Nithin Kamath: Zerodha CEO Nithin Kamath recently shared important news on Instagram. The Securities and Exchange Board of India (SEBI) is making changes to Demat accounts. Starting from October 14, 2024, shares bought by investors will go directly to their Demat accounts. This will happen through a new net settlement process. This change is a big step in how share transactions are done. It will make the market safer and easier for investors. Here’s a simple look at what this means for you.
Simplifying the Demat Account Process with Nithin Kamath’s Insights
Traditionally, when investors buy shares, those shares first go to the broker’s pool account. After that, they are transferred to the client’s Demat account. However, with the new directive from SEBI, this process is going to change. Starting on October 14, 2024, shares will be transferred directly to investors’ Demat accounts. This change will apply to the equity cash segment and physical settlements. It will make the process faster and safer for investors.
Nithin Kamath highlighted that this simplification means brokers will no longer have access to client securities. This change adds an extra layer of security for investors. It aims to remove the risks linked to brokers handling client securities before they are credited to their Demat accounts.
Important Phases of SEBI’s Implementation for Demat Accounts
The transition to this new system will happen in two phases. The first phase will run from October 14, 2024, to January 13, 2025. This phase will focus on equity cash segments and physical settlements. However, if there are problems like inactive Demat accounts or rejected payouts, the securities might still be temporarily credited to the broker’s pool account.
Starting on January 14, 2025, the direct payout system will cover all security transactions. This includes Securities Lending and Borrowing (SLB) and Offer for Sale (OFS) transactions. At this point, the process will be fully automated. This change will further reduce the role of brokers in the settlement process, making it even smoother for investors.
Immediate Changes to Fund Utilization Highlighted by Nithin Kamath
In addition to these structural changes, Nithin Kamath pointed out another important update that has recently taken effect. Investors can now use 100% of the funds from the sale proceeds for new purchases. This is a change from the previous limit of 80%. This increased flexibility allows investors to reinvest their funds more freely. It makes trading more accessible and efficient for everyone involved.
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