Sebi asks depositories to credit 5% of profit to investor fund

Capital markets regulator Sebi on Thursday directed depositories to transfer five per cent of profits from their operations every year to the Investor Protection Fund.

The directive follows Sebi approval in this regard at its meeting held in November.

In a notification, the Securities and Exchange Board of India (Sebi) said "every depository shall credit five per cent or such percentage as may be specified by the Board, of its profits from depository operations every year to the Investor Protection Fund".

The new norms will come under the Sebi (Depositories and Participants) Regulations, 2016.

Depositories - NSDL and CDSL - act like banks for securities and are basically custodians of demat accounts, which are required to hold shares and other securities or trade in them.

An investor needs to open a demat account through any depository participant, which can be a brokerage firm, for dematerialisation of his holdings and transferring securities.

Together, these two have got over 2.47 crore investor accounts while they maintain data for foreign investments into equity markets and the overseas investment limits for government and corporate debt securities.