New Account Settlement System
- SEBI mandates stockbrokers to New Account Settlement System i.e., transfer the available credit balance from trading account to bank account, at least once in a quarter (90 days) or 30 days.
- The process of transferring the unutilised funds back into the bank account is called ‘Running Account Settlement’ or ‘Quarterly Settlement of Funds’.
- Funds are transferred back to the primary bank account of the customer that is linked to the trading account.
New Account Settlement System: Highlight of Guideline
- As per the New Account Settlement System guidelines, the New Account Settlement System will now be done on the first Friday of the quarter or the month depending upon the option selected by the customer.
- Running account of funds shall be settled on the first Friday of October 2022, January 2023, April 2023, July 2023, and so on for all the clients. If the first Friday is a trading holiday, then such settlement shall happen on the previous trading day.
- According to new guidelines, the trading members will have to settle the accounts on a monthly or quarterly basis on the first Friday of the month or quarter.
New Account Settlement System: Significance
- It will ensure uniformity in the settlement of running accounts.
- It aims at protecting the investor and preventing the misuse as money lying in trading accounts of investors for long periods.
- Ease to Customer: If a customer has more than one demat account with different brokers, having one settlement date for the entire industry will make it easier for her to keep track of her funds in all accounts as they would all get settled on the same day.
- It will give certainty to investors and trading members.
- It will help brokers develop a system just like banks, which credit interest in the accounts of their customers at the end of the quarter.
- Brokers can keep only a 225 per cent margin and pay in, and other excess amounts have to be credited to the client’s account.
Securities and Exchange Board of India (SEBI)
- SEBI is a statutory body established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
- To safeguard the interests of security holders and to advance, oversee, and regulate the securities market.
- It is a government-owned organisation that oversees the securities and commodities markets in India.
Powers & Activities:
- It is a quasi-legislative and quasi-judicial authority with the power to create rules, launch investigations, make decisions, and inflict sanctions.
- to safeguard Indian investors’ interests in the securities industry.
- to encourage the growth and smooth operation of the securities market.
- to control the securities market’s commercial activities.
Wealth Inequality in India
- According to Credit Suisse Global Wealth Report, Gini coefficient for India hit a peak of 82.3 in 2020 and remained the same at the end of 2021.
- Gini coefficient is a measure of inequality. A higher figure denotes higher level of inequality.
- Widening Income and Wealth Gap: India’s Gini coefficient has steadily increased from 74.7 in 2000 to 82.3 in 2021.
- Total wealth in India increased by $1.5 trillion or 12% in 2021, to an estimated $14.2 trillion.
- Wealth per adult increased by 9% in 2021 to $15,535.
- Median wealth per adult grew lower at about 7.6%.
- Between 2000 and 2021, mean wealth per adult in India has risen at an average annual rate of 8.8%, whereas median wealth has grown at 5.8%.
- India added 107,000 millionaires in 2021 and accounted for at least 1% of total global millionaires.
- Number of Ultra High Networth Individuals (UHNWI)—with net assets over $50 million—increased by 720 in 2021 to 4,980.
- The top 10% in India held 72.5% of the country’s total wealth at the end of 2021.
- Aggregate global wealth recorded a rise of 9.8% or $41.5 trillion at prevailing exchange rates to reach $463.6 trillion.
- Globally: Among the major fastest growing economies like China, Indonesia and Saudi Arabia, India’s Gini coefficient was the second highest, after Saudi Arabia at 86.4.