Is SEBI Set to Extend Standing SWP and STP Instructions to Demat-Held Mutual Funds?
Synopsis
SEBI's latest proposal could revolutionize how investors manage their mutual fund units in demat accounts by allowing standing instructions for SWPs and STPs. This change aims to simplify transactions and enhance control for investors, marking a significant step towards improving the mutual fund industry.
Key Takeaways
SEBI's proposal aims to simplify SWP and STP transactions for demat investors.
One-time registration will eliminate the need for multiple instructions.
The initiative is expected to enhance investor control over their mutual funds.
A two-phase rollout is planned for the new facility.
Public feedback is invited until February 26.
Mumbai, Feb 6 (NationPress) The Securities and Exchange Board of India (SEBI) has put forward a proposal that would enable investors to establish standing instructions for systematic withdrawal plans (SWP) and systematic transfer plans (STP) concerning mutual fund units maintained in demat accounts. This service is presently limited to units recorded in the statement-of-account format.
According to this proposal, investors holding units in demat form will have the opportunity to register SWP or STP mandates just once with depositories or stock exchanges. This eliminates the necessity for submitting distinct instructions for every SWP or STP transaction.
At present, investors who own mutual fund units in demat format are obliged to give specific instructions for redeeming units through a Delivery Instruction Slip (DIS) for each individual withdrawal or transfer.
Such instructions can also be provided through two-factor authentication by the Depository Participant (DP) or via authorization granted to the stockbroker through a Power of Attorney (PoA) or Demat Debit and Pledge Instructions (DDPI).
Nevertheless, utilizing a PoA can diminish the direct control that investors have over their investments, as noted by the market regulator.
In light of this, SEBI has proposed to “extend the facility of standing instruction for SWP/STP to mutual fund units held by investors in demat form,” thereby enhancing the Ease of Doing Business (EoDB) for various stakeholders within the mutual fund sector.
The regulator has planned a two-phase rollout of this initiative. In the initial phase, investors will be able to register unit-based SWP and STP mandates through depositories or stock exchanges, with transactions executed on the order entry platform of stock exchanges.
The second phase will transition the processing to registrars and transfer agents, potentially introducing more adaptable options such as “amount-based and other variants of SWPs and STPs,” including appreciation-based withdrawals and swing-STPs.
SEBI has opened the floor for public feedback on this proposal until February 26, after which the final framework may be officially announced.
Experts suggest that this adjustment would eliminate a major operational disparity between demat-held mutual funds and conventional mutual fund accounts, thus simplifying long-term investing.
Point of View
I believe SEBI's proposal to extend standing SWP and STP instructions to demat-held mutual funds marks a pivotal moment for investors. This initiative not only enhances convenience but also aligns with the ongoing efforts to improve the Ease of Doing Business in India. It represents a significant step towards modernizing the mutual fund landscape, ensuring that investors have more control over their financial assets.
NationPress
2 May 2026
Frequently Asked Questions
What are SWP and STP?
SWP (Systematic Withdrawal Plan) allows investors to withdraw a fixed amount from their mutual funds at regular intervals, while STP (Systematic Transfer Plan) enables investors to transfer a predetermined amount from one mutual fund scheme to another over a specified period.
How does the new proposal benefit demat account holders?
The proposal allows demat account holders to set up standing instructions for SWP and STP, eliminating the need for separate instructions for each transaction, thus streamlining the process.
When is the deadline for public comments on SEBI's proposal?
The deadline for public comments on SEBI's proposal is February 26.
