SEBI regulations mandate a “running account settlement” for client funds held by brokers, which requires the unutilized funds to be transferred back to the client’s primary bank account at least once every 30 or 90 days, depending on the client’s preference.
A recent circular, SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2025/1, issued on January 6, 2025, modified the rules specifically for accounts that have been inactive.
Key Provisions of the Circular
- Mandatory Settlement for Inactive Accounts: If a client has not executed any trades for 30 consecutive calendar days, their entire free credit balance must be returned to their primary bank account.
- Timeline Change: Previously, brokers had to return funds within three working days of the account becoming inactive for 30 days. The new circular eases this operational burden by requiring the funds to be settled on the upcoming monthly running account settlement date as notified by the stock exchanges in their annual calendar.
- Client Preference: For active clients, the settlement frequency remains either monthly or quarterly (every 90 days) based on the client’s initial choice.
- Resuming Activity: If a client who has been inactive for 30 days places a trade before the scheduled monthly settlement date, the settlement process will revert to their original chosen cycle (monthly or quarterly).
- Purpose: This rule is designed to safeguard investors’ interests by ensuring that unutilized funds are not held by brokers indefinitely and are returned to the client’s bank account.
In Summary
The circular does not introduce a new 30-day settlement payout for all trades but rather specifies the timing for the mandatory return of unutilized funds for accounts that have been inactive for 30 days, aligning it with the standard monthly settlement cycle date. The standard trade settlement cycle in the Indian market for most securities is currently T+1 (Trade date plus one business day).
For further details link: https://www.sebi.gov.in/legal/circulars/jan-2025/measure-for-ease-of-doing-business-settlement-of-account-of-clients-who-have-not-traded-in-the-last-30-days_90552.html