Depository and its Business Partners
10 questions. Each answer is explained.
Question 1 of 10Practice · Series VI — Depository Operations
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Learn these topics
More units in NISM Series VI
- Introduction to the Indian Capital Market8
- Introduction to Depository12
- Functions of Depository Participant – Account Opening18
- Functions of Depository Participant – Account Operations14
- Functions of Depository Participant – Transmission and Nomination14
- Functions of Depository Participant – Dematerialisation18
- Functions of Depository Participant – Trading and Settlement16
- Special Services – Pledge & Hypothecation12
- Special Services – Public Offering / Corporate Actions12
- Special Services – Debt Instruments & Government Securities6
- Foreign Portfolio Investors (FPI)4
- Investor Services6
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series VI Depository Operations
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 10 questions on Depository and its Business Partners, with answers
Q1A retail investor wants to open a demat account and submit securities instructions. The normal customer-facing intermediary is a:
Option A. The clearing corporation acting only as trade clearer
Why it is wrong: A clearing role does not itself make the entity the investor’s DP.
Option B. The issuer’s registrar acting only in its RTA capacity
Why it is wrong: An RTA services issuer records but is not thereby the retail DP account relationship.
Option C. A stock broker without the required DP arrangement
Why it is wrong: A broker needs the applicable DP registration/arrangement to provide the demat service.
Option D. Depository participant — Correct answer
Answer: D. The DP provides the investor-facing connection to the depository. It undertakes account servicing and processes valid instructions within depository rules. Other market institutions have important roles, but a retail client does not ordinarily open the demat relationship directly with a clearing corporation or rating agency. Remember: Identify the intermediary by the service it is authorised to perform.
Hint, shown before you answer in practice mode: Common mistake: Assuming any SEBI-registered intermediary can perform every securities-market function.
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Q2A stock broker wants to start offering demat account services. Is its stock-broking registration alone sufficient?
Option A. Yes. Written consent from every client is enough to replace admission as a DP
Why it is wrong: Private consent cannot replace the required institutional approval.
Option B. No. It must also meet the DP registration, admission and operating requirements — Correct answer
Option C. No. A stock broker can never be eligible to become a DP under the rules
Why it is wrong: The issue is satisfying DP conditions, not a blanket prohibition on brokers.
Option D. Yes. A broker’s registration automatically makes it a DP for demat accounts too
Why it is wrong: Broker registration does not automatically confer depository-participant status.
Answer: B. Eligibility to apply is different from authorisation to operate. A broker may belong to an eligible class, but it must satisfy the separate DP registration/admission and operational requirements before providing DP services. Neither the broker’s trading registration nor a client waiver substitutes for that process. Remember: Distinguish eligible applicant, approved participant and operational commencement.
Hint, shown before you answer in practice mode: Common mistake: Assuming common ownership or branding makes two regulated permissions interchangeable.
VI-022mediumapplication
Q3After exchange trades are executed, which entity centrally determines and manages the relevant clearing and settlement obligations?
Option A. The clearing corporation — Correct answer
Option B. The investor’s bank solely from its cash ledger
Why it is wrong: A cash ledger alone does not determine the securities clearing obligations.
Option C. Each issuer’s RTA independently
Why it is wrong: An RTA handles issuer records rather than exchange-wide trade obligations.
Option D. The depository participant maintaining the retail BO account
Why it is wrong: The DP processes securities instructions but does not centrally clear every exchange trade.
Answer: A. The clearing corporation forms the central clearing and settlement layer for exchange trades. Depositories facilitate the securities leg through electronic accounts, while banks support funds settlement. An issuer/RTA records and services its securities but does not independently clear all exchange trades in them. Remember: Clearing obligations and maintaining individual beneficial holdings are related but distinct functions.
Hint, shown before you answer in practice mode: Common mistake: Assigning the entire settlement process to the RTA because it services the shares.
