Depository Participant: Types, Functions, Eligibility, and Registration Process
- PRITI SIRDESHMUKH
- Dec 13, 2025
- 8 min read
Introduction
A Demat account is required before you can begin investing in the Indian stock market. However, you do not register a bank account directly with the Reserve Bank of India. Moreover, you do not need to communicate directly with stock exchanges or depositories like NSDL or CDSL. There is always a reliable middle layer to manage this for you. That middle layer is known as a depository participant. A DP serves as the intermediary between you and the repository. Your DP administers the entire process of buying and selling shares, storing them in a Demat account, or pledging them for a loan. These participants may be banks, brokers, or financial service providers.
Table of Contents
What is a Depository Participant?
A depository's agent or licensed stockbroker is referred to as a depository participant (DP). A depository is an entity or organisation that holds an investor's assets through a depository participant and provides related services. It stores investor securities. This includes shares, debentures, government securities, bonds, mutual fund units, and so on in electronic form. It serves as a conduit between firms that issue shares and their shareholders. An individual cannot contact the depository directly. A DP allows you to open and maintain a Demat account. They serve as the link between the depository and the investors. A contract between the DP and the depository governs their relationship. A DP is defined in the Depositories Act of 1996 as a person registered under Section 12 of the Securities Exchange Board of India (SEBI) Act, 1992. Section 12 of the SEBI Act requires that no DP acquire, sell, or deal in securities unless registered with SEBI.
Types of Depository Participants in India
Depositories in India are classified into two kinds. As a result, a DP might work for either of the two depository institutions. There are two depository institutions:
National Securities Depository Limited (NSDL)
The National Securities Depository Limited (NSDL) is supported by the National Stock Exchange, Unit Trust of India, and Industrial Development Bank of India, among other entities. NSDL's activities are executed through service providers such as the DP, Share Transfer Agents, and Stock Exchange Clearing Corporations. DPs are commonly referred to as NSDL business partners. DPs must register with NSDL before providing services to investors and clearing members. Investors can access NSDL's depository services through the DP they have registered with. Investors must first open a depository account with the DP. This allows them to take advantage of depository services such as trading account maintenance, dematerialisation, and rematerialisation of securities.
Central Depository Services (India) Limited (CDSL)
The Bombay Stock Exchange, Bank of India, and State Bank of India are among those who support Central Depository Services Limited (CDSL). The CDSL-registered DPs assist investors in obtaining CDSL-related services. CDSL's DPs serve as a conduit between the company and its investors. Investors can get CDSL-recorded and maintained account balances through DPs. At regular periods, the DPs present investors with a statement of their accounts, which includes details of their transactions and securities owned.
Functions of a Depository Participant
Depository Participants are more than just intermediaries. They play an important role in making stock market investments easy, transparent, and secure. Here is why they matter:
They eliminate the paperwork: Before Demat accounts, investors had to maintain track of physical certificates, which might easily be lost or damaged. DPs let you manage all your investments digitally. No files, no printing, and no courier issues.
They increase trade efficiency: DPs enable the purchase and sale of shares in seconds. You do not need to physically sign and submit transfer forms. Everything is completed online, with real-time updates.
They promote safety: Physical shares were susceptible to theft, forgery, and misplacement. A DP stores your assets electronically in your name. Those shares can only be accessed or transferred by you (or persons you have allowed).
They ensure the system runs smoothly: Every day, lakhs of transactions pass through India's financial markets. DPs ensure that the transfer of shares between buyers and sellers is quick, dependable, and secure.
Eligibility Criteria for a Depository Participant
The entities eligible to become Depository Participants are defined by the Depositories Act of 1996 and the SEBI (Depositories & Participants) Regulations of 1996 list the. The following entities qualified to become DPs:
Public financial institutions.
The Reserve Bank of India (RBI) has approved scheduled banks, including foreign banks.
The State Financial Corporations Act of 1951 established the State Financial Corporation.
Institutions that provide financial services and are promoted by the businesses listed above, either collectively or individually.
Custodian of Securities who has received a Certificate of Registration under the SEBI Act of 1992.
A stock exchange's clearinghouse or clearing corporation.
A broker who has been issued a Certificate of Registration under the SEBI Act, 1992.
Non-banking financial company with a net worth of at least Rs. 50 lakh.
Registrar of Issue and Transfer Agents with a minimum net worth of Rs. 10 crore.
Aside from the qualifying criteria listed above, the NSDL and CDSL have introduced additional eligibility requirements for DP registration. The NSDL and CDSL can establish their own eligibility standards under their Bye-Laws. They are –
A stockbroker must have a net worth of Rs 3 crores to register with NSDL and Rs 2 crores to register with CDSL.
A stockbroker with a net worth of Rs 1 crore may be admitted as a DP under the 'Limited Depository Participant' category in CDSL. This is subject to the requirement that their net worth be increased to Rs 2 crores.
The applicant for DP under NSDL should not have been convicted of misappropriation of funds and securities, embezzlement of funds, fraudulent conversion, theft, or forgery during the five years preceding the application's filing date.
The applicant for DP through NSDL should not be barred, expelled, or suspended by SEBI or any stock exchange.
