View all Announcement Mon,February,24,2025

Direct Payout – Pilot Implementation, effective from February 25, 2025

The Securities and Exchange Board of India (SEBI) has beenactively working to enhance the efficiency and security of securitiestransactions for investors. A significant initiative in this direction is the DirectPayout of Securities mechanism, which aims to streamline the settlementprocess by crediting securities directly to investors' demat accounts, there byreducing intermediary involvement.

Implementation Phases and Rollback

The Direct Payout system was designed to be implemented in two phases:

1. Phase 1: Initially set to commence on October 14, 2024, this phase targeted the equity cash segment and physical settlements. However, due to operational challenges, the launch was postponed to November 11, 2024. Despite the adjustments, exchanges encountered "slight delays" in certain cases, leading to a rollback of the implementation shortly after its initiation. The exchanges announced that the go-live date would be rescheduled, with further updates to be provided subsequently.
2. Phase 2: Scheduled to begin on January 14, 2025, this phase aims to extend the Direct Payout system to all security transactions, including Securities Lending and Borrowing (SLB) and Offer for Sale (OFS).  This was not rolled out as scheduled.

Pilot launch from February 25, 2025

To address the challenges faced during the initial rollout,SEBI, in collaboration with the National Securities Depository Limited (NSDL),has devised a pilot plan. This pilot is set to commence on February 25, 2025,focusing on testing the Direct Payout mechanism under controlled conditions toidentify and rectify potential issues before a full-scale implementation. Theinsights gained from this pilot are expected to inform necessary adjustments,ensuring a smoother transition when the system is fully operational.

Pledge Process for NRI and Resident Indian (RI) Clients

The introduction of the Direct Payout system necessitates aclear understanding of the pledge process, especially for Non-Resident Indian(NRI) and Resident Indian (RI) clients:

• Current Pledge Mechanism: Traditionally, when investors purchase securities on margin or without full payment, brokers manage the pledge process. This involves transferring securities to the investor's demat account but marking them as pledged until full payment is received.
• Proposed Changes: Under the new guidelines, brokers will no longer directly manage pledges. Instead, they will request the Clearing Corporation (CC) to mark the pledge in the investor's demat account directly. This change aims to reduce the involvement of brokers in the pledge process, thereby streamlining operations and enhancing security.
• Implications for NRI Clients: In this Pilot launch of the Direct Payout implementation, NRIs are exempted from the direct credit mechanism. This means that during this phase, payouts for NRI clients will continue to be credited to the clearing member's pool account.  Pledge link for MTF purchases will be sent through Navia for the clients to accept.

Important Note for Clients doing BTST

• There may be a delay in the payout process at the Clearing Corporation (CC) level.
• If clients execute BTST (Buy Today, Sell Tomorrow) trades, there is a risk of failure in providing pay-in, leading to a short delivery situation. We advise clients to sell stocks only after the delivery of the shares are credited to their Demat Account. 

[Posted @ 15:14 PM]

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