What does settlement cycle mean?

The settlement cycle refers to the time taken for a trade to be settled (Ie. for the shares to be credited or debited from / to your demat account after you've done a buy / sell transaction) , and it’s different for equities and F&O.

Change in settlement cycle for equity segment.

The settlement cycle for equity is T+2 days. But in 2021, SEBI announced the introduction of T+1 rolling settlement (Link to SEBI article) in a phased manner. Where in at periodic intervals (each month or so) some stocks were moved from T+2 settlement cycle to T+1, where the stock with the lowest volumes on the exchange were moved first to the new T+1 cycle and gradually more and more stock were moved to T+1 cycle. However, effective 27th January 2023 all the stocks traded on the BSE & NSE shall be moved to T+1 settlement cycle.  Faster settlement cycle shall mean faster availability of securities and funds to you.

Example scenario of T+2 settlement.

Buy example:
  1. You buy stocks on Monday (T day).
  2. The stocks get credited to your demat account on Wednesday (T+2 day).
Sell example:
  1. You sell stocks on Monday (T day).
  2. Funds get credited to your trading account on Wednesday (T+2 day). You can withdraw the funds post this.

Example scenario of T+1 settlement.

Buy example:

  1. You buy stocks on Monday (T day).
  2. The stocks get credited to your demat account on Tuesday (T+1 day).

Sell example:

  1. You sell stocks on Monday (T day).
  2. Funds get credited to your trading account on Tuesday (T+1 day). You can withdraw the funds post this.

Settlement cycle for Futures and options (F&O) segment.

The settlement cycle for F&O segment is and will continue to be T+1 days.

Example scenario

  1. You close or initiate a long/short futures or short position on Monday (T day).
  2. Any credit obligation of funds in the form of Mark to Market (MTM) or premium gets settled to your trading account on Tuesday (T+1 day). You can withdraw the funds post the settlement. Any debit obligation of funds is settled on the same day, i.e. T day from your trading account.
It will take an additional day for the settlement process if there’s a settlement holiday.