Registration Under NSDL
The steps for registering a DP with the NSDL are as follows:
Step 1: Applicants who seek to register as a DP with NSDL should submit an application in Form E along with the essential papers listed below.
Board Resolution authorising the applicant to become a Participant and a Net worth Certificate.
Form A provides information about the application.
SEBI requires additional details.
If the applicant and its subsidiaries are registered as Participants with a stock exchange or CDSL, then the stock exchange or CDSL will produce a status report.
The applicant's business history, including the background and details of the promoters' and directors' experience, primary business areas, applicant's background, and track record, should be submitted in the required manner.
Payment of application and entrance fees.
Step 2: The application will be presented before the NSDL Member Committee for approval. Upon clearance, the application will be forwarded to SEBI for registration as NSDL's DP.
Step 3: The applicant must deploy the requisite infrastructure, hardware, and software after gaining clearance from the NSDL Member Committee. The NSDL will undertake an on-site assessment of the applicant's installations before activation.
Step 4: After the NSDL examination, the applicant will be activated as a Participant in a pilot environment for testing.
Step 5: After receiving SEBI permission and paying the necessary fees to SEBI and NSDL, the applicant must sign an agreement with NSDL to serve as a DP. Following the signing of the agreement, the applicant will be added as a Participant to the NSDL system.
Registration Under CDSL
The method for registering a DP with the CDSL is as follows:
Step 1: An applicant who desires to be registered as a DP under CDSL should apply via Form E, along with the necessary annexures:
List of directors and the applicant's shareholding pattern during the last three years.
A brief overview of the candidate, covering their life and activities.
The applicant's director/promoter is also a director/promoter of the following entities.
Shareholding patterns and director lists for all groups of companies/holdings or subsidiaries, as well as the activities they engage in.
A duly notarised copy of the Memorandum and Articles of Association. The goal clause of the MOA must allow the corporation to conduct DP activities.
Certified copy of Board Resolution to Join as DP and Net worth Certificate.
Certified copies of the last three years' annual reports and the prior year's balance sheet.
Experience and background of key persons responsible for DP duties.
Payment of the application fee and processing fees.
Step 2: The CDSL will review the application to determine whether any additional documentation or information is required.
Step 3: The applicant should purchase computer hardware and connect to CDSL. The applicant should also have two trained staff members who are NISM certified or have completed CDSL's five-day DP training.
Step 4: The CDSL will transmit the application to SEBI for approval after the hardware and connectivity have been installed.
Step 5: An applicant will receive a Certificate of Registration from SEBI after receiving permission and paying the registration and annual fees.
Step 6: The applicant will then sign an agreement with CDSL as a DP.
Step 7: CDSL generates a unique DP-ID number when you sign the agreement to create your DP account with them.
Conclusion
A depository is a location where material is placed for safekeeping and protection in electronic form by registered Depository Participants. Essentially, it is an institution that acts similarly to a bank. Just as some banks maintain investor funds, depository institutions keep an account for investors' assets (shares, mutual fund debentures, etc.) in a dematerialised form. Depository Participants frequently offer investors a variety of services on behalf of the depository. Banks, financial institutions, stockbrokers, and clearing houses can become Depository Participants in India by registering with Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL). As a result, both of these deposits are registered with the Securities and Exchange Board of India (SEBI).
Frequently Asked Questions
Can I directly trade with NSDL or CDSL?
No, you will need a depository participant to trade with these key depositories.
What is a Depository Participant?
A Depository Participant (DP) connects investors to the depository. This allows them to keep and exchange securities electronically.
What is the role of a Depository Participant (DP)?
Depository communicates with investors via its agents, known as DP. To take advantage of the depository's services, an investor must first create an account with a DP.
Is CDSL a Depository Participant?
No, CDSL is a depository. DPs are registered agents for depositories such as CDSL.
Is a Depository Participant or a broker the same thing?
No, a DP connects investors with the depository, whereas a broker buys and sells stocks on exchanges.
How do I know if my DP is CDSL or NSDL?
You may look up your demat account number: NSDL accounts begin with "IN," but CDSL accounts are all digits.
How do depository participants differ from traditional banks?
Depository players manage and trade financial securities. Conversely, traditional banks conduct monetary transactions and offer financial services.
Can multiple accounts be opened by an investor?
Yes. An investor can open multiple accounts with the same name, either with the same and distinct DPs. For all accounts, investors must rigorously adhere to SEBI's KYC standards and submit a PAN number.
When does the DP provide the transaction and holding statement?
If a transaction occurs, DPs must provide transaction statements to their clients once per month. DPs also provide transaction statements in electronic format with a digital signature. It is subject to a legally binding agreement with the beneficial owners.
Can a Demat account be opened directly with a depository?
You cannot open a Demat account directly with a depository. It can only be accessed through the depository's DP.
Can I close my Demat account with one DP and transfer all securities to another account with another DP?
Yes. You can send your account closure request to your DP via the form provided. The DP will transfer all securities in the account, as instructed, and shut the Demat account.
Is it necessary to have an account with the same DP as the broker has?
No, investors can trade through whatever broker they like, regardless of the broker's DP.
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