T+1 Settlement Cycle
- After China, India will become the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top listed securities today (January 27), bringing operational efficiency, faster fund remittances, share delivery, and ease for stock market participants.
- Due to the T+1 settlement cycle, trade-related settlements must be made within a day, or 24 hours, after a transaction is completed.
- According to T+1, for instance, if a consumer purchased shares on Wednesday, they would be deposited to their demat account on Thursday.
- Unlike T+2, where they will be resolved on Friday.
- Up to 256 large-cap and top mid-cap equities, including those listed on the Nifty and Sensex, would be subject to the T+1 settlement.
Advantages of T+1 Settlement:
- If an investor sells a share using the T+1 format, she/he will receive payment within a day and the buyer will receive the shares in her demat account the following day.
- With the margins being released on T+1 day, this will also assist investors in lowering their overall capital requirements.
- Additionally, they will benefit from receiving the monies in their bank accounts within 24 hours after the share sale.
- The change will increase operational effectiveness because the rolling of funds and equities will happen more quickly.
Opposition from Foreign Investors:
- Foreign investors had written to the regulator and the Finance Ministry about the operational difficulties they were experiencing because they operate from various geographical locations and were opposed to SEBI’s T+1 plan.
- They brought up challenges such time zone disparities, information flow procedures, and currency conversion issues.
Source The Hindu
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