SEBI is preparing to introduce automated SWP and STP for mutual fund investors in demat accounts. This will eliminate the hassle of repeatedly submitting DIS and give investors complete control without requiring a power of attorney.
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Demat investors: The Securities and Exchange Board of India (SEBI) has proposed simplifying the redemption process for millions of investors holding mutual fund units in demat accounts. This includes introducing automated standing instructions. In a consultation paper issued on February 5, 2026, SEBI suggested bridging the gap between demat and statement of account (SOA) modes. The aim is to allow Systematic Withdrawal Plans (SWPs) and Systematic Transfer Plans (STPs) to operate automatically without manual intervention.
Currently, demat account holders have to submit new instructions for each withdrawal or transfer. SEBI believes this hassle should be eliminated to enable automatic withdrawals for mutual funds purchased through stock exchanges.
The hassle of DIS will end
The regulator has acknowledged that the manual requirement of Delivery Instruction Slips (DIS) is a major hassle for investors. Each month or quarter, separate forms have to be filled out for withdrawals, which causes delays and discourages people from opting for SWP/STP in demat mode.
Complete Control Without a Power of Attorney
Many investors, to avoid this hassle, give their brokers a Power of Attorney (PoA), but this reduces direct control over their investments. SEBI wants standing instructions to be placed directly in the depository system, ensuring complete control and convenience for investors.
The Settlement Process Will Be Simplified
Currently, each STP installment requires a lengthy process between the broker, exchange, and clearing corporation. Sell and buy orders must be entered each time, leading to errors and delays. The new system attempts to automate this process.
Automation with RTA
SEBI proposes that data be automatically transferred between the depository and RTA (Registrar and Transfer Agent) on a fixed date through standing instructions. This will eliminate the need to enter new orders each time, and funds will be transferred directly to the bank account.
Working Group Recommendation
SEBI formed a working group of experts from exchanges, depositories, and RTAs for this purpose. The group recommended that demat holders should also have the same SWP/STP facility as is available in the SOA mode.
The system will be implemented in two phases
The first phase will introduce unit-based SWP/STP, allowing the sale or transfer of fixed units at regular intervals. The second phase will introduce advanced options such as amount-based SWP/STP, swing STP, and profit-based withdrawal. Overall, this move by SEBI is considered a major step towards making mutual fund investments in demat accounts easier, safer, and investor-friendly.
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