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Q4A DP has verified a demat request and sent the certificate details for processing. Who validates the underlying issuer records and confirms the request for electronic credit?
Option A. The depository alone, without validating the issuer records
Why it is wrong: Electronic recordkeeping does not by itself validate all underlying issuer records.
Option B. The DP alone, without issuer/RTA confirmation
Why it is wrong: DP verification does not replace issuer/RTA confirmation of the certificates.
Option C. The issuer or its authorised RTA — Correct answer
Option D. The investor’s broker solely from a contract note
Why it is wrong: A trading contract note does not prove a physical certificate’s validity.
Answer: C. The DP’s initial checks and system entry do not alone establish that a certificate represents a valid holding in the issuer’s records. The issuer/RTA verifies those records and confirms or rejects the request. Electronic credit follows the accepted process, not merely the client’s delivery of paper to a DP. Remember: DP scrutiny and issuer/RTA confirmation are separate controls in the conversion chain.
Hint, shown before you answer in practice mode: Common mistake: Treating receipt of a DRF by the DP as completion of demat.
VI-024mediumapplication
Q5In the standard tripartite arrangement for an issuer using an external RTA to connect with a depository, which parties are involved?
Option A. The issuer, the exchange and the clearing member
Why it is wrong: Trade execution and clearing parties do not replace the RTA and depository in this agreement.
Option B. The beneficial owner, the DP and the depository
Why it is wrong: This describes a different investor-facing relationship rather than the stated issuer/RTA linkage.
Option C. The issuer, the RTA and the depository — Correct answer
Option D. The issuer, the DP and the beneficial owner
Why it is wrong: This omits the external RTA and changes the stated issuer-admission arrangement.
Answer: C. The tripartite structure coordinates the issuer, its servicing RTA and the depository. It allocates responsibilities for electronic connectivity, records and securities servicing. It is not the investor’s trading contract and is not an arrangement among family members connected with a BO account. Remember: An issuer-connectivity agreement is different from a customer account-opening document.
Hint, shown before you answer in practice mode: Common mistake: Assuming every agreement mentioned in depository operations is signed by the BO.
VI-025mediumconceptual
Q6A DP posts its Rights and Obligations document on its website but provides no copy or required acknowledgement to a new BO. Is the website posting alone an adequate substitute?
Option A. No. The DP must still deliver the document and get the acknowledgement as required — Correct answer
Option B. Yes. Posting it publicly removes every account-level paperwork duty that the DP has
Why it is wrong: General publication is not evidence that this BO received and acknowledged the document as required.
Option C. Yes. Giving the client a tariff sheet of charges automatically replaces the document
Why it is wrong: Price information does not replace the separate rights-and-obligations content.
Option D. Yes. The document only matters once a dispute with the client has already arisen
Why it is wrong: The document is part of establishing and operating the relationship, not only resolving disputes.
Answer: A. The Rights and Obligations document informs the BO of the service relationship and must be supplied and acknowledged in the prescribed manner. A public web page can aid access, but it does not by itself prove the required account-level compliance. A tariff sheet covers charges, not the full rights-and-obligations framework. Remember: Public disclosure and customer-specific delivery are different compliance steps.
Hint, shown before you answer in practice mode: Common mistake: Treating the availability of a document somewhere online as proof of receipt.
VI-026mediumapplication
Q7A DP employee enters a client instruction, and a second authorised employee checks the entry against the original instruction before release. What risk does this control most directly address?
Option A. An issuer that cannot pay interest on its debentures
Why it is wrong: An issuer’s payment capacity is not controlled by checking a DP’s data entry.
Option B. A change in the corporate tax rate announced in the Budget
Why it is wrong: Tax-rate changes are outside the control’s operational purpose.
Option C. Wrong or unauthorised processing by a single operator — Correct answer
Option D. The daily rise and fall in the market price of the shares
Why it is wrong: A review of instructions cannot prevent price volatility.
