Quarterly settlements in the Indian Stock Market is an initiative by SEBI. These balances (both funds & securities) are transferred to the respective bank account & Demat account owner, once in 90 days.

Settlement of funds & securities through quarterly settlement is an initiative by SEBI. In order to safeguard the interests of the investor/trader, SEBI mandated all stockbrokers to reverse any funds that are lying in the Trading account back to the bank account of the client. This quarterly settlement has to be done for both funds and securities of the clients. SEBI mandates that this is done once in a period of 90 days.

However, SEBI's rule is that any account where the balance is less than ₹10,000 (₹ 50,000 for MCX) need not be settled. Meaning, the funds needn't be transferred back to your account. Also, it allows the broker to block additional 125% margins for any open position held by you and then reverse any excess funds lying in the account.

However, if the account has a balance of less than ₹10,000 (₹50,000 for MCX) but you haven't made any trades in the month/quarter considered for settlements, the money in your trading account will be transferred to your bank account as per this NSE circular.

Example: Assume you have ₹1,00,000 in your account and have taken 3 lots of Nifty (assume margin for one lot of Nifty is ₹27,000), then  ₹81,000 would be blocked from your account leaving you with a balance of ₹19,000. The Exchange allows a broker to block 2.25 times of the margin it levies for the open position held by the client and after blocking this 2.25 times margin if there is any credit, it needs to be reversed. Going back to the above example, 2.25 times of ₹81,000 would be ₹1,82,250. Since the funds available in your account is only ₹1,00,000 the broker need not make any refund and will mark your account as 'retained'. Once the broker marks your account as retained, he is required to send you a statement explaining the basis for such retention.

However, after applying the 2.25 margin rule, if there is any credit standing in the your account, such funds will have to be reversed to the your bank account.

Note: As per SEBI’s latest circular, all brokers need to settle the accounts of all clients on the first Friday of every quarter i.e. October 2022, January 2023, April 2023, July 2023, and so on. If the first Friday is a trading holiday, then such settlement shall happen on the previous trading day which is Thursday.