Buying shares in the Indian stock market means you will get the shares reflected in the demat account on the second day after trading. In the physical delivery of shares, it is the responsibility of the depository participants or DP and your broker to transfer the shares from one to another demat account holder within the stipulated time.
Usually as per the Indian stock market regulation, T+2 is the trading cycle in which shares are transferred from one demat account to another demat account holder. However, if after buying shares, your DP has not transferred the shares to your demat account on T+2 day, then what can you do or what would be the reason and how to deal with such problems?
Topics Covered :
- What is the T+2 Trading Settlement Cycle and how does it work?
- 5 Possible Reasons Behind Shares Not Transferred to the Demat account:
- What to Do When Shares Not Transferred into Your Demat Account?
- Conclusion
What is the T+2 Trading Settlement Cycle and how does it work?
In earlier times when digital technology was not developed enough, the trading cycle was much longer – you can say 15 days or week taking time to manually transfer the ownership of shares. But now the scenario has completely changed and thanks to the digital era, the trading settlement cycle becomes up to 2 days making the transaction faster.
The T+2 is the trading settlement cycle applied in the Indian stock market. It means when you buy shares on a day, the delivery of shares will be completed on 2nd day of the trading day. Suppose you have purchased shares on Monday, then it will be reflected or credited into your account on Wednesday, and this is the maximum time takes place. If you bought shares on Friday, then it will reflect in your account on Tuesday, as two days are not trading days.
However, despite in digital era, few of the depositors do not use the digital mode of transferring shares, instead, they still use the physical mode of verification and taking cheques and then issuing the transfer of ownership using the delivery instruction slip.
Because of this such depositories need time to transfer the shares taking T+2 days and it is the maximum days allowed to transfer the shares from one demat to another. But what if shares are not transferred into your demat account on T+2 Day? There could be multiple reasons behind that, let’s find out what they are and how to sort them out.
Recommended Read: What is Trade Settlement
5 Possible Reasons Behind Shares Not Transferred to the Demat account:
Usually, as per the trading settlement cycle rules of T+2, the shares should be transferred to your demat account on the second working day after buying. However, sometimes if it doesn’t happen, there could be multiple reasons as to why shares are not credited into your demat account. Let’s find out what could be the possible reason behind such delays.
- Payments Due With Your DP or Broker
If there is any due pending against your demat account, your share transfer will be held by the depositary. However, most of the depository participants do not delay or hold the share transfer because of such overdue payments. But if the due amount is accumulated and becomes very high, then depositories can take such actions to hold shares.
The overdue payment could be anything from unpaid markings to annual demat charges, MTM losses, DP clearing fees, or other charges. Make sure you need to clear all such dues and payments so that DP cannot take such actions. Contact your DP and broker to know why your share has been not transferred if there is any payment overdue or other reasons.
- Unavailability of Shares Your Bought
One of the other reasons behind not transferring shares into your demat account is shares not available at the time of your purchase. This means the quantity of shares you bought from the market might not be available that much at that point of time. Usually, it does not happen with large-cap stocks, small or other illiquid stocks are sometimes not available.
Now your shares will be transferred only after acquiring them from the auction market. You may get your shares after 5-6 days depending on the auction completion. If your shares are not credited because of this reason, then your DP will inform you. However, in case shares are not arranged or credited into your demat account even after 5-6 days, then your fund or the amount of money you paid at the time of purchase will be returned into your account.
- BTST/STBT Activities by the Intraday Traders
Apart from intraday trading, there is another concept in which you don’t get delivery of shares into your demat account. If you bought specific shares today and sold the same company shares in the same quantity the next day, then shares delivery will not take place. In the stock market, this trading activity is called BTST or Buy Today Sell Tomorrow.
However, meanwhile, if you have sold another stock on the second day (T+1), then this stock will go into the auction market and your DP might hold the transfer of other shares temporarily in your demat account. And when the auction is over, the stock will be transferred into your demat account. Hence, make sure you are not stuck into BTST trading activities.
- Frozen or Dormant Demat Account
It could be also one of the reasons behind the shares not being transferred into your demat account even after the T+2 settlement cycle. Just like your bank account if you are not using your demat account for a longer period, then it might become dormant.
You need to contact your DP or broker to know the status of your demat account. Sometimes it could be frozen or become inactive due to pending KYC or verification-related issues. In such frozen and inactive demat accounts, shares are not transferred.
- There could be No Valid Reasons
Apart from above mentioned genuine reasons there could be no valid reason behind not transferring the shares into your demat account. If your shares are not credited into your demat account after T+2 days, then you should inform your DP about this. Sometimes brokers intentionally hold shares in their pool account for no valid reasons.
Here your broker might be misusing your shares, which means they can use them for financing from the bank by pledging shares as a collateral security. You need to inform your DP if such suspicious activities occur, or you can also inform the regulatory authority SEBI or the compliance department of your broking company. You can also inform to higher authorities of your broking company.
What to Do When Shares Not Transferred into Your Demat Account?
If shares are not transferred into your demat account, try to figure out the possible reason out of the above-mentioned. However, if you are still unable to find a valid reason why the shares have not been transferred into your demat account, then you should inform about the same to your broker as well as your depository participant to check the valid reason.
In case of IPO allotment, if the shares have been not transferred into your demat account before or till the date of listing then you should immediately inform your broker and DP. There could be multiple reasons behind not transferring shares, if this happens it is your responsibility to figure out and inform about the same to your broker and DP to take quick action.
Conclusion
The T+2 trading settlement cycle is applicable in most of the stocks traded on the stock exchange. Even now SEBI has allowed settling the share delivery the next day. Means the T+1 trading settlement cycle is also applicable to various selected stocks. But still, most of the stocks come under the T+2 trading settlement cycle, so you should wait for 2 days.
However, if shares are not transferred after 2 working days, then you can wait for one more day but the next day you need to inform your broker and DP. The reason behind not transferring the shares into your demat account could be anything like pending overdue on your demat account, unavailability of shares, BTST activities, or frozen demat account.
It is purely your responsibility to inform your broker and DP, as it might be possible that your broker or DP is not aware of such issues, as everything happens electronically. But overlooking such matters or delay in escalating such issues, after T+3 day you should immediately inform your broker and DP to look after this matter and sort it out as soon as possible.
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