Starting October, FPIs to get funds on the day of settlement: Sebi's Narayan

Sebi Whole-Time Member Ananth Narayan G on Thursday said foreign portfolio investors will get funds into their accounts on the day of settlement itself. At present, FPIs get the funds two days after the transaction or a day settlement, Narayan said, while speaking at the annual GFF here.

He said before custodians can remit funds to FPIs, they need to ensure that all taxes have been withheld as required, and as advised by a tax consultant.

The custodians provide details of transactions to the tax consultant only after settlement of the trade on T+1 or one day after the transaction, he added.

"From October 2024, we expect custodians to make available funds to FPIs on the day of the settlement itself," he said.

He said the custodians will provide details of the FPI transactions based on inputs from the clearing corporations on T+0 evening itself, so that tax-related formalities can be completed early on T+1, well in time for the funds to be remitted the same day.

He said on a typical day, the float lying with custodians is estimated around Rs 1 lakh crore, of which a significant portion arises from the lag in remitting funds to the FPI.

Brokers hold a float of around Rs 2 lakh crore of client funds, which results in an interest income of Rs 12,000 crore per year, he said, adding that this explains why some entities are able to offer trading at minimum charge.

He also said it will be pragmatic to stick to the T+0 settlement rather than press for instantaneous settlement, which has been disclosed to be the ultimate aim by Sebi.

The commercial banker turned regulator also said well-calibrated changes are imperative for economic progress.