Running Account Authorisation (RAA) Explained | mastertrust

Key Takeaways

RAA settles unused trading funds monthly (30 days) or quarterly (90 days), based on your chosen option.

• 30 days of inactivity trigger settlement within three working days, regardless of your chosen cycle.
• Brokers retain funds tied to pay-in obligations and required cash margin; only the surplus transfers back.
• RAA is mandatory; you choose the cycle, not whether periodic settlement applies.
• Tracking settlement dates through a demat account app keeps you informed instead of caught off guard.

Running Account Authorisation (RAA) Explained: Why Your Funds Get Returned to Your Bank

You added money to your trading account last month, didn't utilize it, and now it's back in your bank account without you asking for it. You're not being scammed, and your broker hasn't made an error. 

This is Running Account Authorisation at work, and it's basic demat account information every investor should have before they start trading.This blog covers what RAA is, why SEBI mandates it, how the settlement cycles work, and how to manage it through a demat account app.

What Is Running Account Authorisation?

Running Account Authorisation, or RAA, is a standing instruction you give your stockbroker when you open a trading and demat account. It lets the broker hold your unused funds instead of transferring every idle rupee back to your bank after each trade.

Without RAA, a broker would technically have to settle your account after every single transaction. RAA saves you from constantly moving money in and out every time you buy or sell securities. SEBI requires every broker to offer this framework, and every investor falls into one of two settlement cycles.

The Two RAA Settlement Cycles

Once you have created an account, there are two possibilities:

• Monthly (30 days): This is settled on the first Friday of every month; any extra funds not used by any open positions are paid into your bank account.
• Quarterly (90 days): Settled on the first Friday of the quarter (April-June, July-September, October-December, January-March).

Effective from January 2024, brokers can settle clients' running accounts on the first Friday and/or Saturday of the applicable month or quarter, depending on the chosen settlement cycle. 

If either day is a trading holiday, the settlement is carried out as per the settlement calendar published annually by the National Stock Exchange (NSE). The settlement amount is determined after accounting for the client's end-of-day obligations across all segments. 

Why Does This Rule Exist?

These regulations were put in place by SEBI to safeguard against the very real possibility of brokers managing large, suspicious balances for their clients without any supervision. These schedules have been designed to ensure that the surplus funds lying with the client accounts cannot be misappropriated by the brokers. 

The 30-Day Inactivity Clause

If your trading account has a positive balance on the settlement date and there has been been no trading activity for 30 days, the funds will be automatically paid out during the monthly settlement process 

What Happens to Funds Tied to Open Positions?

This does not imply that brokers will give back every single rupee to the customer through the process of RAA. On any settlement day, brokers are allowed to retain the entire pay-in amount outstanding for the day and also some part of the end-of-day margin, which should be kept as cash margin against the obligations.

Common Doubts Around RAA

Is my money safe while in the retention period?

Yes, since RAA only permits the broker to retain the funds but not use them.

Is there a minimum balance required to choose RAA?

No, there is no minimum balance required in either case.

Is it mandatory to choose RAA?

Yes. As per exchange regulations, brokers are required to provide clients with the option to choose their preferred running account settlement frequency either monthly or quarterly. Clients must select one of these options while opening or managing their trading account. 

Will I be informed prior to the settlement? 

Yes. Brokers are required to inform you through your registered mobile number and email address. 

How mastertrust Helps You Stay on Top of RAA

Keeping track of settlement dates, your chosen cycle, and account activity gets tedious, especially across equity, F&O, and intraday segments. mastertrust's demat account app gives you a clear communication of your fund ledger, upcoming settlement dates, and margin utilisation in one place, so a fund transfer never surprises you.

mastertrust is a SEBI-registered stockbroker, and all running account settlements are carried out in line with SEBI and exchange-prescribed timelines.  Review settlement history anytime through the mastertrust demat account app.If you haven't opened your account yet, you can open a demat account with mastertrust and pick your RAA cycle right at onboarding.

Final Thoughts

Running Account Authorisation (RAA) is a SEBI-mandated authorisation that allows brokers to retain your unused trading funds and securities until the scheduled running account settlement. Once you know your cycle, the inactivity rule, and how open positions affect what gets retained, those fund transfers stop feeling random.

Frequently Asked Questions (FAQs)

Q1. What is Running Account Authorisation in a Trading Account?

It is an authorization through which you allow your broker to keep any leftover amount rather than settling the amount after each transaction.

Q2. How often does RAA settlement happen?

Monthly or quarterly, based on your chosen cycle, unless the 30-day inactivity rule triggers an earlier settlement.

Q3. Will I lose money if my funds get settled and returned? 

No. Settlement moves your unused balance to your bank account; your holdings and open positions are unaffected.

Q4. Can I change my RAA cycle after opening my account?

Most brokers let you update your preferences through your demat account app or by contacting support.

Q5. Does RAA apply to all segments, including F&O? 

Yes, settlement accounts for your end-of-day obligations across equity, F&O, currency, and commodity segments together.