A depository is a system which holds your shares in the form of electronic accounts in the same way a bank holds your money in a savings account. Depository System provides the following advantages to an investor. Your shares cannot be lost or stolen or mutilated. You never need to doubt the genuineness of your shares i.e., whether they are forged or fake. Share transactions like transfer, transmission etc.
Transaction costs are usually lower than on the physical segment.
There is no risk of bad delivery. You should surrender your share certificates in physical form and your DP will arrange to get them sent to and verified by the company and on confirmation credit your account with an equivalent number of shares. This process is known as de-materialisation. You can always reverse this process if you so desire and get your shares reconverted into paper format. This process is known as re-materialisation.