The functioning of depository system is very much alike to the banking system in the economy. The major difference between the banking system and depository system is that the first holds funds within accounts whereas the latter holds securities within accounts for the clients. The transfer by both is also different this is a major variation in the services provided by both. It is to be noted that the similarity for both the system is that they transfer securities or funds when there is no authentic handling of securities or funds.
In fact banking system and depository system is very useful for keeping securities and funds safely. But the hardware and software which are necessary for the operation of the system should be installed in the company for proper functioning. The shares are safe in the electronic form because and the applicant should follow the procedures of application. He or she has to approach the agent of depository to open an account. The certificates of shares should be surrendered by the applicant in the physical form. The agent is the one who had to arrange to send and verify the certificates by the company. If the confirmation is done the account is alter credited with an equivalent number of shares. This process is termed as dematerialization.
The main advantage of the depository system is that it can be facilitated in simplest and faster ways in the electronic forms. First of all, the applicant has to approach the broker for the confirmation of sales and purchase and then approach the agency of the system. He must be approached with a request to debit or credit the account for the transaction purposes. The separate communication to the company is not needed here in the depository system which is the feature that attracts many consumers.