T+1 settlement cycle is in the interest of all market participants: SEBI Chairman Ajay Tyagi

Ajay Tyagi, chairman of SEBI (Image: Reuters)

SEBI Chairman Ajay Tyagi on September 16 said the T+1 settlement cycle is in the interest of all market participants.

"T+3 settlement cycle started in 2003, lots of advances in technology since then, T+1 ensures you get funds in a quicker manner. There is a need to further reduce settlement time to ensure margin being kept for less time," he said during a media briefing.

"We would like to go in a phased manner towards T+1. FPI participation in one SE is only 5 percent. Have received FPI representation on T+1, have therefore allowed phased transition. T+1 settlement cycle is in the interest of all market participants," he said.

Tyagi's media briefing had followed his address at the inaugural session of the 12th edition of Financial Markets Summit, organised by the Confederation of Indian Industry (CII).

The market regulator had on September 7 introduced T+1 (Trade plus 1 day) rolling settlement cycle for stocks on an optional basis. The new rule will come into effect on January 1, 2022.

Tyagi said filings with the market regulator show an initial public offering (IPO) pipeline of around Rs 30,000 crore.

Funds raised via IPOs in FY22 till-date (five months) are almost equal to what was raised in FY21, which was Rs 46,000 crore, the SEBI Chairman said. During the last 18 months, technology companies have raised 15,000 crore through IPOs.

"Growing number of unicorns in the startup ecosystem is a testimony to the new-age tech companies coming of age in our economy. These companies often follow a unique business model, focusing more on rapid growth than immediate profitability" he said.

Tyagi said individual investor participation in the market has risen by "leaps and bounds".

He said the stock market has recovered after falling in March 2020, and flagship indices are now more than double of their lowest point in that point.

He also said that the Indian equity market has given the "best returns in dollar terms" when compared with any emerging or developed market.

He said the average monthly equity cash turnover rose to Rs 15 lakh crore in financial year 2021-22 so far, from Rs 13.7 lakh crore in 2020-21 and Rs 8 lakh crore in 2019-20.

In FY20, 4 lakh new demat accounts were opened each month, which has jumped to 12 lakh per month in FY21 and 26 lakh in FY22.

Tyagi also said there is an urgent need to unify the bond market.

"The bond market in India is dominated by G-Secs. Corporate bonds are generally priced on the basis of G-Secs of comparable maturity. It is desirable that the two markets are unified, wherein, trading, clearing and settlement takes place on one platform, backed up by a holding structure that provides for frictionless transfer of bond holdings," Tyagi said.

He also said sustainable development and addressing climate change have emerged as priority areas. He said encouraging sustainable investments is the need of the hour.