Financial overview: Monthly and quarterly payout analysis

The Security Exchange Board of India introduces measures to keep investors, traders and their funds secure. This ensures they can freely trade in the market without worrying about the security of their investments and especially, unused funds. One such initiative launched by SEBI in 2009 is the monthly and quarterly payout for settling the funds. 

In this article, we will look at the policy of monthly and quarterly settlement payouts to understand this policy thoroughly. 

What is a quarterly settlement?

Monthly and quarterly settlements are a policy introduced by SEBI to secure the funds of all traders and investors. Under this policy, your broker is mandated to transfer all the unutilized funds to the bank account of the client on a monthly or quarterly basis. This initiative introduced by SEBI in 2009 ensures that the funds remain secured. 

SEBI has declared that w.e.f. January 2024, the settlement of the unutilized funds based on this policy will take place on the first Saturday of every month (if the investor has opted for monthly settlement) or on the first Saturday of January, April, July, and October (if the investor has opted for quarterly settlement). 

SEBI Guidelines 

Based on the circular issued on October 2022, the main points detailed by SEBI include: 

• If the balance of the trading account is more than 0 on the settlement date, then the entire amount will be credited to the trader’s bank account. 
• If the balance of the trading account is more than 0 on the settlement date and no transaction has been made in 30 days then the funds will be released in the monthly settlement period. 
• If any margin requirements are left on the settlement date, the broker will block an additional 125% against the holdings. If any shortfall occurs in the margin, the funds will be retained, and in case of excess funds, they will be reversed to the bank account. 
• All the accrual and debit charges will also be retained and the funds will be released after the dedication. 

All traders and investors receive a settlement report on their registered email address detailing the funds transferred to their account as well as the amount that is retained on the settlement date by the broker. The report summarizes the value of funds and securities that are available and retained, payout details, and the amount that will not be returned. 

Reasons you did not receive the amount

In case you have not received the settlement payment, these are the potential reasons: 

1. Margin

The broker can hold a margin for the current open positions. A margin of 125% is retained by the broker in addition to the 100% portfolio value of the open positions. This makes the amount retained 225% in total. For example, if you have 25,000 in the trading account and the open positions amount to 10,000. In this case, the margin retained will be 22,500 and the fund released will be 2,500. 

2. User end error

It is mandatory to upload the bank account details to get the monthly payout of mutual funds. If the details are not uploaded then the fund transfer will fail. It can also lead to the account being frozen or blocked. 

3. Invalid IFSC

If the IFSC code is inaccurate, this might transfer your money to another account. This detail is as important as the bank details to ensure a smooth and on-time transfer. 

4. Balance less than ₹1

Certain bank accounts do not process the transaction if your trading account is below Re 1. In this case, the broker will issue the settlement and you will be intimated about the reason for transaction failure. 

5. Service down

Lastly, there is a possibility that your bank server might be down at the time of monthly payout. In this scenario, the broker will retry to execute the payment. 

Conclusion

Irrespective of how often you trade, it is integral to understand the movement of funds and securities and the quarterly and monthly interest payout. The monthly and quarterly payout report provides you with a detailed summary of the funds and securities that are either refunded or credited by the broker. Ensure that you receive the email once the monthly and quarterly interest payout has been settled.  

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