With online trading using demat accounts, buying and selling shares is just a matter of clicking a button. We often assume that as soon as we click buy, the share we purchased will be immediately transferred into our demat account. However, this is not always the case. Indian stock exchanges follow the T+2 settlement cycle under which shares are transferred to the purchaser’s account by the Depository Participant within T+2 trading days. Sometimes, however, the purchased stock does not show up in the buyer’s demat account even after T+2 days. What does one do in such a situation? Read on to find out.
What is T+2 Settlement?
You wonder why in this digital age when everything happens at the click of a button, does settlement of shares by the depository participant take up to T+2 days. The answer to this lies in the fact that not all depository participants operate online. There are many legacy depository participants who still use the physical method of accepting payment through cheques and transferring ownership of shares through Delivery Instruction Slip (DIS). This is why depository participants ask for a maximum of T+2 days for the settlement of shares. Here T+2 days means a maximum of 2 trading days after the transaction was performed. So if the transaction was performed on a Friday, T+2 days would mean Tuesday as Saturday and Sunday are trading holidays. It needs to be noted that this is the maximum time within which your depository participant should transfer the shares to your demat account. Often, the shares are transferred before this period as well. But what if shares are not transferred even after the T+2 deadline is over?
Reasons Why Your Shares Haven’t Been Transferred Even After T+2 Days
There are several reasons why your shares may not have been transferred to your demat account even after T+2 days.
1. Dues Pending With Your Depository Participant/Broker
There are a lot of small charges associated with trading on a demat account that need to be paid to the depository participant. Although depository participants do not usually obstruct the transfer of shares on account of small overdue amounts, sometimes these charges can add up and your depository participant may hold up the credit of shares to your demat account until such times as these charges are paid by you. These dues may include unpaid margins, unfunded market-to-market losses, or annual account maintenance charges (AMC). In such a case, it is advisable that you get in touch with your depository participant or broker and discuss the overdue charges if any.
2. Shortfall of Shares Bought
Sometimes it so happens that you may purchase a certain number of shares, but that number may not be available in the market for sale during the given period. In such a case, the shares are not credited to your account until they are available from the seller. Although this rarely happens with large-cap stocks or stocks that have high trading volume, it does occur sometimes with small or mid-cap stocks that have low trading volumes and there is a liquidity issue in the market. In such a case, the stocks that the seller failed to deliver go up to auction, and you will either have the shares transferred to your account within 5-6 days, or you will have your money returned to you. Your depository participant keeps you informed of these proceedings. However, to be on the safe side, it is advisable that you immediately get in touch with your broker/depository participant in case your shares are not credited to your demat account within T+2 days.
3. Frequent BTST/STBT Activity by Intra-day Traders
If you are a frequent intra-day trader you likely place a lot of Buy Today Sell Tomorrow orders (BTST). With BTST, you are allowed to sell the stock on T+! day, even though the delivery happens on T+2, with the understanding that you would give delivery once you get the stock. If you have sold the stock on T+! itself, then, of course, there is no question of receiving delivery on T+2. However sometimes, when you sell another stock on T+1, and this stock goes into auction, the depository participant may put crediting on hold for your demat account for other stocks as well. In such a case, the stock will be credited to your account once the auction is over.
4. Depository Participant Has Not Transferred for No Valid Reason
Occasionally, your depository participant may not credit shares to your demat account for any of the reasons listed above. In such a case one should wait for T+2 days and then immediately escalate the issue with the depository participant. Sometimes the broker can misuse your shares by holding on to them. For instance, there have been cases where brokers have tried to raise finances from banks by pledging the investors shares lying with them as collateral. You need to be vigilant about such malpractices.
Shares you purchase using your demat account are usually transferred to your account within T+2 business days. However, sometimes there might be a delay owing to a number of reasons such as dues pending with the depository participant, not enough liquidity in the purchased stock, or frequent BTST activity. In each case, it is advisable that you get in touch with your broker immediately on T+3 and escalate the matter.