Sebi takes cautious approach: T+0 settlement to remain optional for now

The Securities and Exchange Board of India (Sebi) is taking a measured view of whether the accelerated settlement mechanism from T+1 to T+0 is essential for the market’s long-term architecture or simply a technological milestone that doesn’t require universal adoption.

In a candid conversation with Fortune India, Sebi Chairman Tuhin Kanta Pandey firmly pushed back against the idea that shortening the settlement cycle is turning the market into a trader’s arena. “That comparison is not appropriate. You’re comparing apples and oranges,” he said, addressing concerns that T+0 might fuel excessive churn and dilute the ethos of long-term investing.

Pandey made it clear that the move to reduce settlement cycles—from T+3 to T+2, then T+1, and now selectively to T+0—is fundamentally about efficiency, investor trust, and risk reduction, not trading behaviour. “Decreasing the time of settlement is about increasing efficiency and improving the trust of investors because why should an investor’s money be locked up? You’re only trying to increase efficiency and ensure the money doesn’t lie with brokers, it lies with investors,” he explained.

The new Sebi chief believes that transition to T+0 enhances investor protection by ensuring that clearing corporations directly credit securities to demat accounts, bypassing intermediaries. “Securities are safe because the clearing corporation directly credits them to your demat account, not through brokers. To that extent, this system is superior in terms of investor protection, money protection, and securities protection,” he said.

In fact, India has taken a global lead in this area. In March 2024, the regulator had introduced the optional T+0 settlement system with an initial pilot set of 25 stocks. Building on this, the regulator, starting January 31, 2025, allowed the T+0 mechanism to be expanded in phases to 500 top stocks by market capitalisation, beginning with the bottom 100 stocks in that list. Each month, an additional 100 would be brought under the optional T+0 mode, gradually broadening the experiment.

The system represents a significant step as under T+0, investors receive stocks and funds on the same day. To facilitate the shift, the regulator has directed qualified stock brokers—those with a minimum number of active clients as of December 31, 2024—to implement systems enabling their clients to participate in the T+0 cycle. These brokers will get three months to become compliant with T+0 requirements. Additionally, from May 2025, custodians—who handle large institutional flows—will also be part of the new settlement ecosystem, and block trades will be allowed under this faster settlement cycle. In short, Sebi has asked exchanges, clearing corporations, depositories, and custodians to prepare for full institutional integration into the system. 

With this move, India becomes the first country globally to pilot such a fast-paced equity settlement framework.

Pandey dismissed fears that T+0 would tilt the market toward short-term trading by pointing out that India’s tax framework already encourages long-term investing. “On the trader-versus-investor issue, you have taxation such as STT. If you’re trading frequently, there’s taxation every time,” he pointed out.

Still, Pandey acknowledged that trading plays a crucial role in providing market liquidity. 

“Can we stop people from trading? They build liquidity in the market. If everyone just sits as investors and nobody trades, exits will be difficult,” he added, stressing that market-making and investor participation are two sides of the same coin.

Even as the settlement infrastructure expands, Sebi isn’t rushing to push T+0 across the board. The regulator has emphasised that it is analysing the model’s broader applicability, especially considering foreign portfolio investor (FPI) participation, custodian coordination, and time zone constraints. “We have to analyse it further, but T+1 is a very good development and gives a fairly right balance because of time zones and FPIs moving money. T+0 may have its own challenges. Hence, it’s optional,” Pandey said.

While the regulator continues to champion technological advancement, it remains focused on ensuring that changes are inclusive, calibrated, and grounded in market readiness. As Pandey put it, the ultimate goal is not velocity for its own sake but stability, transparency, and trust.