SEBI asks custodians to settle FPI trades by T+1, remit fund on time
This story was originally published at 22:02 IST on 29 August 2024
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MUMBAI – The Securities and Exchange Board of India has nudged custodians who settle trades of foreign portfolio investors to make available funds to FPIs on the day of settlement itself from October, whole-time member Ananth Narayan G. said. Narayan was addressing a session at the Global Fintech Fest in Mumbai today.
Referring to current inefficiencies in the settlement system, Narayan said that FPIs were receiving funds from the custodians on T+2 instead of T+1. The stock exchanges had shifted fully to T+1 settlement in cash market from January 2023.
"The typical float lying with custodians is estimated at around INR 1 lakh crore (1 trln rupees), of which a significant portion arises from the above lag in remitting funds to the FPI. As in broking, the implicit income from such float, along with foreign exchange conversion linked revenues, allows Indian custodians to charge practically zero as explicit custody fees," Narayan said in his address.
The wholetime member said that SEBI was taking calibrated steps to resolve such remaining inefficiencies. He said that custodians will provide details of the FPI transactions based on input from the clearing corporations on T+0 evening itself, and tax related formalities can then be completed early on T+1. This will enable them to remit funds to FPIs on T+1, he indicated.
In the case of moving to T+0 settlement, which is optional currently, Narayan said that "continuing with the optional T+0 settlement alone might be the more calibrated and prudent option." SEBI had made stock exchanges launch a beta version of the optional T+0 settlement window from March to test waters. End
Reported by Rajesh Gajra
Edited by Akul Nishant Akhoury
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