Answer: C. The second-person review checks that what will be processed matches the authenticated customer instruction. This separation reduces the chance that one person can introduce and release an error or unauthorised movement without detection. It is an operational control, not protection against market or issuer-credit risk. Remember: Match each control to the error or abuse it is intended to prevent.
Hint, shown before you answer in practice mode: Common mistake: Describing all risk controls as protection against trading losses.
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Q8A DP receives a second copy of an instruction already processed. What should be checked before any further posting?
Option A. Only whether the customer still holds enough shares to cover the second debit
Why it is wrong: Availability does not authorise repeating an instruction that was already executed.
Option B. The instruction’s identity and processing status, so it is not executed twice — Correct answer
Option C. Only whether the share price has changed since the first copy was processed
Why it is wrong: A price change does not establish the customer’s intent to transfer twice.
Option D. Whether the issuer has announced a record date for its next dividend
Why it is wrong: Dividend information does not resolve duplicate processing.
Answer: B. A duplicate document does not necessarily represent a second instruction. The DP should use the instruction number and processing trail to establish whether it has already been acted upon. Sufficient balance alone is not authority for a second debit. Good records must distinguish a copy or resubmission from a genuinely new instruction. Remember: Check identity and status, not just balance, before executing an instruction.
Hint, shown before you answer in practice mode: Common mistake: Treating every received copy as a fresh debit authorisation.
VI-028mediumapplication
Q9A DP is discontinuing its service. Which objective should govern handling of existing client holdings?
Option A. An orderly transfer or other permitted resolution under the depository process — Correct answer
Option B. Automatic transfer of all client securities into the DP’s own proprietary account
Why it is wrong: Client holdings do not become proprietary assets merely because a DP exits.
Option C. Automatic sale of every client holding, with no instruction from the clients
Why it is wrong: A service closure is not a blanket sale authorisation.
Option D. Deleting every client record as soon as the DP’s service is formally discontinued
Why it is wrong: Records remain necessary for transactions, claims and applicable retention duties.
Answer: A. Discontinuance of a service provider does not make client holdings its property. The relevant closure, transfer and record-retention procedures protect continuity and the ownership trail. Clients’ balances and pending instructions must be dealt with through permitted processes rather than erased or disposed of for the DP’s convenience. Remember: Participant exit is a servicing transition, not a transfer of beneficial ownership to the participant.
Hint, shown before you answer in practice mode: Common mistake: Assuming the end of a DP relationship extinguishes the customer’s holding.
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Q10An investor asks who determines and distributes a cash dividend entitlement using the beneficial-owner information supplied through the depository. The appropriate answer is:
Option A. The depository decides the dividend independently of the issuer
Why it is wrong: The depository supplies records and infrastructure rather than declaring an issuer’s dividend.
Option B. The DP declares the rate while the issuer only records it
Why it is wrong: Dividend declaration is not selected by the client’s DP.
Option C. The issuer/RTA processes the cash benefit for entitled holders — Correct answer
Option D. The clearing member treats all dividends as exchange-settlement pay-out
Why it is wrong: A cash corporate benefit is distinct from securities-market trade pay-out.
Answer: C. The issuer’s corporate action establishes the cash benefit. Its issuer/RTA process uses the relevant holding and payment details to distribute it. Depository records support identifying eligible BOs. A DP cannot invent dividend rates, and securities-settlement margins are not a fund from which company dividends are paid. Remember: Data supply and cash-benefit distribution are different responsibilities.
Hint, shown before you answer in practice mode: Common mistake: Expecting the DP to declare or finance the dividend.
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Depository and its Business Partners: common questions
How many practice questions are there on Depository and its Business Partners?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 13 practice topics for NISM Series VI, which has 150 questions in total.
Are these real NISM Series VI questions on Depository and its Business Partners?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series VI?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Functions of Depository Participant – Account Opening
18 questions on Functions of Depository Participant – Account Opening. Its quiz opens on that unit.
Open Functions of Depository Participant – Account Opening