A new settlement mechanism for foreign portfolio investors (FPIs) has led to efficiency gains of Rs 2,000 crore annually, according to Sebi.
The regulator introduced this system on September 9, enabling FPIs to access sale proceeds on the T+1 day.
In a circular issued on Wednesday, Sebi stated that FPIs can now obtain the proceeds from securities sales on the day following the trade (T+1), thanks to process enhancements. ‘T’ refers to the day the trade occurs, and ‘T+1’ is the settlement day.
These process improvements have resulted in efficiency gains estimated at Rs 2,000 crore per year, as mentioned in Sebi’s press release dated October 16.
Previously, FPIs faced delays in accessing sale proceeds due to tax clearance procedures. However, under the new system—effective since September 9, 2024, after consultations with stakeholders—FPIs can access the proceeds on T+1 for either repatriation or reinvestment, aligning their settlement process with that of domestic institutional investors.
The updated process ensures that tax certificates for FPI sale trades executed on ‘T’ day are issued by 9:00 AM IST on ‘T+1’ day, allowing FPIs to access their funds the same day.
Sebi’s circular highlighted the previous issue: “FPIs encountered delays in accessing their sale proceeds beyond the typical T+1 settlement date, primarily due to the former tax clearance procedures necessary to comply with FEMA regulations.”
To resolve this, Sebi worked with key stakeholders, including FPIs, clearing corporations, custodians, and tax consultants, resulting in significant process improvements that now allow FPIs to access sale proceeds on the settlement day, matching the timelines of domestic institutional investors.
