The Securities and Exchange Board of India (SEBI) is considering a new proposal to allow investors to set up standing instructions for systematic withdrawal plans (SWP) and systematic transfer plans (STP) for mutual fund units held in demat accounts. Currently, this facility is only available for units held in the statement-of-account mode. Under the proposal, demat investors can register SWP or STP mandates with depositories or stock exchanges, eliminating the need for separate instructions for each transaction.
Investors with mutual fund units in demat form currently have to provide separate instructions for redemption of units through a Delivery Instruction Slip (DIS) for each withdrawal or transfer. SEBI’s proposal aims to simplify this process by enabling investors to set up standing instructions for SWP/STP mandates for demat-held MF units. This move is intended to enhance the ease of doing business for various stakeholders in the mutual fund industry.
SEBI’s proposal outlines a two-phase rollout plan. In the first phase, investors can register unit-based SWP and STP mandates through depositories or stock exchanges, with transactions executed on the stock exchanges’ order entry platform. The second phase may involve processing through registrars and transfer agents, introducing more flexible options such as amount-based SWPs and STPs, including appreciation-based withdrawals and swing-STPs. Public comments on the proposal are invited until February 26, following which the final framework may be implemented.
Analysts believe that this proposed change will bridge an operational gap between demat-held mutual funds and traditional mutual fund accounts, ultimately enhancing the convenience of long-term investing.
