Indian Stock Market already announced they are going to accept the T+1 settlement cycle. Now, this is the official news: from 27th January, the exchange of India will go for the T+1 settlement cycle. In India, mostly there are two significant exchanges NSE India (National Stock Exchange of India Ltd) and BSE ( Bombay Stock Exchange). All blue-chip and large capital companies will switch to the T+1 settlement on 27th January. In 2003 SEBI (Securities Exchange Board of India) reduce the cycle to T+2 from T+3. So the decision of T+1 settlement cycle has been taken after 20 years.
What is the Settlement Cycle?
The settlement cycle is the time between the transaction, delivery of shares, and settlement of accounts involved in the transactions. To clarify take an example of vegetable market, you buy vegetable from some shop and you have a tradition of giving the money and receiving the receive vegetable in T+2 days. Here you can see the delay in the process and due settlement.
Benefits of T+1 cycle
Now the main question comes how this benefited us, retail investors. All the buyers and sellers will be able to complete the transactions on T+1 cycle. To clarify take an example if you buy shares on Monday they will be credited to your account by Tuesday. Even all the settlements for the seller will happen on Tuesday only. Even the company actions like bonus and dividend of shares will be credit to the bank account in T+1 day. Overall, it increases the smoothness of the business.
Phased Manner in Indian Markets
The decision of T+1 cycle will roll out in a phased manner. Phased manner simply means this settlement will be for some batch of company. On 8th November 2021, the exchange informed that they will implement T+1 for the bottom 100 stocks in terms of their market cap. Furthermore, more than 500 stock will be added on the same criteria and this cycle continues.