SEBI issued Circular No. HO/47/14/13(2)2026-MRD-POD2/I/16590/2026 on July 17, 2026, extending the facility of creating standing instructions for Systematic Withdrawal Plan (SWP) and Systematic Transfer Plan (STP) for mutual fund units held in demat form. This move integrates SWP/STP functionality within the depository ecosystem, allowing investors holding MF units in demat accounts to automate periodic withdrawals or transfers without physical intervention, aligning demat-held MF units with the flexibility already available in statement-of-account form.

Mutual fund units can be held either in physical statement-of-account (SoA) form through RTAs or in demat form through depositories like NSDL and CDSL. Historically, systematic plans — SIP (investment), SWP (withdrawal), STP (transfer) — were operationally smoother in SoA mode because RTAs directly processed these instructions. Demat-held MF units lagged behind in this functionality, creating a two-tier investor experience.

SEBI's July 2026 circular plugs this gap by mandating that depositories enable standing instruction facilities for SWP and STP on demat-held MF units. This means investors can now instruct their depository participant (DP) once, and the system will automatically execute periodic redemptions (SWP) or switches between schemes (STP) without fresh authorisation each time.

The significance is multi-dimensional. First, it strengthens the demat ecosystem for mutual funds — a key SEBI objective since MF unit dematerialisation was encouraged post-2020. Second, it reduces operational friction for investors with consolidated portfolios in demat accounts (especially those holding both equities and MFs together). Third, it aligns with SEBI's broader investor protection and ease-of-access agenda. For SEBI Grade A aspirants, this circular sits at the intersection of depository regulations, MF regulatory framework, and investor service standards — all high-weight areas.