Normal pay-in
A pay-in instruction, available to BSE clearing members and seller BOs, that can be given any time from the trade day up to the pay-in deadline even with no balance yet in the account, unlike early pay-in.
In plain language
Not every pay-in instruction needs money or securities in the account right away. Normal pay-in is exactly this kind of instruction. A clearing member, or the seller BO on its behalf, tells the DP to deliver securities to the Clearing Corporation for a trade. It can do this even with no balance yet. The balance just has to turn up by the time pay-in is actually due.
How it works
From Chapter 8, section 8.3.1: normal pay-in can be used by a CM (applicable only to BSE CMs who have set up normal pay-in — non-BSE CM accounts are not allowed to use it) or the seller BO, to deliver securities to the CC by giving a normal pay-in instruction to the DP. This instruction can be given any time from the "T" day up to the pay-in day, until the pay-in time — even if no balance is available in the account at that moment.
At the time of actual pay-in: for BSE pay-in, CDSL earmarks the balance in the account against which the normal pay-in instruction was entered, to the extent of the quantity specified, and debits the account at pay-out time. For non-BSE pay-in, the BO account is debited at pay-in time to the extent of the quantity in the instruction, and the shares are credited to the CM account, from which the CM's own pay-in to the Clearing Corporation is then made.
This sits alongside early pay-in (used for margin exemptions and similar benefits, requiring adequate balance up front) and auto pay-in (no instruction needed at all — CC-generated) as the three pay-in routes NSDL and CDSL both offer.
A worked example
A BSE clearing member, set up for normal pay-in, gives a normal pay-in instruction on Monday (T day) for 500 shares it expects to receive from clients before the Wednesday pay-in deadline — even though its CM account shows zero balance of that stock at the moment the instruction is entered.
By Wednesday, the required 500 shares have arrived in the account from client deliveries. Because this is a BSE pay-in, CDSL earmarks the 500 shares against the standing normal pay-in instruction and debits the account at pay-out time, completing the CM's obligation to the Clearing Corporation.
Had the CM instead needed the shares available at NSE (a non-BSE exchange) rather than BSE, the mechanics would differ slightly: the BO account would be debited at pay-in time and the shares credited to the CM account directly, rather than earmarked and debited later at pay-out.
Why NISM asks about it
Chapter 8, section 8.3.1 (point 3), sets normal pay-in alongside early pay-in and auto pay-in as the three routes for delivering securities into a settlement. Expect a question on the fact that normal pay-in is only for BSE CMs who have specifically set it up, and on the distinction between the BSE earmarking mechanism and the non-BSE debit-and-credit mechanism.
Common exam traps
- Normal pay-in can be given with no balance in the account — unlike early pay-in, which needs adequate balance to execute.
- It is available only to BSE CM accounts that have set it up; non-BSE CM accounts cannot use normal pay-in.
- BSE pay-in earmarks the balance and debits at pay-out time; non-BSE pay-in debits at pay-in time and credits the CM account directly — two different mechanics for the same instruction type.
- Do not confuse normal pay-in with auto pay-in, where the CM gives no instruction at all and the CC/system handles it automatically.
Check yourself
1.Which statement about the normal pay-in facility is CORRECT?
- a)It is available to clearing members of all stock exchanges
- b)It is applicable only in the case of BSE CMs, and instructions from non-BSE CM accounts are not allowed
- c)It can only be given if adequate balance is already available in the account
- d)It must be given at least one day before the trading day
Show the answer
Answer: (b) It is applicable only in the case of BSE CMs, and instructions from non-BSE CM accounts are not allowed
Normal pay-in facility can be used by a CM — applicable only in case of BSE CMs; instructions from non-BSE CM accounts are not allowed — or by the seller BO to deliver securities to the CC.
Option C is the reverse of the truth and worth memorising as the distinguishing feature: normal pay-in instructions can be given any time from the "T" day to the pay-in day till the pay-in time, even if no balance is available in the account.
Option D describes early pay-in, which runs from one day prior to the day of trading up to the pay-in day — and which, unlike normal pay-in, executes only if adequate balance is available in the CM or BO account.
2.To avail margin exemption, during which window can a CM or BO give early pay-in instructions to the DP?
- a)Only on the pay-in day, before the pay-in deadline
- b)From the T day up to the pay-in day, even if no balance is available in the account
- c)From the afternoon of T+1, after the Clearing Corporation uploads the instructions
- d)From one day prior to the day of trading up to the pay-in day, or such time as the stock exchanges may specify
Show the answer
Answer: (d) From one day prior to the day of trading up to the pay-in day, or such time as the stock exchanges may specify
The workbook: "For availing margin exemption, the CM / BO can give early pay-in instructions to DP from one day prior to the day of trading upto the pay-in day or any such time as may be specified by the stock exchanges." The CC maintains separate early pay-in accounts for each CM, and the execution of early pay-in will take place only if adequate balance is available.
The distractors are the windows of the other pay-in modes:
- B is the normal pay-in window — normal pay-in instructions can be given any time from the "T" day to the pay-in day till the pay-in time, even if no balance is available in the account.
- C is when auto pay-in details can be viewed on the CDSL system — from T+1 day afternoon, after the CC uploads them.
- A is too narrow. Starting a day before the trade is what lets early pay-in earn the margin exemption.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Auto Delivery-outNSDL delivery-out instructions the Clearing Corporation generates automatically for authorised clearing members, based on net delivery obligations, so the member need not submit a manual DO form for pay-in.
- Auto pay-inA facility letting authorised BSE and NSE clearing members skip manual pay-in instructions, with securities in their settlement account considered for pay-in by the Clearing Corporation automatically.
- Early pay inDelivering securities to the clearing corporation's early pay-in account ahead of the pay-in deadline, mainly to earn margin exemption; now usually done by blocking shares in the client's own demat account.
- Clearing member accountThe special demat account a broker or custodian opens to settle exchange trades, through which clients' sold shares go to the clearing corporation and bought shares arrive; also called the pool account.
- Irreversible Delivery-outA manual delivery-out instruction for margin payment or exemption purposes that NSDL's Auto Delivery-out never generates automatically, requiring careful sequencing against any Auto DO for the same securities.