Source: Indian Express
Context: Stock exchanges have decided to delay the implementation of T+0 (same-day) settlement cycle for institutional clients, which was set to start on September 30, 2024, on a voluntary basis. T+0 was introduced for retail clients in 25 securities as a beta version in March 2024.
T+0 and T+1 Settlement Cycles:
- T+0 Settlement: Refers to same-day settlement of trades where both funds and securities are exchanged on the same day.
- T+1 Settlement: In this system, trades are settled one business day after the transaction date. It was introduced in 2021 and has already been implemented in phases.
- Key Issue: Foreign portfolio investors (FPIs) are resisting T+0 due to the pre-funding requirements, and systems aren’t fully ready for seamless adoption.
Significance on the Economy:
- Faster Settlements: Reduces the risks associated with delayed settlements and facilitates quicker access to funds and securities for investors.
- Efficiency for Retail Investors: T+0 can optimize fund utilization, particularly benefiting retail investors with limited capital.
- Improved Accuracy: T+1 has already led to reduced error rates in settlements, especially for FPIs, improving overall market efficiency.
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