SEBI Extends SWP and STP Instructions to Demat Mutual Fund Units
Investors who hold mutual fund units in a demat account will be able to set up standing instructions for Systematic Withdrawal Plans (SWP) and Systematic Transfer Plans (STP), a facility so far available only for units held in statement of account form. SEBI announced the change in Circular No. HO/47/14/13(2)2026-MRD-POD2/I/16590/2026 dated 17 July 2026. The circular took effect immediately, but the facility will go live in two phases, by 31 January 2027 and 30 April 2027.
What was missing for demat holders
The circular records that the facility of creating standing instructions for SWP or STP mandates was not available for mutual fund units held in demat form. A demat holder who wanted a regular payout, or a staggered move from one scheme to another, had to place a fresh request each time. Investors holding the same units through the fund house or its registrar could register one mandate and let it run.
An SWP is a series of redemptions that gives the investor a regular payout. An STP redeems units from one scheme and invests the proceeds in another scheme of the same mutual fund at set intervals. Because demat units sit in the depository system, extending these mandates needs depositories, depository participants, exchanges, registrars and AMCs to work to a common process. SEBI had floated the proposal in a consultation paper dated 5 February 2026 before issuing the final circular.
Who the circular is addressed to
The circular is addressed to all depositories, recognised stock exchanges, registrar and transfer agents, depository participants, mutual funds and AMCs, and the Association of Mutual Funds in India.
Two-phase rollout
| Step | What it covers | Deadline |
|---|---|---|
| Standard framework | Depositories jointly publish the operating framework on their websites | 31 October 2026 |
| Phase I | Unit-based SWP and STP: standing instructions for a fixed number of units | 31 January 2027 |
| Phase II | Amount-based SWP and STP: standing instructions for a fixed amount | 30 April 2027 |
Unit-based mandates come first because they match how balances are recorded in a demat account. Under a unit-based SWP, the same number of units is redeemed each time, so the cash received will vary with the NAV. The amount-based option in Phase II lets an investor fix the rupee amount instead, with the number of units worked out at the time of each transaction.
How each mandate will work
Under a Phase I unit-based SWP, the standing instruction will specify a fixed number of units, and that many units will be debited from the demat account and redeemed at the chosen frequency, with the proceeds paid to the investor. Under a unit-based STP, the specified units will be redeemed from the source scheme and the proceeds invested in the chosen target scheme of the same mutual fund, so the demat account will show a debit in one scheme and a credit in the other. In Phase II the investor will state a rupee amount, and the units to be debited will be calculated at the NAV applicable on each date.
The standing instruction does not change what an SWP or STP is. It only removes the need to submit a fresh request for every instalment, and brings demat holdings on par with statement of account holdings for recurring transactions.
Role of the depositories
SEBI has made the depositories responsible for putting the facility in place. They must:
- jointly publish a standard framework on their websites by 31 October 2026;
- amend their bye-laws, rules and regulations where needed;
- carry out the system changes required for Phase I and Phase II.
The common framework will set out how mandates are registered, changed, cancelled and executed, and how information flows between depository participants, registrars and AMCs. Depository participants will be the first point of contact for most demat investors, while registrars and AMCs will process the underlying redemptions and subscriptions.
The circular was issued under Section 11(1) of the SEBI Act, 1992 read with Section 26(3) of the Depositories Act, 1996.
What investors and advisers should note
- The facility is not yet usable. Investors should wait for their depository participant to offer it after the framework is published and Phase I goes live.
- A unit-based SWP will not give the same cash amount every month. Investors who need a fixed payout may prefer to wait for the amount-based option by 30 April 2027.
- Distributors and advisers should track the depositories' framework due by 31 October 2026 for the detailed workflow before recommending the demat route for systematic plans.
Depository participants, registrars and AMCs should plan system testing, investor communication and mandate forms around the three dates above so that the facility can be offered from day one of each phase.
Updated on 27 September 2026: Linked and verified against the SEBI circular of 17 July 2026 and the February 2026 consultation paper; corrected the legal basis cited and tightened the explanation of the two phases.
