SEBI Allows Mutual Fund Unit Transfers Without Demat Account

The Securities and Exchange Board of India (SEBI) has introduced a much-awaited reform, allowing mutual fund investors to transfer units without the need for a demat account. This move simplifies processes like inheritance, gifting units, and updating joint holders across most mutual fund schemes.

New Reform Enables Smoother Mutual Fund Transfers

On October 29, 2025, SEBI announced that investors could now transfer mutual fund units held in Statement of Account (SoA) mode without opening a demat account. This change is applicable to all mutual fund schemes except Exchange Traded Funds (ETFs) and solution-oriented schemes like retirement and children’s funds. Both resident and non-resident individuals can utilise this facility, as long as the units are not under lien, freeze, or lock-in.

Practical Use Cases: Gifting, Joint Holders and Inheritance

This change holds relevance in various life stages. When a minor turns 18, a parent or sibling can now be added as a joint holder. After the death of a holder, the nominee can receive units and further transfer them to other legal heirs. It also allows easier gifting of units to family members or third parties without demat complexities.

Eligible Investors and Schemes

Investors holding units in non-ETF and non-solution schemes across all mutual fund houses are eligible. Both the transferor and transferee should be KYC compliant and hold a valid folio. Transfers involving minors or between residents and NRIs are not permitted.

Read More:SEBI Proposes Standardised KYC Process for New Mutual Fund Folios!

Transfer Process via RTAs: Simple and Secure

Transfers are processed through registrars and transfer agents (RTAs) such as CAMS, KFintech or MF Central. The sender logs in with their PAN, selects the relevant scheme, and initiates the transfer by entering the recipient’s details. OTP-based consent from both parties finalises the transaction, which follows the First In, First Out (FIFO) model. Units become redeemable only after 10 days of transfer.

Conclusion

SEBI’s decision to enable mutual fund transfers without a demat account streamlines key investor actions such as inheritance, gifting, and adding joint holders. With robust security checks and a digital-first process through RTAs, the reform brings greater accessibility and operational ease to investors.

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