Sebi notifies winding down policy for depositories

Markets regulator Sebi has notified new framework for orderly winding down of depositories in the events like a depository going bust or voluntary closure of business.
Depositories act like banks for securities and are basically custodians of demat accounts which are required to hold shares and other securities or to 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.
There are two depositories in India -- NSDL and CDSL -- and they are considered among the most important infrastructure institutions for the Indian capital markets.

Together, these two have got nearly 2.5 crore investor accounts, while they also maintain data for foreign investments into equity markets and the overseas investment limits for government and corporate debt securities.
"Every depository shall devise and maintain a wind-down plan," the regulator said in a notification dated May 27.
For the purpose of this regulation, 'wind-down plan' means a process or plan of action employed, for transfer of the beneficial owner accounts and other operational powers of the depository to an alternative institution that would take over the operations of the depository in scenarios such as erosion of networth or its insolvency or its inability to provide critical services, it added.

Earlier, a suggestion for putting in place a policy for orderly winding down of depositories was made by Sebi's Depository System Review Committee, which includes Sebi officials as also industry and independent experts.