SEBI's T+0 Settlement: What It Means for Indian Investors

Imagine buying a stock and seeing the shares in your demat account the very same day. Imagine selling shares and having the cash ready for another investment almost instantly. This isn’t a futuristic dream; it’s the new reality the Securities and Exchange Board of India (SEBI) is building with the introduction of the T+0 settlement cycle.

For years, Indian investors have operated on T+2 and, more recently, T+1 settlement cycles. This latest move towards same-day settlement is a game-changer. Let’s break down what it is, how it works, and why it matters for your investment journey.

The Evolution of Settlement Cycles in India

Before diving into T+0, it’s essential to understand what a settlement cycle is. When you buy or sell a stock, the transfer of shares and funds isn’t instantaneous. The time this process takes is the settlement cycle, where ‘T’ stands for the trading day.

• T+2 Settlement: For a long time, India followed the T+2 system. If you sold a stock on Monday (T), the money would be credited to your account on Wednesday (T+2).
• T+1 Settlement: In a major leap completed by January 2023, SEBI transitioned the market to a T+1 cycle. This meant transactions were settled the next business day, making India’s market one of the fastest in the world.
• T+0 Settlement: Now, SEBI is pushing the boundaries further with T+0, or same-day settlement. This means both funds and securities for a transaction are settled on the day the trade is executed.

How T+0 Settlement Works: The Phased Rollout

SEBI is implementing this change cautiously. It’s important to note that the T+0 settlement is optional and will run alongside the existing T+1 cycle, giving the market ecosystem time to adapt.

The rollout began in March 2024 with a beta version for a select 25 stocks, initially for retail investors. While the plan is to eventually extend this facility to the top 500 listed companies, SEBI is prioritizing a smooth transition.

Based on feedback from market participants, the deadline for Qualified Stock Brokers (QSBs) to have the necessary systems in place has been extended to November 1, 2025.

The proposed framework for the trading day includes two phases:

1. Phase 1 (Optional T+0): Trades executed until 1:30 PM will be eligible for the T+0 settlement cycle.
2. Phase 2 (Optional Instant Settlement): A separate, later trading session may be introduced for trades up to 3:30 PM, which would be settled instantly.

This phased and optional approach ensures market stability is not compromised while introducing massive efficiency.

Key Benefits of Same-Day Settlement

The move to T+0 brings several powerful advantages for investors and the market as a whole.

1. Enhanced Liquidity

This is the most significant benefit for retail investors. With T+0, money from a sale is available in your account the same day. Similarly, shares you buy are credited to your demat account that day. This frees up your capital and securities almost instantly, allowing you to react to market opportunities without delay.

2. Reduced Risk

Shorter settlement cycles reduce the time between a trade and its final settlement. This minimizes “counterparty risk”—the small but real risk that the other party in your trade fails to deliver the shares or funds. With T+0, this risk window shrinks from a full day to just a few hours.

3. Increased Market Efficiency

Faster settlement cycles make the entire market more efficient. Quicker turnover of capital can lead to increased trading volumes and better price discovery. This positions the Indian stock market as one of the most advanced and efficient globally.

Navigating the Implementation Challenges

Every major reform presents challenges, and the primary concern here is the readiness of the market infrastructure.

• Broker Readiness: Brokers, especially Qualified Stock Brokers (QSBs), must upgrade their systems and processes to handle the speed of T+0 settlement. Recognizing this, SEBI extended the implementation timeline to ensure a smooth transition based on broker feedback.
• Operational Complexity: Managing two parallel settlement cycles (T+1 and T+0) requires robust technology and clear communication to avoid confusion for investors and intermediaries.
• Price Fragmentation: Concerns have been raised about whether having two different settlement prices for the same stock could fragment the market. However, this risk is considered low as T+0 volumes are expected to be a small fraction of T+1 volumes initially.

The Road Ahead: A More Agile Market

SEBI’s introduction of an optional T+0 settlement is a bold, forward-looking step. It reflects the regulator’s commitment to leveraging technology to make Indian markets more robust, efficient, and investor-friendly.

For now, the T+1 cycle remains the default. As your broker enables the optional T+0 facility for eligible stocks, you will gain a powerful new choice: the choice of speed. This change empowers you to be more agile with your capital, making the Indian stock market an even more dynamic and exciting place to invest.