Explanation:

On September 7, Sebi allowed stock exchanges to start the T+1 system as an option in place of T+2. If it opts for the T+1 settlement cycle for a scrip, the stock exchange will have to mandatorily continue with it for a minimum 6 months.

• Thereafter, if it intends to switch back to T+2, it will do so by giving one month’s advance notice to the market.
• Any subsequent switch (from T+1 to T+2 or vice versa) will be subject to a minimum period.

Why T+1 settlement?

• According to a Sebi paper, a shortened cycle not only reduces settlement time but also reduces and frees up the capital required to collateralise that risk.
• T+1 also reduces the number of outstanding unsettled trades at any instant, and thus decreases the unsettled exposure to Clearing Corporation by 50%. The narrower the settlement cycle, the narrower the time window for a counterparty insolvency/bankruptcy to impact the settlement of a trade.

Working

• If an investor sells shares on Tuesday, settlement of the trade takes place in two working days (T+2). The broker who handles the trade will get the money on Thursday, but will credit the amount in the investor’s account only by Friday. In effect, the investor will get the money only after three days.
• In T+1, settlement of the trade takes place in one working day and the investor will get the money on the following day. The move to T+1 will not require large operational or technical changes by market participants, nor will it cause fragmentation and risk to the core clearance and settlement ecosystem.
• In April 2002, stock exchanges had introduced a T+3 rolling settlement cycle. This was shortened to T+2 from April 1, 2003.

Hence both statements are correct.