🟢 Final Circular — Extension of Existing Facility
Issued by SEBI's Market Regulation Department (MRD) on 17th July, 2026. Provisions take effect immediately. Phased implementation runs through October 2026 to April 2027 — see Effective Dates below.
Background
Mutual Fund investors have long been able to set up standing instructions with a Mutual Fund or its RTA for two common facilities: a Systematic Withdrawal Plan (SWP), enabling periodic redemption of a specified number of units or amount, and a Systematic Transfer Plan (STP), enabling periodic transfer of investment from one scheme to another scheme of the same Mutual Fund via redemption and subscription.
However, this standing-instruction facility has not been available for Mutual Fund units held in demat form — leaving a meaningful segment of investors unable to automate their SWP/STP mandates. Following representations from Depositories, recommendations of a SEBI-constituted Working Group, and recommendations of SEBI's Secondary Market Advisory Committee, SEBI has now decided to extend this facility to demat-held units, in the interest of ease of doing business.
Two-Phase Implementation
The facility will roll out in two phases, distinguished by whether the standing instruction is based on a fixed number of units or a fixed payout amount.
✅ Phase I — Unit-Based SWP/STP
Standing instructions based on a fixed number of units to be redeemed at a specified frequency — either for withdrawal, or for purchasing units of another scheme of the same Mutual Fund.
💡 Phase II — Amount-Based SWP/STP
Standing instructions for a fixed amount required as pay-out at a specified frequency, or for purchasing units of another scheme of the same Mutual Fund.
Role of Depositories
Depositories are designated as the nodal facilitator for implementing this framework. Beyond ensuring phased rollout, they have been directed to take several concrete steps.
- Jointly publish a standard operational framework on their websites to operationalise the facility
- Make necessary amendments to relevant bye-laws, rules, and regulations for implementation
- Carry out any required system changes to support the framework
- Disseminate the provisions of this circular on their websites
Key Implementation Dates
⚠️ Note on Effective Date
The circular's provisions are effective immediately from issuance, but the actual investor-facing facility only becomes usable once Depositories complete each implementation phase per the timeline above.
Compliance Checklist
☑ Depositories: Coordinate jointly to draft and publish the standard operational framework by 31st October, 2026.
☑ Depositories: Identify and initiate bye-law/rule/regulation amendments needed to support demat-based SWP/STP standing instructions.
☑ Depositories & DPs: Scope and build the system changes required to capture and execute unit-based standing instructions ahead of the 31st January, 2027 Phase-I deadline.
☑ Depositories & DPs: Plan amount-based standing instruction capability ahead of the 30th April, 2027 Phase-II deadline.
☑ RTAs and AMCs: Prepare to interface with the new demat-based standing instruction mechanism alongside existing non-demat SWP/STP processes.
☑ All entities: Disseminate the circular's provisions and monitor the joint framework once published by Depositories.
CorpLawUpdates Analysis
This circular closes a practical gap that has quietly inconvenienced demat-holding Mutual Fund investors for years — the inability to set up automated SWP or STP mandates simply because their units sit in a demat account rather than a statement-of-account (SOA) folio. As more investors consolidate holdings in demat form for convenience and estate-planning reasons, this facility brings parity between demat and non-demat unit holders.
The phased approach — unit-based first, amount-based later — is a sensible sequencing choice. Unit-based standing instructions are operationally simpler since they don't require real-time valuation at the point of redemption, making Phase-I a lower-complexity build for Depositories and DPs. Amount-based instructions in Phase-II will require more robust NAV-linked calculation logic, justifying the longer runway to April 2027.
The biggest execution risk sits with the joint framework Depositories must publish by 31st October, 2026 — since both major depositories will need to align on a common operational standard, RTAs, DPs, and AMCs should expect the granular process details (turnaround times, rejection handling, dispute resolution) to only firm up closer to that date.
For compliance and operations teams at AMCs and DPs, the practical takeaway is to start engaging with depository working groups now, well ahead of the October framework, rather than waiting for the published standard before beginning system-readiness work.
Source: SEBI Circular HO/47/14/13(2)2026-MRD-POD2/I/16590/2026 dated July 17, 2026, "Extending facility of creating standing instructions for Systematic Withdrawal Plan (SWP)/ Systematic Transfer Plan (STP) for Mutual Fund units held in demat form," issued by Sanjay Singh Bhati, General Manager. Available at www.sebi.gov.in under Legal Framework → Circulars.
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Verify with primary regulatory sources before acting.
