SEBI to Expand T+0 Settlement: Strengthening India’s Financial Market Infrastructure

The Securities and Exchange Board of India (SEBI) has announced plans to expand the T+0 settlement cycle to a wider array of stocks following the successful completion of its initial pilot phase. T+0 settlement refers to a system where the transfer of shares and funds happens on the same day the trade is executed, a significant leap from the current T+1 (trade plus one day) standard.

India has been a pioneer in shortening settlement cycles, having transitioned from T+2 to T+1 in early 2023. The move toward T+0 is designed to provide investors with immediate access to liquidity, thereby increasing the velocity of capital in the market. By shortening the time between trade execution and settlement, the regulator aims to significantly reduce counterparty and settlement risks, which are inherent in longer cycles. This modernization is expected to make the Indian equity market more attractive to retail investors who value quick access to their funds.

From a policy perspective, this transition reflects the growing sophistication of India’s digital payment and banking infrastructure, such as UPI and real-time gross settlement systems, which provide the necessary backbone for instantaneous financial transactions. However, the expansion also presents operational challenges. Market intermediaries, including brokers and clearing corporations, must upgrade their technology to handle real-time processing. Furthermore, Foreign Portfolio Investors (FPIs) may face hurdles due to time zone differences and the need for pre-funding trades, which SEBI is addressing through a phased implementation.

SEBI’s cautious approach—starting with a pilot and then expanding—demonstrates a commitment to maintaining market stability while pushing for innovation. This reform is expected to lower the cost of capital and improve the overall 'Ease of Doing Business' in the Indian financial sector, aligning with the broader goal of making India a global financial hub.