A depository participant (DP) plays a crucial role in the functioning of a demat account, acting as a bridge between the investor and the central depositories, such as NSDL or CDSL in India. When an investor opens a demat account, it is not done directly with the depository but through a DP, which can be a bank, stockbroker, or financial institution authorised to provide these services.

The primary role of a DP is to facilitate the holding and transfer of securities in electronic form. When an investor buys shares, the DP ensures they are credited into the demat account. Similarly, when securities are sold, the DP debits them from the account and coordinates with the depository to update records. This process eliminates the risks of physical certificates like theft, damage, or forgery.

Apart from enabling transactions, a DP also handles account statements, updates investor details, and ensures smooth communication between investors and the depository. DPs are responsible for maintaining compliance with regulatory requirements and ensuring that securities are transferred accurately and efficiently.

In addition, a DP provides services for pledging shares, crediting dividends or bonus issues, and dematerialising or rematerialising securities. In short, the DP acts as the investor’s access point to the securities market, ensuring safety, convenience, and transparency in holding and managing investments.