SEBI Extends SWP, STP Standing Instruction Facility To Mutual Fund Units Held In Demat Form

The Securities and Exchange Board of India (SEBI) has extended the facility of creating standing instructions for Systematic Withdrawal Plans (SWPs) and Systematic Transfer Plans (STPs) to investors holding mutual fund units in demat form, a move aimed at facilitating ease of doing business.

The circular, issued on Friday, requires depositories to implement the framework in two phases and designates them as the nodal facilitators for its rollout.

At present, mutual fund investors can create standing instructions with mutual funds or their Registrars and Transfer Agents (RTAs) for SWPs by periodically redeeming a specified number of units or a fixed amount.

They can also set up STPs to transfer investments from one scheme of the same mutual fund to another through redemption from one scheme and subscription to another. However, this facility has not been available for mutual fund units held in demat form.

SEBI noted that it received representations from depositories seeking the extension of the facility. The proposal was also examined by a working group set up by the regulator and the Secondary Market Advisory Committee before the decision was taken.

Under the new framework, implementation will take place in two phases. In the first phase, investors holding mutual fund units in demat form will be able to create standing instructions for unit-based SWPs and STPs based on a fixed number of units. The second phase will extend the facility to amount-based SWPs and STPs based on a fixed amount.

For unit-based SWPs, the standing instructions will allow redemption of a fixed number of mutual fund units at a specified frequency. In the case of unit-based STPs, a fixed number of units will be redeemed from one scheme and used to purchase units of another scheme of the same mutual fund at the chosen frequency. During the second phase, investors will similarly be able to create standing instructions based on a fixed withdrawal or transfer amount.

Depositories have been directed to complete implementation of the first phase by January 31, 2027, while the second phase must be rolled out by April 30, 2027.

The circular also requires depositories to jointly publish a standard framework on their websites by October 31, 2026. They must make the necessary amendments to their bye-laws, rules and regulations, carry out the required system changes, and disseminate the provisions of the circular on their websites.