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T+1 Settlement Cycle: Indian markets achieve complete transition to T+1 settlement cycle

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T+1 Settlement Cycle: Indian markets achieve complete transition to T+1 settlement cycle

T+1 (trade plus one) means that trade-related settlements will be cleared within a day of the actual transactions. Earlier, trades on the Indian exchanges were settled in two working days after the transaction took place(T+2).

The stock exchanges, NSE and BSE, earlier in a joint statement, announced that they would implement the T+1 settlement cycle in a phased manner, starting February 25, 2022, with the bottom 100 stocks in terms of market value.

“The first batch of securities transitioned to T+1 Settlement on February 25, 2022, and thereafter, every month, a batch of around 500 securities transitioned to T+1 Settlement. From January 27, 2023, all securities ie, equity shares, including SME shares, exchange-traded funds (ETFs), real estate investment trusts (REITs), infrastructure investment trusts (InvITs), sovereign gold bond (SGB), government bonds, and corporate bonds trading in the equity segment will now be settled only on T+1 basis,” NSE said in a release.

Market analysts believe that the T+1 settlement system will allow the cycle of money to move faster without waiting for an extra day.

NSE witnessed transactions by more than 2.7 crores investors (unique PANs) in the equity segment in the financial year 2022, and the number has already surpassed 2.3 crores in this financial year as well. In value terms, there is a healthy mix of participation across investor categories, with individual investors accounting for about 36%, followed by proprietary desks at 27%, foreign institutional investors at 15%, and domestic institutional investors accounting for 11%.

Globally most stock exchanges in developed as well as emerging markets follow the T+2 settlement system.

“It’s a great achievement for the Indian capital market. The shortening of the settlement cycle to T+1 will bring in significant capital efficiencies to the investors and improve risk mitigation for the entire industry,” Ashishkumar Chauhan, MD & CEO of NSE, said

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