Dear Nagaraju,
Settlement of Funds & Securities through Quarterly Settlement is an initiative by SEBI to ensure brokers do not misuse funds and/or securities kept with him.
Assume you’d kept Rs.25,000 with your broker and not traded for more than a year. There are chances that some brokers may start utilizing these funds by trading on your account, resulting in brokerage revenue for themselves. One fine day you realize that all of the 25,000 you had kept is gone either as trading losses or as brokerage to the broker.
In order to safeguard the interest of the investor/trader and to not let the above scenario happen, SEBI mandated all stock brokers 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 be done once in a period of 90 days.
SEBI’s rule is that any account where the balance is less than 10,000 need not be settled meaning the funds needn’t be transferred back to the client’s account. Also it allows the broker to block additional 125% margins for any open position held by the client and then reverse any excess funds lying in the account.