According to SEBI's mandate, all stockbrokers must settle client accounts every 30 or 90 days. To meet this requirement, the free balance will get credited to your registered primary bank account.
Settlement of funds & securities through quarterly settlement is an initiative by SEBI to safeguard the interests of the investor/trader.
SEBI has mandated all stockbrokers to return fund balances that are unutilised in the client's trading account to their primary bank account.
Free balance is the balance that is unutilised with the stock broker after considering any upcoming funds Pay-in obligation to exchange for any trade done and 225% of margin after adjusting for any stock that has been pledged as on the date of settlement.
If a customer has not traded over the previous 30 days, their funds balance would be credited back to their primary bank account, registered with us.
Refer to the following link to check the SEBI circular of Securities & Commodities accounts.
Assume you have ₹1 lakh in your account and have taken 3 lots of Nifty options (assume the 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 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 ₹81,000 would be ₹1,82,250. Since the funds available in your account are only ₹1 lakh 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 your account, such funds will have to be reversed to 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.