Sebi Introduces New Rules for Unused Trading Funds: Money to Be Returned After 30 Days

In a significant move aimed at enhancing investor protection and improving ease of doing business, the Securities and Exchange Board of India (Sebi) has issued new guidelines for stock brokers regarding unused funds in trading accounts. Starting immediately, investors who have not made any transactions within the past 30 days will see their funds automatically transferred back to their bank accounts on the next settlement date.
Mandatory Return of Unused Funds
As per the circular issued on January 6, 2025, Sebi has revised the rules for clients with a credit balance who have not conducted any transactions in the last 30 calendar days. Under the new guidelines, if funds are lying unused in the client’s account for more than 30 days, the entire credit balance will be transferred to the client’s linked bank account during the upcoming settlement date in the monthly running account settlement cycle. This will be done regardless of the client’s preferred settlement cycle, as stipulated by the stock exchanges.
Example to Understand the New Rule
To illustrate the new policy, let’s consider an example: If an investor has ₹38,000 in their Zerodha trading account but has not made any trades during December, and the settlement date for the monthly cycle is the 6th of each month, then the full ₹38,000 will be returned to the investor’s bank account on January 6th. If the investor wants to resume trading after that, they will need to fund their account again.
Impact on Investors Who Trade Sporadically
The new rule mainly affects investors who do not trade frequently and prefer to keep funds in their trading accounts as “dry powder.” If they do not initiate any trades within a 30-day window, their unused funds will be returned to their bank account on the settlement date of the monthly cycle.
However, if an investor makes a trade after the 30-day period but before the settlement cycle, the settlement will proceed based on the client’s preferred cycle, whether it is quarterly or monthly, as indicated to the trading member.
Immediate Implementation
This rule comes into effect immediately and is designed to ensure that clients’ funds are not left idle for extended periods while also offering better liquidity and transparency in the market. Investors will now need to be aware that if they are not trading regularly, their unused funds will be transferred out of their trading account automatically after 30 days.
The revised guidelines reflect Sebi’s continued efforts to streamline operations in the stock market, making the process more investor-friendly and secure.