Tweak rule to facilitate same-day settlement of FPI trades: Bankers
foreign portfolio investors (FPIs) betting on India, have asked the Reserve Bank of India (RBI) to consider a tweak in the rule to facilitate same-day settlement of stock trades, better known as T-plus-zero (or, T+0).
They want the banking regulator to enable FPIs to have a mechanism where funds can be organised from banks during the day to buy shares and squared off in evening-an arrangement that would be handy once the shorter settlement cycle of T+0 is extended for institutional trades. In the T+0 cycle, the buyer gets the shares and the seller receives the money on the same day the trade happens.
Indications are that the market regulator Securities & Exchange Board of India (Sebi), wants custodian institutions to be ready for T+0 settlement for FPI and other institutional trades by end December or early January as the Sebi chairperson is believed to be keen on executing this before her term ends in February 2025, two industry persons told ET.
In a T+0 cycle, FPI managers located in different time zones would have to either hold adequate funds in their rupee accounts with banks in India or have the flexibility of intra-day funding. «Several international asset managers do not want to pre-fund their accounts as that could mean accepting lower returns and paying for the hedging cost (to protect against INR depreciation). Instead, they would prefer a system where the banks (typically, the custodian banks) pay the exchange on their behalf, book forex forward, liquidate the forex contract to convert the dollars
