50 lakh to act only for itself; an additional ₹50 crore to act for others |
| Registrar to an issue or share transfer agent | Net worth of at least ₹10 crore and SEBI registration |
What every DP must do for its clients
Regulations 58 to 63.
- checkSign an agreement with the beneficial owner, in the form the depository's bye-laws specify, before acting for them.
- checkOpen a separate account for each BO and keep each client's securities apart from other clients' and from the DP's own.
- checkMove securities into or out of an account only on the BO's instruction, and confirm the transfer to the BO.
- checkSend statements of account at the frequency and in the form the agreement provides.
- checkOffer the option to nominate a person to receive the securities on death, and a person to operate the account if the BO is incapacitated.
- checkAllow the BO to transfer or withdraw securities as the agreement provides.
- checkStay continuously connected electronically to each depository it serves, and review its internal systems and controls.
Free account, this exam preselected.
Services you get through a DP
- check_circleOpening and closing demat accounts
- check_circleDematerialisation (paper certificates to electronic form) and rematerialisation (back to paper)
- check_circleDelivering and receiving securities for exchange trades, and off-market transfers between accounts
- check_circleReceiving IPO allotments and non-cash corporate benefits such as bonus and rights shares
- check_circlePledging securities, and freezing an account for debits, credits or both
- check_circleHolding mutual fund units, bonds and government securities in the same account
Basic Services Demat Account (BSDA)
A lower-cost demat account for individuals. You can hold one BSDA, as first or sole holder, if you have no other demat account as first holder and your holdings stay within ₹10 lakh. Annual maintenance charges are nil up to ₹4 lakh and at most ₹100 between ₹4 lakh and ₹10 lakh. Under a SEBI circular of June 28, 2024, new individual accounts are opened as BSDA where eligible, and the holder can opt out.
How Series VI tests this
Expect role questions ('who is the registered owner of dematerialised shares?' The depository. 'Who is the beneficial owner?' The investor), eligibility questions on the DP categories and net worth figures, and obligation statements such as 'a DP may transfer securities on the instruction of the stock broker'. That one is false: only the BO's instruction counts.
The common trap is confusing the depository's role with the DP's. The depository holds and records; the DP is the investor's point of contact and acts only through the depository system.
FAQs
What is a depository participant?expand_more
An agent of a depository (NSDL or CDSL), registered with SEBI, through which investors open demat accounts and use depository services. Banks, stock brokers and custodians are common DPs.
What is the difference between a depository and a depository participant?expand_more
The depository holds securities electronically and maintains ownership records. The DP is the intermediary that opens your account and carries out your instructions on the depository's system.
Who can become a depository participant?expand_more
Only entities in the categories Regulation 35 lists, such as banks, financial institutions, custodians, clearing corporations, stock brokers, NBFCs and registrars and transfer agents, subject to the net worth conditions and SEBI registration.
Can a DP move my shares without my instruction?expand_more
No. Regulation 59 allows a DP to register a transfer to or from your account only on receipt of your instructions, and every entry must be supported by an instruction from you.
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