Prajna Capital - An Investment Guide

In the last decade or so, the stock market has moved towards paperless trading. For investors, who used to burdened with reams of stock certificates, a demat account has become a necessity. Not having a depository or demat account has now become the biggest entry barrier to investing in equities. It is no wonder that more and more entities (commodities futures and spot market) are moving to the dematerialised form of trading. A demat or 'dematerialised' account holds shares in electronic form, thus saving you the bother of holding shares in paper form. DEPOSITORY FUNCTIONS A depository is similar to a bank. It holds shares, which belong to investors, in electronic form. The investor has to open an account with the depository, through a Depository Participant ( DP ). The DP is an intermediary between the depository and the investor. In India, there are two depositories, viz., National Securities Depository and Central Depository Services. A number of banks (HDFC Bank, ICICI Bank...

Some conditions that make it possible for NRIs to buy shares of companies here, and some procedures involved A non-resident Indian ( NRI ) is a citizen or person of Indian origin ( PIO ) who resides outside India. Under the Foreign Exchange Management Act 1999 ( FEMA ), a person who is not a 'person resident in India', as defined under Section 2(V) of the Act is considered as a 'person resident outside India'. A PIO could be a citizen of any country but should have held an Indian passport, his parents or grandparents should have been citizens of India by virtue of the Constitution of India or the Citizenship Act 1955, he should be the spouse of an Indian citizen, or should be a person referred to in sub clause (a) or (b). Investments by PIO in domestic securities are treated in the same as investments by NRIs and require the same approvals, while being eligible for the same exemptions. A NRI or PIO can open a demat account with any depository participant ( D...

Here are outlines of rules governing NRI investments in India Non-resident Indian ( NRI ) means a 'person resident outside India' who is a citizen of India or is a 'person of Indian origin' . Under the Foreign Exchange Management Act, 1999 ( FEMA ), a person who is not a 'person resident in India' , as defined under Section 2 (v) of the Act is considered a 'person resident outside India'. 'Person of Indian Origin' ( PIO ) means a citizen of any country other than Bangladesh or Pakistan, if he at any time held an Indian passport; or, he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or the person is a spouse of an Indian citizen, or a person referred to in sub-clause (a) or (b). An investment by a PIO in Indian securities is treated just as investments by non-resident Indians and requires the same approvals, and enjoys the same exemptions. NRIs can pur...

Is it necessary to have account with the same DP as broker has? No. Depository / DP can be chosen by you as per convenience irrespective of the DP of your broker. Whether my broker can also act as a DP? Yes he can. In fact most of the brokers are also registered as a depository participant so that they offer both the services and you also get the benefit of synergy in operations. However it is not compulsory for you to open a DP account with your broker. Whether depository participants are governed by any Rules and Regulations? Depository participants are governed by SEBI Act, 1992, Depositories Act, 1996, Securities and Exchange Board of India [Depositories and Participants] Regulations, 1996, Rules, Regulations and Bye laws of the respective depository with which he is registered as well as various directives of SEBI and depository issued from time to time. What are the documents to be signed with depository participant? Before opening an account with a depository participant, you ar...