Top Questions on NISM Series 6 Depository Operations

The NISM‑Series 6 exam is a key certification for professionals working in the Indian securities market. Depository Operations form a core part of the syllabus and appear in the exam with high weightage. Below is a curated list of the most commonly asked questions, complete with concise answers, study tips, and an FAQ section to help you ace this module.

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1. 📚 What are Depositories and Their Functions?

Question	Answer
Q1. Define a depository.	A depository is an electronic system that holds securities (shares, bonds, mutual funds, etc.) in dematerialised form and facilitates their transfer, settlement, and safekeeping.
Q2. Name the two depositories in India.	National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
Q3. What are the main functions of a depository?	- Dematerialisation of physical certificates - Rematerialisation back to paper - Transfer of securities (both inward and outward) - Record‑keeping and data management - Dividend & coupon payment - Corporate actions (splits, bonus issues, etc.)

Tip: Memorise the seven core functions as a mnemonic: Dematerialise, Rematerialise, Transfer, Record‑keep, Div‑pay, Corporate actions, Liquidity support.

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2. ❓ Common Exam‑Style Questions

#	Question	Key Points to Cover
1	What is the difference between a Demat account and a Demat holder?	- Demat Account: a user‑controlled account (name, PAN, address). - Demat Holder: the depository’s registered custodian (e.g., a bank or broker) that holds the account on behalf of the investor.
2	Explain the concept of ‘Inward Transfer’ and ‘Outward Transfer’.	- Inward Transfer: moving securities from another depository to your own account. - Outward Transfer: sending securities from your account to another depository.
3	What are the two types of transactions in Depository Operations?	- Transfer Transactions (Inward/Outward) - Transfer‑and‑Hold (TTH) Transactions
4	List the mandatory documents required for Dematerialisation.	- Original certificate or counter‑part - PAN card - Address proof - KYC/AML verification
5	How does the depository handle corporate actions?	- It receives notifications from the issuer - Updates the account balances accordingly - Sends statements to investors

Strategy: Use flashcards. Each card should have the question on one side and the key answer points on the other. Review them daily.

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3. 📌 Deep‑Dive: Transfer‑And‑Hold (TTH) Transactions

Item	Detail
Definition	A transaction where securities are transferred to a specific person or entity on behalf of the record holder.
When is it used?	- Gift of securities - Transfer to a nominee - Transfer to a beneficiary (e.g., in a trust)
Process	1. Request TTH form. 2. Submit supporting docs. 3. Depository updates the account (record holder + TTH).
Tax Implications	- Transfer of securities on a gift basis is exempt from gift tax up to ₹50,000. - If above, it’s taxable as per gift tax provisions.

Quick Quiz: Which transaction type is preferable when you want to give shares to a child but keep legal ownership? – Answer: TTH (Transfer‑and‑Hold).

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4. 🔍 Common Pitfalls & How to Avoid Them

Pitfall	Fix
Forgetting the PAN requirement	Always match the PAN on the Demat account with the investor’s PAN.
Mixing Inward and Outward Transfer codes	Create a mnemonic: Inward = Incoming, Outward = Outgoing.
Ignoring Corporate Action Notifications	Subscribe to the depository’s e‑mail alerts and check the account monthly.
Overlooking Transaction Fees	Know the fee schedule for NSDL vs. CDSL; some brokers waive fees.

Pro Tip: Keep a “Transfer Cheat‑Sheet” on your desk while studying. It’s a lifesaver during mock exams.

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5. 📑 Sample Question & Answer (Practice)

Q: During a corporate action, a company declares a 1:4 bonus issue. If an investor holds 400 shares, how many shares will they receive after the bonus?

A:

• Bonus ratio = 1:4 (1 new share for every 4 existing shares).
• Current holdings = 400 shares.
• New shares = 400 ÷ 4 = 100 shares.
• Post‑bonus total = 400 + 100 = 500 shares.

Why this matters: Bonus issues affect the number of shares and the price per share; the depository must adjust the account accordingly.

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6. 📊 Key Numbers to Memorise

Item	Value
Number of depositories	2 (NSDL & CDSL)
Minimum holding period	10 trading days (for Demat account)
Maximum permissible transfer fee	₹30 per transaction (subject to change)
Average turnaround time	1–3 working days for inward/outward transfers

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7. FAQ – Quick Fix for Doubts

Question	Answer
Q: Can I open a Demat account without a bank account?	Yes, but most brokers require a linked bank account for fund transfers and tax reporting.
Q: What if I lose my Demat account details?	Submit a written request to the depository with ID proof; they will issue a new account number.
Q: Is there a penalty for late rematerialisation?	Yes; a fee of ₹10 per certificate is levied for each month of delay.
Q: Do I need to update my address with the depository?	Mandatory if you change your residential address; otherwise, you won’t receive statements or tax forms.

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8. 📌 Study Tips & Checklist

Tip	Why It Works
Create a Mind Map	Visualise the flow: Issuer → Depository → Investor.
Use “Explain‑to‑A‑Friend”	Teaching reinforces recall.
Timed Mock Tests	Simulate exam conditions; focus on time‑management.
Join Study Groups	Discuss tricky corporate action scenarios.
Watch Video Lectures	Many online platforms offer animated breakdowns of transfers.

Checklist Before the Exam

• 100% covered all depository functions.
• Completed 3 full mock exams.
• Clarified all FAQ doubts.
• Reviewed transaction fee schedule.
• Created a cheat sheet for quick reference.

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9. 🚀 Call to Action

Ready to ace the NISM‑Series 6 Depository Operations section?

1. Download our FREE “Depository Operations Mastery” PDF – a one‑page cheat sheet with formulas, mnemonics, and quick‑recall tips.
2. Enroll in our 7‑day intensive webinar – live Q&A with industry experts.
3. Join our NISM Study Group – 24/7 support, peer‑to‑peer learning, and doubt‑clearing sessions.

Click here to get started: https://nismstudyhub.com/series6

Your success in the NISM exam is just a few clicks away. Let’s make it happen! 🚀