SEBI Eases Settlement Norms for Inactive Brokerage Accounts

The Securities and Exchange Board of India (SEBI) has introduced revised settlement norms for brokerage accounts inactive for over 30 days. The new rules aim to enhance operational efficiency and address concerns raised by the brokerage industry regarding stringent timelines for returning client funds. These changes are expected to reduce the procedural burden on brokers while ensuring secure handling of client funds.

SEBI’s Revised Settlement Guidelines

Under the updated norms, brokerage accounts deemed inactive—those with no trades for 30 calendar days—will now have their funds returned on the next scheduled monthly settlement date. This change applies irrespective of whether clients opt for monthly or quarterly settlement cycles.

Previously, brokers were required to return funds within three working days of identifying inactivity. However, the Brokers’ Industry Standards Forum (ISF) highlighted the operational difficulties of adhering to this timeline, even though client funds remained securely held by clearing corporations. SEBI’s circular addressed these challenges by aligning settlement timelines with the stock exchanges’ annual calendars.

Implications for Clients and Brokers

The revised norms provide flexibility for brokers while safeguarding clients’ settlement preferences. If an inactive client resumes trading before the monthly settlement date, their funds will be handled as per their chosen cycle, ensuring a client-centric approach. SEBI has also mandated stock exchanges to update their regulations and inform members to facilitate smooth implementation.

This change is expected to reduce administrative bottlenecks for brokers, while clients continue to benefit from secure and transparent fund handling. With immediate effect, the guidelines seek to balance operational efficiency with client satisfaction.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.