SEBI to bring T+1 settlement, sets up panel to address concerns: Report

The panel will comprise of officials from exchanges, clearing corporations and depositories.

The Securities and Exchange Board of India (SEBI) has setup a panel of experts who will look into the concerns that could hinder the process of shifting the country’s trade settlement to T+1 (Trade plus 1 day) from the current T+2, a report in The Economic Times said.

This means that the shares would be transferred to the buyer's demat account the day after the transaction, and the seller would receive the proceeds. At present, trades are settled two working days after the transaction is done. India moved to the T+2 settlement cycle from the T+3 cycle in April 2003.

Moneycontrol could not independently verify the story.

The panel will comprise officials from exchanges, clearing corporations and depositories.

“Globally, people are talking of accelerated settlements. That is why the proposal is being pursued again. Nothing concrete has been decided,” a senior official with a market intermediary told the publication.

The reduction in settlement time would increase the liquidity and trade turnover. The regulator has discussed the T+1 settlement mechanism on various platforms but faced resistance from market participants, especially Foreign Portfolio Investors (FPI). However, SEBI has firm grounds for this reform as less settlement time means less risk of default by brokers.

FPIs have reservations that implementation would be difficult because of the time difference. This measure may impact volume on the cash market as FPIs account for more than 40 percent of the market.

Currently, most of the global markets operate on T+2 but some large markets including the US have resolved to shorten the settlement cycle to T+1 by 2023, the report added.