Foreign Investors To Now Access Sale Proceeds As Quickly As Domestic Investors
Overseas investors had reported delays, saying that they could not access their sale proceeds on ‘T+1’ settlement date.
Foreign portfolio investors can now access their sale proceeds as quickly as domestic investors, that is, on the settlement day itself, as per a circular issued by the Securities and Exchange Board of India on Wednesday.
Overseas investors had reported delays, saying that they could not access their sale proceeds on ‘T+1’ settlement date. These delays were usually caused by tax clearance processes and compliance with FEMA regulations.
Resultantly, the markets regulator worked with key groups like FPIs, clearing corporations, custodians, and tax experts to improve the process.
Starting Sept. 9, 2024, FPIs selling securities will receive their tax certificates by 9:00 a.m. the next day (T+1 day). This means they can either withdraw or reinvest their money on the same day. These changes are expected to boost efficiency, saving around Rs 2,000 crore each year.
SEBI expects these improvements to strengthen India as a top investment destination for FPIs, by making the process more investor-friendly.
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Earlier this month, the markets regulator had approved the expansion of same day settlement option for equity trades, including block deals, but refrained from allowing optional instantaneous settlement.
The number of scrips eligible for trading under the optional T+0 settlement will be increased in a phased manner from the 25 to top 500 in terms of market capitalisation, SEBI had said during its board meeting on Oct. 1.
Institutional investors, including foreign portfolio investors and mutual funds, will also have access, it had said.
The T+0 settlement process refers to settling trades on the same day, which means that the seller of stocks will receive money on the day of sale instead of the earlier T+1. The shortened settlement cycle is expected to bring cost and time efficiency, transparency in charges to investors and strengthen risk management at clearing corporations.
