The Securities and Exchange Board of India (SEBI) is planning a major change that could make life easier for people holding mutual fund units in demat accounts.
The regulator wants to introduce automated standing instructions for withdrawals and transfers, similar to what already exists for Statement of Account (SOA) holders.
On February 5, 2026, SEBI released a consultation paper proposing changes that would allow Systematic Withdrawal Plans (SWP) and Systematic Transfer Plans (STP) to run automatically, without repeated manual approvals.
This move aims to remove paperwork and delays that demat investors currently face.
Why Demat Mutual Fund Investors Face Problems Today
At present, investors holding mutual funds in demat form must submit a fresh Delivery Instruction Slip (DIS) for every withdrawal or transfer.
This applies even to regular monthly or quarterly SWPs.
The process is time-consuming and inconvenient.
Investors often need to deal with physical paperwork or complex digital approvals each time.
of this, many people avoid using demat accounts for long-term income planning.
SEBI believes this manual process discourages systematic investing and needs to be fixed.
No Need for Power of Attorney Anymore
To avoid repeated paperwork, some investors give Power of Attorney (PoA) to their brokers.
However, this reduces their direct control over investments.
SEBI has highlighted that while PoA and DDPI options exist, they come with security concerns.
The new proposal aims to solve this problem by allowing standing instructions directly within the depository system.
This way, investors can keep full control of their assets while still enjoying automated withdrawals.
How Automation Will Fix the Settlement Process
Currently, every STP or SWP transaction involves multiple steps between brokers, exchanges, clearing corporations, and depositories.
This entire cycle is repeated for each installment.
Such a system increases the chances of delays and operational errors.
SEBI plans to automate this flow so that transactions happen smoothly on pre-set dates.
Once standing instructions are registered, withdrawals and transfers will happen without manual intervention.
Two-Phase Rollout Plan Explained
Phase 1: Unit-Based Automation
In the first phase, investors will be able to register standing instructions once through stock exchanges and depositories.
A fixed number of units will be sold or transferred at regular intervals.
This phase uses existing infrastructure and requires minimal system changes.
Phase 2: Amount-Based and Advanced Options
In the second phase, Registrars and Transfer Agents (RTAs) will handle the process.
This will allow more flexible options such as fixed-amount withdrawals, capital appreciation-based withdrawals, and swing STPs.
These features are especially useful for retirees and long-term investors who want regular income without touching their principal amount.
Same Experience Across Platforms
SEBI has made it clear that investors will not face major changes in how they interact with brokers or depositories.
The goal is to provide the same smooth experience across platforms while improving backend efficiency.
By shifting control to RTAs and exchanges, the system will become faster, safer, and more reliable.
What Happens Next
SEBI is inviting public feedback on the proposal.
Investors and stakeholders can submit their comments until February 26, 2026, through SEBI’s official website.
If implemented, this change could remove one of the biggest disadvantages of holding mutual funds in demat form and make systematic investing much simpler.
