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What does settlement cycle mean?

The settlement cycle refers to the time taken for a trade to be settled, and it’s different for equities and F&O.

Settlement cycle for equity segment.

The settlement cycle for equity is T+2 days. But in 2021, SEBI announced the introduction of T+1 rolling settlement (PDF) in a phased manner. Stocks (DOC) have been moved to T+1 settlement from 25th Feb, 2022.

Example scenario of T+2 settlement.

Buy example:
  1. You buy stocks on Monday (T day).
  2. The stocks get credited to your demat account on Wednesday (T+2 day).
Sell example:
  1. You sell stocks on Monday (T day).
  2. Funds get credited to your trading account on Wednesday (T+2 day). You can withdraw the funds post this.

Example scenario of T+1 settlement.

Buy example:

  1. You buy stocks on Monday (T day).
  2. The stocks get credited to your demat account on Tuesday (T+1 day).

Sell example:

  1. You sell stocks on Monday (T day).
  2. Funds get credited to your trading account on Tuesday (T+1 day). You can withdraw the funds post this.

Settlement cycle for Futures and options (F&O) segment.

The settlement cycle for F&O segment is T+1 days.

Example scenario

  1. You close or initiate a long/short futures or short position on Monday (T day).
  2. Any credit obligation of funds in the form of Mark to Market (MTM) or premium gets settled to your trading account on Tuesday (T+1 day). You can withdraw the funds post the settlement. Any debit obligation of funds is settled on the same day, i.e. T day from your trading account.

It will take an additional day for the settlement process if there’s a settlement holiday. See What is a settlement holiday and its impact? , Market holiday calendar 2022 .

Read more about clearing and settlement on Varsity by visiting zerodha.com/varsity/chapter/clearing-and-settlement-process.