Bring out the need and role of depository system in secondary markets.

Bring out the need and role of depository system in secondary markets. 

Ans. The need and role of depository system in secondary markets can be judged from the benefits it gives to different interest groups. 

(a) Benefits to the investor: Speedy transfer of shares; Avoidance of risk; Dematerialization and rematerialization facility; Loss indemnification; Safety from fake and stolen shares; No refusal of share transfer; Low borage cost; Availability of periodic information. 

(b) Benefits to the issuer: Reduction in volume of paper work; Ease in distributing benefits to actual beneficiaries;Facilitates wider spread of shareholding over a geographical area. 

(c) Benefits to the Lending Banks: Frees the bank from the problems of transfer deed and other related matter by simplifying creation No headache of replacing securities in case of book closures; Makes switching of portfolio convenient; Shares can be easily transferred to bank in case borrower defaults in payment; Reduces paper cost. 

(d) Benefits to the Intermediaries: Elimination of the problem of bad or fake shares; Easier to get loans on dematerialized securities; Reduction in brokerage rate.