What if DP hasn't transferred shares to your demat account?

Online trading demat accounts makes it easy to buy and sell shares. We assume that once we click "Buy", the purchase will immediately be transferred to our demat account. This is not always true. Indian stock exchanges use the T+2 settlement cycle, where shares are transferred to the purchaser’s account by the Participants within T+2 trade days. Sometimes however, the stock purchased does not appear in the buyer's account after T+2 trading days. What should one do? Continue reading to learn more.

What's T+2 Settlement?

It is a mystery why settlement of shares by a depository participant takes T+2 days in an age where everything can be done instantly online. This is because not all online depository participants are the same. Many legacy depository participants still accept payment by cheques and transfer ownership of shares via Delivery Instruction Slip (DIS). Depository participants request a maximum T+2 day for settlement of shares. T+2 days refers to a maximum of two trading days from the date that the transaction occurred. If the transaction was made on Friday, T+2 days means Tuesday and Saturday are trading holidays. This is the maximum amount of time that your depository participant can transfer shares to your demat account. The shares may be transferred even before the T+2 deadline. What if the T+2 deadline has passed and shares are still not transferred?

Why your shares haven't been transferred even after T+2 days

There may be several reasons your shares might not have been transferred into your demat account after T+2 days.

1. You are responsible for paying the dues to your broker/depository participant.

A lot of small fees are associated with trading on a Demat Account. These charges must be paid by the participant. Depository participants are not likely to block the transfer of shares due to small amounts of overdue. However, these charges can add up. Your depository participant might hold the credit of your demat account until you pay these charges. These dues could include unpaid margins or unfunded market-to–market losses. It is best to contact your broker or depository participant and ask them about any overdue charges.

2. Shortfall of shares bought

Sometimes, you might purchase a certain amount of shares but they may not be on the market during that time. The shares will not be credited to your account until the seller has made them available. This happens rarely with stocks with high trading volumes or large caps, but it can happen with smaller or Mid-cap stocks with low trading volumes or liquidity issues. If the stock seller fails to deliver, it will be up for auction. You will receive the shares to your account in 5-6 days or your money back. These proceedings are kept in the hands of your depository participant. To be safe, you should contact your broker/depository participant immediately if your shares aren't credited to your demat accounts within T+2 days.

3. Intra-day traders are frequent BTST/STBT activity

You will likely place a lot more Buy Today Sell Tomorrow (BTST) orders if you are an intra-day trader. BTST allows you to sell stock on T+ T+2 delivery, but you can still sell the stock on day! You have already sold the stock on T+ If the stock has been sold on T+!, you will receive delivery on T+2. Sometimes, however, if you sell another stock on T+1 and the stock goes into auction, the participant in depository may place crediting on hold for your account for other stocks. If this happens, the stock will be credited once the auction has ended.

4. Depository Participant Has Not Transfered for No Valid Reason

Sometimes, your depository participant might not credit shares to your account for one of the above reasons. If this happens, you should wait T+2 days before contacting the depository participant. Sometimes, the broker may hold onto your shares in a way that is abusive. Brokers have attempted to borrow money from banks by offering shares as collateral. These malpractices should be avoided.

Conclusion

Usually, shares purchased using your demat account transfer to your account within two business days. Sometimes, however, there may be a delay due to a variety of reasons, such as dues pending with a depository participant, insufficient liquidity in the purchased stocks, or frequent BTST activities. It is best to contact your broker on T+3 immediately and escalate the matter.