The Hindu Business Line : If all goes well, T+1 by Oct: Bajpai

COME July 1, 2004, an institutional investor may possibly have the shares purchased by it on any day being credited to its account on the following day and simultaneously find its bank account swiped off for an equivalent value.

But a lot depends on how quickly the banking industry is able to expand the scope both in terms of the number of players and also the nature of transaction put through under the Real Time Gross Settlement (RTGS) system currently under the implementation by the banking industry, Mr G.N. Bajpai Chairman of SEBI, told Business Line.

He was responding in the context of a perceived delay in the market switching over to the T+1 system of settlement.

"Once I am convinced that RTGS is working well and all transactions, not just high-value transactions, are taking place seamlessly, I would take a couple of months to brief the intermediaries and announce T+1 in India," he said.

"On the securities side, straight through processing would be effective and mandatory from July 1, 2004 for all non-retail transactions. STP would prepare the securities side for T+1," said Mr Bajpai.

While the Reserve Bank of India has put the RTGS in place, it is still not market-wide. Only four banks - State Bank of India, Standard Chartered Bank, HDFC Bank and Saraswat Bank - have implemented the system so far. However, 16-20 more banks are slated to join the RTGS by the end of the month.

The RBI, on its part, is seeking to put in place a fully integrated system by July. Banks have also been asked to expand the coverage of RTGS so that a larger customer base would be able to avail itself of this service. If the implementation of RTGS and STP go as per schedule, according to Mr Bajpai's plans, T+1 settlement would be a reality by October.

STP and RTGS result in quick processing and ensure fewer errors and lower costs. While STP was introduced about a year ago, it was on an optional basis. This has been made mandatory for all corporate trades from July. "For individuals I do not want to implement the systems yet as there are various infrastructure requirements. But it would be a question of time even for this segment," said Mr Bajpai.

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If all goes well, T+1 by Oct: Bajpai