FPIs may get funds on settlement day: Sebi official
custodians would make funds available to foreign portfolio investors on the day of settlement itself, a senior Sebi official said on Thursday.
«Inefficiencies and opacity dog not only the Indian domestic investor; they also impact foreign portfolio investors (FPIs). While India fully moved to a T+1 settlement cycle in January 2023, most FPIs are only able to access their funds from sale of securities on T+2 or later,» Sebi whole time member Ananth Narayan said. He was speaking at the Global Fintech Fest.
“Some of the inefficiencies that have crept in here are frankly man-made. Before custodians can remit out funds to FPIs, they need to ensure that all taxes have been withheld as required, and as advised by a tax consultant,” he said.
Currently, custodians provide the details of transactions to the tax consultant only after settlement of the trade on T+1.
The tax consultant would then provide the requisite details later in the evening on T+1 or beyond, thus making funds practically available to the FPI only on T+2 or beyond. Incidentally, the typical float lying with custodians is estimated at around `1 lakh crore, of which a significant portion arises from the above lag in remitting funds to the FPI, Narayan said. He added, the implicit income from such float, along with foreign exchange conversion linked revenues, allows Indian custodians to charge practically zero as explicit custody fees.
The Sebi official also said, currently brokers hold about Rs 2 lakh crore of client funds on their books on a given day.
