The change comes at a time when online MF distributors are increasingly moving investors from the SoA mode to demat holdings.
Investors holding mutual fund (MF) units in demat form will soon be able to use systematic withdrawal plan (SWP) and systematic transfer plan (STP) facilities.
The Securities and Exchange Board of India (Sebi) announced the extension of the two systematic transaction options to demat-held MF units.
Until now, these facilities were available only for units held in the statement of account (SoA) form.
Key Points
- Sebi has extended SWP and STP facilities to mutual fund units held in demat form, ending a long-standing limitation.
- The rollout will happen in two phases, covering unit-based transactions first and amount-based transactions later during 2027.
- Depositories must publish the operational framework by October 31, 2026, and complete required technology upgrades before implementation.
- The move addresses a key gap created as distributors increasingly shifted investors from statement of account holdings to demat mode.
- SWPs provide regular withdrawals, while STPs enable systematic transfers between mutual fund schemes for efficient portfolio management.
Demat Mutual Funds
The regulator said the facility will be implemented in two phases.
The first phase, to be rolled out by January 31, 2027, will allow investors to register unit-based SWP and STP mandates, where a fixed number of units are redeemed or transferred at a specified frequency.
SWP and STP Rollout
The second phase, to be implemented by April 30, 2027, will extend the facility to amount-based SWPs and STPs.
The regulator has directed depositories to jointly publish the operational framework by October 31, 2026, and carry out the required system changes.
Sebi Two-Phase Plan
The change comes at a time when online MF distributors are increasingly moving investors from the SoA mode to demat holdings.
Groww, the country's largest mutual fund distributor, announced the transition last year.
Groww Demat Shift
The growing shift to demat holdings had left investors without access to automated SWP and STP facilities.
SWPs allow investors to withdraw a fixed amount or a specified number of units at regular intervals and are widely used by investors to generate a regular cash flow from their investments, while STPs help systematically shift money from one mutual fund scheme to another, typically from debt to equity.
SoA to Demat Transition
Sebi had first proposed the move in a consultation paper released on February 5, 2026.
Feature Presentation: Ashish Narsale/Rediff
