Running Account Authorisation: What Is It And How Does It Work

Investing in the stock market requires opening a demat and a trading account. The Demat account is to hold the securities you buy virtually while the trading account executes the financial transaction. If you sell the securities, your stockbroker must credit the funds to your bank account within one working day of the stock exchange payout. However, if you do not want to keep transferring money from your bank account to your trading account, you can utilise the option of running account authorisation (RAA).
 

If you are an avid trader or investor, you can ask your stockbroker to retain the funds in your trading account. This blog will help you understand what running account authorisation (RAA) is and how it can make your investing process more efficient.

• Running account authorisation is a facility that allows investors to have their trading account balance retained for a specific time.

• Running account authorisation ensures that the investors can trade quickly using the retained funds without having to transfer funds from their bank accounts.

• The time period for running account authorisation is 30 or 90 days.

Running account authorisation meaning refers to a facility provided by the Securities and Exchange Board of India to demat and trading account holders, where they can ask their stockbrokers to retain their funds in their trading accounts for a longer period. Under the running account authorisation, instead of transferring funds back to the investor’s bank account after every settlement, the broker holds them for 30 or 90 months, allowing investors to avoid transferring funds again to their trading account for additional investing. The authorisation to retain period under the running account authorisation is renewed periodically, and investors have the option to withdraw their funds at any time.

The Securities and Exchange Board of India (SEBI) released a circular on 27th July 2022, named SEBI/HO/MIRSD/DOP/P/CIR/2022/101, which gave an option to investors to ask their stockbrokers to retain their funds and only transfer them to their bank accounts after 30 or 90 days.

As per SEBI rules, if you have opted for the running account authorisation facility, your trading account will be settled, and the remaining amount will be refunded to your bank account on the first Friday of every month. This is in case you have opted for the 30-day cycle. On the other hand, if you have opted for the 90-day cycle, your trading account will be settled on the first Friday of the quarter. If the settlement Friday is a trading holiday, the stockbroker settles the trading account on the previous day: Thursday.

Here are the upcoming settlement dates for monthly RAA:

Here is the upcoming settlement date for the quarterly RAA:

SEBI has mandated that stockbrokers must credit the amount remaining in investors' trading accounts back to their bank accounts if they have not performed any trading activity in the last 30 days using their demat and trading accounts. Hence, even if you have opted for the running account authorisation, you will receive your trading account funds in your bank account on the 30th day of no transaction. This is because the RAA is meant to help you use the funds for trading and investing without having to transfer funds again from your bank account. However, if you do not perform any activity in 30 days, even when the stockbroker has retained the funds, it goes against the logic behind RAA. Hence, the stockbroker credits the funds back to your bank account on the 30th day if there is no trading activity.

It becomes a hassle to keep transferring funds from your bank account to your trading account every time you buy securities. If you know that you are selling securities for re-investing, you can utilise the facility of running account authorisation to ask your stockbroker to retain the funds in your trading account for 30 or 90 days. However, it is important that you utilise the funds within 20 days to avoid their credit back to your bank account.