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India's Securities Settlement Time Plunges to One Day

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  Published in Business and Finance on Thursday, February 12th 2026 at 0:59 GMT by Business Today
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Mumbai, February 12th, 2026 - The Securities and Exchange Board of India (SEBI) today announced the full implementation of its groundbreaking securities credit settlement process, allowing for direct dematerialized (demat) transfers and slashing settlement times from a cumbersome 120 days to a remarkable single day. This sweeping change is poised to reshape the Indian securities market, boosting efficiency, reducing systemic risk, and ultimately benefiting investors across the board.

The move, initially proposed in late 2025, has been rolled out in phases, with today marking the complete transition for all listed securities. For years, the Indian market has lagged behind global counterparts in settlement efficiency. The lengthy 120-day cycle was a legacy of older trading and clearing systems, creating bottlenecks, increasing counterparty risk, and hindering market liquidity. SEBI's intervention addresses these critical issues head-on.

The Mechanics of Change: Direct Demat Transfer

The core of the new system is the elimination of multiple intermediaries in the securities transfer process. Previously, transactions involved a series of steps requiring validation and confirmation by various entities. Now, under the new regulations, securities move directly from the seller's demat account to the buyer's demat account. This is enabled by a modernized clearing and settlement infrastructure, significantly enhancing automation and real-time processing.

"This isn't just about speed; it's about a fundamental shift in how we operate," explains Dr. Anya Sharma, a leading financial market analyst. "By removing layers of intermediaries, we've not only reduced settlement time but also minimized the potential for errors, discrepancies, and the associated operational costs."

A Deep Dive into the Benefits

The advantages of this new system extend far beyond mere convenience. Here's a detailed look at the key impacts:

• Accelerated Liquidity & Capital Turnover: The rapid settlement cycle frees up capital that was previously locked in transit for extended periods. This injected liquidity fuels faster market turnover, enabling investors to react quickly to changing market conditions and maximizing returns.
• Mitigated Counterparty Risk: The reduced settlement time dramatically lowers the risk of default by either the buyer or the seller. A shorter exposure window minimizes the potential for market disruptions caused by counterparty failures.
• Enhanced Transparency and Auditability: The direct demat transfer provides a clear and verifiable audit trail, making it easier to track transactions and investigate any potential irregularities. This increased transparency fosters investor confidence and promotes market integrity.
• Lower Transaction Costs: Streamlined processes translate into reduced operational costs for brokers, depositories, and clearing corporations. These savings are expected to be passed on to investors in the form of lower transaction fees.
• Improved Investor Experience: Investors, both retail and institutional, will experience faster access to their securities, enhancing their overall trading experience. This is especially beneficial for short-term traders and those who frequently rebalance their portfolios.

Industry Response and Future Implications

The industry response to the SEBI's initiative has been overwhelmingly positive. Leading brokerage firms have reported a significant reduction in settlement failures and a corresponding increase in trading volumes. Depositories like CDSL and NSDL have invested heavily in upgrading their infrastructure to support the new system, and early reports suggest they are handling the increased transaction load with ease.

However, the transition hasn't been without its challenges. Some smaller brokers initially struggled to adapt to the new system, requiring support from SEBI and larger firms. Addressing these disparities was crucial to ensure a smooth implementation.

Looking ahead, experts predict that this move will pave the way for further innovations in the Indian securities market, including the potential introduction of same-day settlements and even real-time gross settlement (RTGS) for securities transactions. SEBI is already exploring the use of blockchain technology to further enhance security and transparency in the settlement process. The goal is to establish India as a leading global financial hub, characterized by efficiency, innovation, and investor protection. This isn't simply a regulatory change; it's a foundational step towards a more modern and robust securities market for India.