When does SEBI plan to launch full-fledged T+1 settlement in the Indian equity markets? Do you think that Indian markets are ripe for such a shift?

SEBI has finally decided to go ahead with the launch of T+1 settlement in the Indian equity markets. This has been under discussion for some time but now in the latest board meeting of SEBI, they have expressed seriousness about going ahead rapidly.

What T+1 means is that trades executed would be settled on the next trading day, against the T+2 formula that is used now. Remember while equity markets have been in T+2 for 17 years while futures and options have always been on T+1 basis.

It was only in 2001 that India shifted to T+3 rolling settlements, introduced F&O and banned Badla and ALBM altogether. Within a year, markets shifted to T+2 but there has been little progress in last 17 years, despite big strides in digitization of banking and new technologies. That is why SEBI feels it is time to shift to the T+1 system.

There is no problem for the banking system as it fully geared up to handle T+1. After all, futures and options are already operating in T+1 settlement since ages and things have been quite smooth. Most PSU banks are also savvy enough to handle the tech implications.

Another view of SEBI is that small investors are losing crores of rupees each year in the form of free float money as there is a 3 days gap between payment of fund and getting the actual credit for transacting in their demat account. This can be resolved by shifting to T+1.