T+2 days settlement cycle is live in India for mutual funds

By: ISL | 13 February, 2023

AMFI has started settling equity mutual funds on a T+2 day. Read on to learn more.

All Indian asset management firms (AMCs) have switched to a T+2 (trading date plus two days) redemption payment cycle. It has been started on 1 February in an effort to assist mutual fund investors.

What is t1, t2 and t3 settlement?

• Here are two important factors to consider while buying or selling a stock, bond, or other security: the transaction date, or T, and the settlement date. The terms T+1, T+2, and T+3, therefore, stand for the settlement dates of securities transactions that occur on a transaction date plus one Day, two days, and three days, respectively.
• The transaction date, as the name indicates, is the precise day when the transaction was completed. For instance, if you purchase 80 shares today, T, the date of today becomes the transaction date. This date will always be the day that you completed the transaction, therefore it never changes.
• Indian stock exchanges had been using T+2 settlement procedures until recently; it was the first large economy to switch to T+1 for equities. Additionally, AMFI adopted the NSE's structure for quicker settlement times: starting today, equity mutual funds are settled in T+2 days rather than the previous T+3 days.
• Investors have two days to "settle" or finalize their security purchases. The abbreviation "T+2" stands for "trading date plus two days," and it refers to this settlement cycle.
• T+2 refers to the requirement that your payment for a security purchase is received by your brokerage company no later than two business days following the trade's execution.
• Your securities certificate must be delivered to your brokerage company no later than two business days following the sale of a security.
• The majority of security transactions, such as those involving stocks, bonds, municipal securities, mutual funds sold through a brokerage company, and limited partnerships that trade on an exchange, are subject to the two-day settlement date. Stock options and government securities are settled on the next business day after the trade.

Important Times to Know

• Customers who withdraw money from equities mutual funds in India will begin receiving credit to their bank accounts within two days starting on February 1, 2023, as opposed to the previous three days.

 

 

Withdraw timelines
Scheme	Cut-off time	Applicable NAV	Payout Day
Equity	2.45 PM	Same Day	T+2 Business Day
Switch timelines
Schemes	Cut-off time	Switch-Out NAV	Switch-In NAV
Equity to Equity	2.45 PM	Same day	T+2 Business Day
Equity to Debt	2.45 PM	Same day	T+2 Business Day
Equity to Liquid	2.45 PM	Same Day	Day Prior to T+2 Business Day

 

 

• It is clear from this that the adoption of the quicker settlement mechanism considers investors' interests and lowers the risks associated with financial markets. Additionally, it motivates all parties involved— exchanges, brokers, clearing firms, and exchanges— to modernize their facilities and technology.