Trade at flat Rs. 20/order | Open free* Demat & Trading Account Now Open Account

Due to advancements in technology, investing in the stock market has become entirely digital. At the core of this modern system are depositories and their intermediaries, known as Depository Participants (DPs).

 

If you are an investor or considering opening a Demat account, understanding what a DP is and how it functions is crucial. This guide explores DP’s role, the services it offers, associated charges, and its importance within the Indian securities ecosystem.

Understanding a Depository Participant (DP)

A Depository Participant is an agent or intermediary registered with one or both central depositories (NSDL/CDSL) to offer Demat account services to investors. Think of the DP as the ‘gateway’ between you and the central depository.

DPs may be banks, brokers, financial institutions, or other entities authorised by the Securities and Exchange Board of India (SEBI). When you open a Demat account, you do so through a DP, which maintains your account and provides a range of services.

Understanding Depositories and Their Function

A depository is a centralised entity that holds securities such as stocks, bonds, mutual funds, and other financial instruments in electronic form on your behalf. This eliminates the need for physical share certificates, reducing risks like loss, theft, or forgery.

In India, there are two main central securities depositories:

  • National Securities Depository Limited (NSDL)

  • Central Depository Services Limited (CDSL)

     

Both NSDL and CDSL maintain electronic records of securities ownership and facilitate seamless trading, settlement, and transfer of these securities.

How Depository Participants Work

While depositories serve as the digital vault for your securities, DPs orchestrate the day-to-day operations. The interaction between you, DP, and the central depository works as follows:

  1. Account Opening: You can open a Demat account through a Depository Participant by completing KYC formalities and documentation.

  2. Dematerialisation: Submit physical share certificates to the DP to convert them into electronic form. The DP coordinates with the depository and registrar to update your holdings.

  3. Transaction Processing: When buying or selling securities, the DP acts as the custodian, ensuring that securities move electronically into the Demat account

  4. Maintenance and Records: The DP provides periodic holding statements and transaction reports

  5. Corporate Actions: The DP manages entitlements from companies and facilitates investor participation in corporate decisions

     

DPs ensure your holdings are secure and transactions compliant with regulatory requirements.

Depository Participant Charges

DP charges are fees levied upon debit of securities from your Demat account. These charges are distinct from brokerage fees and other statutory taxes like Securities Transaction Tax (STT) or GST. They typically consist of a fixed depository fee and an additional charge set by the specific DP. These may include:

Charge Type

Description

Annual Maintenance Charge (AMC)

Recurring fee for maintaining the Demat account

DP Transaction Charges

Fees per securities transaction (buy/sell)

Depository Fees

Charged by CDSL and NSDL per transaction

Other Service Charges

Charges for statement generation, rematerialisation, etc.

All charges are subject to Goods and Services Tax (GST) as per government regulations.

Role of Depository Participants in Investor Protection and Compliance

Apart from facilitating transactions, DPs play a vital part in upholding regulatory standards and preventing fraud. DPs are responsible for ensuring investor protection through:

  • Maintaining up-to-date KYC and investor details in compliance with SEBI guidelines.

  • Providing transparent records of holdings and transactions.

  • Offering grievance redressal mechanisms for investor complaints.

  • Facilitating electronic voting (e-voting) and participation in shareholder meetings.

  • Implementing robust data security measures to protect investor information.

Depository Participant vs. Stockbroker

While both Depository Participants (DPs) and stockbrokers are crucial for you as an investor, they serve distinct functions. Check out how they distinguish from each other below:

Basis

Stockbroker

Depository Participant (DP)

Primary Function

Helps you buy and sell securities in the market

Acts as a link between you and the depository, holding and managing your securities in an electronic (Demat) account

Role in Trading

Executes your trades, offers market insights, and provides investment advice

Facilitates the movement of your securities, manages your Demat account, and ensures trades are settled by connecting you to the depository

Type of Account

Provides a trading account for buying and selling

Provides a Demat account for holding securities electronically

Relationship with Depositories

Interacts with depositories for trade settlement

Directly interacts with depositories (like NSDL or CDSL) to manage your Demat accounts and transfer securities

Asset Ownership

Helps you gain or transfer ownership of securities in the market

Safeguards your ownership of securities held in Demat form and facilitates their transfer through your Demat account

Regulatory Oversight

Regulated by the Securities and Exchange Board of India (SEBI)

Regulated by SEBI and acts as an agent of the depository for maintaining Demat accounts

Charges

Charges brokerage fees for your buy and sell transactions

Charges DP fees for maintaining your Demat account and facilitating security transfers. They may also have other account-related fees

Difference Between a Depository and Depository Participant

While both depositories and depository participants (DPs) are integral to the dematerialised trading system, they operate at different levels. Check out their distinctions below:

Basis

Depository

Depository Participant (DP)

What It is

The central hub that holds and maintains all your securities in electronic form

An authorised entity that connects you to the depository and offers its services

Primary Function

Acts as the custodian of securities, handles electronic settlements, and processes corporate actions (like dividends or bonuses)

Helps you open Demat accounts, settles your trades, and provides various account services

Examples

NSDL and CDSL in India

These are typically your brokerage firms, banks, or other financial institutions that are linked to a depository

Regulatory Oversight

Primarily regulated by the Securities and Exchange Board of India (SEBI)

Regulated by both the depository they're associated with and SEBI

Other Functions

Holds securities electronically, ensures that trades settle smoothly, and handles corporate action

Facilitates opening Demat accounts, ensures your trades are settled, and sends you account statements

Interface

You generally don't deal directly with the depository

You'll directly interact with your DP for all your Demat account needs

Conclusion

Depository Participants form the critical link between investors and the central securities depositories, enabling efficient electronic holding and transfer of securities. They offer a range of essential services that support modern trading, regulatory compliance, and investor protection in India’s capital markets. Understanding their role helps investors manage their portfolios with greater confidence and clarity.

Disclaimer

This content is for educational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.

Frequently Asked Questions

What is a Depository Participant?

It is an intermediary registered with a central depository that provides a Demat account and securities-related services to investors.

How to open a Demat account through a DP?

Select the Depository Participant, complete KYC, submit documents to your chosen DP, and fill out account opening forms to open a Demat account.

Can a DP be a bank or broker?

A bank, financial institution, broker, custodian or any other eligible entity under the SEBI (Depositories and Participants) Regulations, 2018, can be a DP. 

What charges do DPs levy?

Charges include Account Maintenance Charges, DP transaction fees, dematerialisation fees, etc.

What services does a DP provide?

A DP provides the following services:

  • Account opening

  • Dematerialisation

  • Transaction facilitation

  • Holding statements

  • Corporate actions

Home
active_tab
Loan Offer
active_tab
CIBIL Score
active_tab
Download App
active_tab