Capital Markets: Challenges and Developments

T + 0 Settlement System kick starts today


From UPSC perspective, the following things are important :

Prelims level: T+0 Settlement Cycle

Mains level: NA

Why in the news?

India’s stock market will begin the with a ‘beta version’ of T+0 settlement system (same day settlement) from today. This is the world’s fastest stock settlement system.

About T+0 Settlement Cycle

  • SEBI has planned to introduce the shorter cycle in two phases:
  1. T+0 Settlement Details: In Phase 1, trades executed until 1:30 PM will be settled by 4:30 PM on the same day.
  2. Instant Settlement Mechanics: Phase 2 envisages immediate trade-by-trade settlement, with trading continuing until 3:30 PM.

Features of the T+0 Settlement Mechanism

  • Early Pay-In Trend: A large percentage of retail investors already make early pay-ins of funds and securities, indicating readiness for instant settlement.
  • Instant Receipt Benefits: The mechanism enables instant receipt of funds and securities, reducing settlement shortages and enhancing investor control.
  • Investor Protection: Direct crediting of funds and securities into investors’ accounts, especially for UPI clients, strengthens investor protection.

Settlement Cycle: A Quick History  


  • SEBI shortened the settlement cycle from T+5 to T+3 in 2002, and then to T+2 in 2003.
  • The T+1 cycle was introduced in 2021 and fully implemented by January 2023.
  • In T+1, the settlement of funds and securities occurs on the next day after the trade.

Scope and Implementation of T+0

  • Initially, the T+0 settlement will be available for the top 500 listed equity shares based on market capitalization, implemented in three tranches.
  • The same surveillance measures applicable in the T+1 cycle will apply to the T+0 cycle.
  • Trade-for-trade settlement securities will NOT be eligible for T+0.

Rationale behind T+O Cycle

  • Market Growth and Efficiency: With the significant growth in market volumes and participants, SEBI aims to enhance market efficiency and safety, especially for retail investors.
  • Technological Advancements: The evolution of payment systems like UPI and the sophistication of market infrastructure support the feasibility of shorter settlement cycles.
  • Investor Attraction: Faster transactions, reliability, and low costs are key factors that attract investors, making Indian securities a more appealing asset class.

Benefits of the New Mechanism

  • Flexibility for Clients: The new mechanism offers faster payouts of funds to sellers and securities to buyers, providing greater flexibility and control.
  • Market Ecosystem Advantages: The faster settlement cycle is expected to enhance the operational efficiency of the securities market, benefiting the entire ecosystem.



2017: The term ‘Digital Single Market Strategy’ seen in the news refers to

a)    ASEAN

b)    BRICS

c)    EU

d)    G20


Practice MCQ:

With reference to the T+0 Settlement Cycle, consider the following statements:

1.    Trades executed until 1:30 PM will be settled by 4:30 PM on the same day.

2.    Trade-for-trade settlement securities will also be eligible for T+0.

Which of the given statements is/are correct?

a)    Only 1

b)    Only 2

c)    Both 1 and 2

d)    Neither 1 nor 2

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