As per SEBI regulations, brokers are required to settle (transfer to client's bank account) unused funds based on certain settlement criteria.
However, brokers are permitted to retain some fund balances of the client's despite the client being qualified for settlement as per settlement criteria. Such a balance is called as retainable balance and it is explained below:
If on the day of settlement date (Let's assume its a Friday) your trading account has the following:
- Rs. 1,00,000 as cleared fund balance.
- Rs. 20,000 as value of pledged securities (after haircut)
- Rs. 25,000 as used margins on open positions. (Blocked margins on open positions)
- Rs. 10,000 as debit amount for purchase transactions done on Thursday / Friday (T & T-1 day fund obligations)
Then the calculation for returning the funds to your bank account from your trading account shall be as follows:
Cleared Fund Balance
(-) T & T-1 day fund obligations [ ie. value of shares purchased on friday / thursday]
(-) 50% of blocked margins on open / un-settled positions
(-) [ 175% of blocked margins on open / un-settled positions
(minus) value of pledged share and second preference to available cleared fund balance ]*
* If the value is negative consider this value as 0
For example using the above and formulae we can calculate the funds that shall be returned to you as follows:
Fund balance: Rs. 1,00,000 (Cleared Fund Balance)
(-) Rs. 10,000 (T & T-1 day fund obligations)
(-) Rs. 12,500 (50% of blocked margins on open / un-settled positions)
(-) Rs. 23,750 [ 43750 ( ie. 175% of 25000) - 20000 (ie. Value of pledged securities after haircut) ]
ie. 1,00,000 -10,000-12,500-2,3750 = Rs. 5,3750 shall be retuned to your bank account.