NSDL Glitch Delays Share Settlements, Affecting Feb 2026 Trades

Introduction

A significant technical disruption at the National Securities Depository Ltd. (NSDL), India's second-largest depository, has led to delays in the settlement of equity trades executed earlier this week. Investors who purchased shares on Tuesday and Wednesday found that the securities were not credited to their demat accounts within the standard T+1 settlement cycle. This operational snag has temporarily prevented affected clients from selling their holdings, highlighting the critical role of robust infrastructure in the seamless functioning of India's capital markets.

The Nature of the Disruption

The root cause of the delay was identified as a technical glitch within NSDL's systems, specifically an instability in its network. This issue disrupted the inter-depository transfer mechanism, a routine but vital process for moving securities between NSDL and its larger rival, Central Depository Services (India) Ltd. (CDSL). When trades require shares to move from an account in one depository to an account in another, this link is essential. The failure in this process meant that while shares were transferred to broker pool accounts, they could not be allocated to the final investor demat accounts.

Breakdown in the Settlement Cycle

India's equity market operates on a T+1 settlement cycle, meaning trades are settled the day after they are executed. Typically, clearing corporations settle trades by 10:30 am, and depositories credit shares to investor accounts shortly after. However, the NSDL glitch disrupted this final, crucial step. The depository was reportedly unable to perform its "Beginning Of Day" (BOD) process correctly, which is the opening snapshot of an investor's holdings. Without the purchased shares reflecting in the BOD, investors were unable to access or trade them.

NSDL's Response and Corrective Actions

NSDL acknowledged the technical snag and initiated immediate remedial measures. An NSDL spokesperson confirmed it was a network issue that temporarily disrupted connectivity with CDSL. To address the problem, the depository moved its operations to its Disaster Recovery (DR) site. NSDL's Chief Executive Officer, Vijay Chandok, assured stakeholders that backup servers had been activated and that the bulk of the issues were being resolved. The depository expected to clear the entire backlog of pending settlements by Thursday night, February 5, 2026.

Internal Review and Future Safeguards

In the wake of the incident, NSDL has initiated a comprehensive review of the event to prevent a recurrence. A spokesperson stated that the depository has begun a "deep dive" into the cause of the network instability to learn from the incident and further strengthen its systems. This internal evaluation will include a deeper assessment of its network resilience and redundancy frameworks, potentially involving an independent assessment to bolster its operational integrity.

Widespread Impact on Investors and Brokers

The settlement delay was not an isolated incident affecting a single brokerage. Officials at multiple brokerage firms confirmed that clients across the industry were impacted. A notice from Nirmal Bang Securities to its clients explicitly mentioned the pending credit of shares from Tuesday and Wednesday's trades. The chief of another brokerage, speaking anonymously, confirmed that clients of all firms faced issues due to the inter-depository transfer problem originating from NSDL. This was particularly frustrating for traders engaged in "Buy Today, Sell Tomorrow" (BTST) strategies.

Key Details of the NSDL Settlement Delay

Market Reaction and Broader Context

The news of the settlement delay had a direct, albeit modest, impact on NSDL's stock, which traded 1.4% lower on Thursday afternoon. While the broader market indices remained largely unaffected, the incident has once again put the spotlight on the operational resilience of India's Market Infrastructure Institutions (MIIs). The country's $1.2 trillion stock market has a history of technical disruptions, with the most significant being a multi-hour trading halt at the National Stock Exchange (NSE) in 2021. That event prompted the Securities and Exchange Board of India (SEBI) to push for stronger disaster recovery frameworks.

Regulatory Scrutiny on System Stability

This glitch serves as a real-world stress test for the regulations put in place by SEBI. The regulator has consistently emphasized the need for robust IT infrastructure, cybersecurity, and near-zero data loss recovery capabilities for critical market entities like depositories and exchanges. While the NSDL issue appears to have been contained and resolved relatively quickly, it reinforces the importance of continuous investment and vigilance in maintaining the stability of the financial ecosystem, especially as trading volumes continue to grow.

Conclusion

The technical glitch at NSDL, while disruptive for affected investors and brokers, appears to be on the path to a swift resolution. The depository's prompt activation of its disaster recovery plan and clear communication about the timeline for normalcy are positive signs. However, the event serves as a crucial reminder of the inherent operational risks in a complex financial market. The subsequent internal review by NSDL and the continued oversight from SEBI will be vital in strengthening the infrastructure that underpins investor confidence in the Indian stock market.