Question

Write three similarities between Bank and Depository.

Hint:

{Three Similarities:}

• Both are custodians (bank = money, depository = securities)
• Both facilitate transfers (bank = funds, depository = shares)
• Both maintain accounts with transaction records

Answer 1

Both banks and depositories are financial institutions that play crucial roles in the financial system. Here are three similarities between them: Similarity 1: Custodians of Value

• Bank: Banks act as custodians of money. Customers deposit their cash with banks for safekeeping.
• Depository: Depositories act as custodians of securities. Investors hold their shares, debentures, and other securities in electronic form with depositories.
• Both provide safe storage and protection of valuable assets (money in banks, securities in depositories).

Similarity 2: Facilitate Transfers

• Bank: Banks facilitate transfer of funds from one account to another through cheques, NEFT, RTGS, etc.
• Depository: Depositories facilitate transfer of securities from one account to another during buying and selling of shares through electronic settlement.
• Both enable smooth and efficient transfer of assets between parties.

Similarity 3: Maintain Accounts and Records

• Bank: Banks maintain savings accounts, current accounts, and fixed deposit accounts for customers with detailed transaction records.
• Depository: Depositories maintain demat accounts (beneficial owner accounts) for investors with detailed records of securities holdings and transactions.
• Both provide periodic statements (bank statements, holding statements) to account holders.

Additional Similarities (for reference):

• Intermediaries: Both work through intermediaries—banks have branches, depositories have Depository Participants (DPs)
• Interest/Dividend: Both facilitate receipt of returns—banks give interest on deposits, depositories facilitate receipt of dividends and bonus shares
• Regulation: Both are regulated by statutory authorities (banks by RBI, depositories by SEBI)