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ADR and GDR

A Depository is a company that holds shares in electronic form, eliminating the need for physical certificates, with two main types in India: NSDL and CDSL. The depository system enhances efficiency in managing financial assets, while depository participants act as intermediaries between investors and depositories. Additionally, Depository Receipts allow investors to hold shares in foreign companies, catering to the growing demand for international investment diversification.

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78 views8 pages

ADR and GDR

A Depository is a company that holds shares in electronic form, eliminating the need for physical certificates, with two main types in India: NSDL and CDSL. The depository system enhances efficiency in managing financial assets, while depository participants act as intermediaries between investors and depositories. Additionally, Depository Receipts allow investors to hold shares in foreign companies, catering to the growing demand for international investment diversification.

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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

WHAT IS A DEPOSITORY?

A Depository is a Company where the shares of an individual are held in the electronic form, at the request of the shareholder. This eliminates the physical form of holding. There are two sorts of depositories in India: National Securities Depository Limited(NSDL) and Central Depository Service (India) Limited(CDSL).

WHAT IS THE DEPOSITORY SYSTEM? The bank holds our funds in the electronic form and subsequently debits or credits the account, depending on our issuance or deposit of cheques. Similarly, our financial assets such as Equity Shares can be held in the same manner. Alternatively, we can deposit your shares in an organization called as a Depository, which holds our shares in an electronic form.

OBLIGATIONS OF A DEPOSITORY ?

The depository is obligated to : Maintain the client holdings, Enable DEMAT and REMAT of eligible securities, Disbursement of corporate benefits, Effect settlement of securities traded on the exchanges Off-market trades through book entry transfers, Provide for pledging/hypothecation of eligible securities.

PHYSICAL SHARES
1. The risk of loss, mutilation is common. 2. Handling of a large number of physical certificates. 3. Bad deliveries may happen. 4. Stamp duty is payable. 5. In loans against shares, banks usually charge a higher interest rates and margin money. 6. Settlements in the physical segment is lengthy and tedious job.

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DEPOSITORY SYSTEM-

1. The risk of loss, mutilation is completely removed. 2. Handling of certificates is ended in the Depository mode. 3. no bad delivers. 4. no stamp duty is payable. 5. banks usually charge a lower interest rate and margin money.

6. Settlements in the electronic segment has proven to be far more efficient and convenient compared to physical shares.

WHAT IS A DEPOSITORY PARTICIPANT (DP)-

The entities which act as an intermediaries in clearing and settlement process between investors and depositories are called as depository participants. A depository participant gets registered with the depository as per the SEBI regulations for offering DP services.

WHAT IS A DEPOSITORY RECEIPT-

It is a type of negotiable financial security, Traded on a local stock exchange, Represents a security usually in the form of equity, that is issued by a foreign publicly listed company, It is a physical certificate, Allows investors to hold shares in the equity of other countries. The most common types of DRs are the 1. American Depositary Receipt(ADR). 2. Global Depository Receipt(GDR).

WHY DR SThe increasing demand for Depositary Receipts is driven by The desire of individual and institutional investors to diversify their Portfolios, Reduce risk and Invest internationally in the most efficient manner possible.

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