Equity mutual fund to shift to T+2 settlement cycle from Feb 1

New Delhi: Asset management companies (AMCs) will move to a shorter redemption payment cycle of T+2 for equity schemes from February 1.

What is T+2 settlement cycle

At present, funds are transferred to the investor's bank account within 3 days after the completion of the redemption process.

The move is in line with the T+1 settlement cycle of equity markets to benefit mutual fund investors.

From Friday, Indian equity markets moved to a T+1 settlement cycle for all stocks, shortening the settlement cycle by a day and making the availability of funds a day sooner than at present.

To pass on this benefit to mutual fund investors, it has been decided all AMCs will move to the T+2 redemption payment cycle for equity schemes, and implement this uniformly with effect from February 1, 2023, after allowing a couple of days for the settlement cycle to stabilise, Association of Mutual Funds in India (Amfi) said in a statement.

"We want to pass on the benefit to our mutual fund investors and hence we are proactively adopting a T+2 redemption payment cycle for equity funds," Aditya Birla Mutual Fund MD and CEO and AMFI Chairman A Balasubramanian said.

Since the day, Sebi announced the phased movement of equity markets to the T+1 settlement cycle, the industry has been preparing to shorten the redemption payment cycle, AMFI Chief Executive NS Venkatesh said.

From January 27, all securities -- equity shares, including SME shares, exchange-traded funds (ETFs), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), Sovereign Gold Bond (SGB), Government Bonds and Corporate Bonds trading in the equity segment will now be settled only on T+1 basis.

Globally most stock exchanges in developed as well as emerging markets follow the T+2 settlement system. PTI SP SP BAL BAL