T+1 settlement cycle

Subject – Economy

Context – In global first, bourses to move to T+1 settlement from Feb 25

Concept –

Come February 25, India’s stock market will become the fastest in the world in terms of payout of money to clients and trade settlement.
Despite a pushback from foreign portfolio investors (FPIs), the National Stock Exchange (NSE) and the BSE declared that they will implement the T+1 (trade plus one day) settlement cycle in a phased manner starting with the bottom 100 stocks in terms of market value.
- Thereafter, 500 stocks will be added based on the same market value criteria from the last Friday of March and so on every following month.
SEBI had given its go-ahead for T+1 settlement in September but FPIs had sought more time from the regulator.
T+1 settlement cycle means that market trade-related settlements will need to be cleared within one day of the actual transactions taking place.
Currently, in the T+2 cycle, it takes 48 hours or more for the shares to be transferred into the client account in case of purchases. This means a seller cannot demand payment for at least two days.
When India’s markets move to the T+1 cycle, they will be the first globally.
The NSE has nearly 2,000 stocks on its platform while the BSE has more than 7,000 on its main board. All of these will gradually move to the T+1 settlement cycle.