Custodian banks, both local as well as overseas, have approached out to the Security and Exchange Board of India (Sebi) seeking a delay in implementing new rules of trade plus one day, or T+1, until April next year
Banks approach SEBI
Custodians, including CitiBank, Deutsche Bank, HSBC, ICICI Bank and Kotak Mahindra Bank, have reached out to Sebi to postpone the transition from T+2 to T+1 settlement cycle.
These custodians have raised concerns around the shorter stock market settlement cycle and also show cause that how it would pose trouble for both them and FPIs.
They even told the market regulator that not extending the timelines will result in disruptions.
Comment from Deloitte
Rajesh H Gandhi, “Some of the FPI groups and their associates have requested for postponing T+1 to ensure they get adequate time for developing and implementing necessary systems and cash flow and forex management processes.”
Current Settlement
Current regulations allow FPIs to carry out trade and investment activities—including handling of mismatches, obligation matching, margin collection and arranging funds on T+2 basis.
That means all trades on the capital markets have to be settled two days after the trade is carried out.
Largest capital markets globally, USA, UK and Japan all currently follow T+2 settlement. The only exception is China, which moved to T0 or T+1 settlement a few years back.
About Custodian Bank
Custodian banks handle funds and securities on behalf of Foreign Portfolio Investors (FPIs).
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