The (SEBI) is planning a phased roll-out of the Systematic Withdrawal Plan (SWP) and Systematic Transfer Plan (STP) facilities for mutual fund units held in demat form, allowing only unit-based transactions in the first phase, while deferring amount-based plans and liquid fund STPs to a second stage, people familiar with the matter said.
In phase one, investors holding units in demat mode will be allowed to set up SWP and STP mandates by specifying a fixed number of units to be redeemed or transferred at regular intervals. These transactions will be routed through depositories, clearing corporations and stock exchanges, without involving registrar and transfer agents (RTAs) in net asset value (NAV) calculations.
Currently, the facility of a one-time instruction for SWP/ STP is not available with respect to mutual fund units held in demat mode. An SWP allows investors to redeem a fixed sum or set of units from their fund at regular intervals, while an STP lets them move money from one scheme to another, such as gradually transferring from a debt fund to equity.
SEBI is expected to issue the consultation paper soon as the proposals have been approved by the working group and other committees. An e-mail sent to SEBI for comments did not elicit a response.
Phased approach
The phased approach is aimed at easing operational and system-level challenges involved in extending systematic transaction facilities to the demat ecosystem. “There are multiple market infrastructure institutions involved, and the idea is to implement what is technologically and operationally manageable first,” another source said.
While the markets regulator will seek public feedback on the full framework, it is expected to first roll out the simpler, unit-based version of SWP and STP and take a call on the more complex, amount-based transactions later.
Phase two, which may be taken up after reviewing public comments, will extend the facility to amount-based SWP and STP transactions, where investors specify a rupee amount rather than units. This phase will also introduce systematic transfers from liquid and overnight funds into other schemes, and will require RTAs to provide NAVs and compute unit equivalents, adding to system complexity.
Once a mandate is registered with a depository participant or trading member, the system will auto-generate debit and credit transactions as per the investor’s instructions. SWP proceeds will be credited to the investor’s registered bank account, while STP transactions will result in units being transferred to the chosen scheme.