Depository is a body that holds securities of investors in electronic (demat) form. This includes shares, debentures, bonds, or government securities.
Under the depository system of holding shares, a depository entity registered with SEBI holds securities of various companies for investors in demat form. Any transaction involving securities is completed through the depository. Currently, NSDL and CDSL are the main depositories in India.
Depositories appoint depository participants who are middlemen between themselves and investors. Banks, share transfer agents, and financial institutions authorised by SEBI are depository participants. All communications between investors and depositories are through depository participants.