The T+1 settlement cycle, and the world’s only large market to have one.

Equity settlement is the unglamorous half of the stock market. A trade is executed on Tuesday; the seller transfers the shares and the buyer transfers the money on some agreed later day, and the difference between those two dates is the settlement cycle. For most of the country's modern market history, the cycle was T+2 — two business days after trade. In January 2023, after twelve months of phased implementation that began with the smallest-capitalised stocks and ended with the largest, the Securities and Exchange Board of India moved the entire cash market to T+1. India became, and remains, the only large equity market in the world on a T+1 cycle.

The shift was technically modest. Most of the infrastructure required to settle on T+1 had existed for several years; the question was whether the various counterparties — the clearing corporations, the depositories, the custodians, the banks, the brokers — could coordinate on a tighter schedule without errors. The phased rollout was designed to make the coordination visible, and to give the slower participants time to upgrade.

The operational consequences

The shift was operationally significant. Foreign portfolio investors, who fund Indian trades from overseas custodian accounts, raised concerns about funding times across time zones; for some American funds, T+1 in India meant arranging Indian rupee funding before the New York trading day had ended. The clearing corporations responded by allowing certain pre-funding arrangements, and the custodian banks by extending their cut-off times. The system absorbed the change. Settlement failures, against the predictions, fell.

The market's nervousness about T+1 was, in retrospect, mostly a nervousness about novelty.

The shorter window has consequences that are still being measured. Margin requirements at the clearing corporations have shifted, because the time between trade and settlement is the time over which counterparty risk accrues. Securities lending and short-selling activity, both of which depend on a settled inventory of shares, have had to recalibrate. The cost of carrying a position has, marginally, declined. The cost of getting one's own back-office wrong has, sharply, risen.

The T+0 question

In March 2024, SEBI announced a pilot for T+0 — same-day settlement — on a small set of stocks, available to a subset of investors, with manual oversight. The pilot has progressed unevenly. The argument for T+0 is straightforward; the argument against is that the rest of the world's clearing infrastructure is not on T+0, and an Indian market settling same-day exposes a series of cross-border friction points that nobody has yet untangled. Whether T+0 becomes the universal cycle, or remains a small parallel rail, is a question for the next regulatory cycle.