The Securities and Exchange Board of India (Sebi) has extended the deadlines for implementing the second and third phases of its revamped nomination framework for mutual fund folios and demat accounts, citing operational challenges faced by depositories and stakeholders. In a circular issued on Wednesday, Sebi postponed Phase II from June 1 to August 8, 2025, and Phase III from September 1 to December 15, 2025, following representations from Central Depository Services Limited (CDSL), National Securities Depository Limited (NSDL), and industry bodies like the Association of National Exchanges Members of India (ANMI) and Commodity Participants Association of India (CPAI).
Introduced in January 2025, the framework aims to enhance transparency, streamline asset transfers, and reduce unclaimed assets, addressing the Rs 1.2 lakh crore in unclaimed mutual fund and demat assets reported in 2024. The guidelines, rolled out in three phases after a February 2025 circular, mandate nomination for single holdings, strengthen survivorship rules, and introduce robust verification measures. Phase I, completed by April 30, 2025, enabled digital nomination updates, while Phases II and III focus on system upgrades for joint accounts and nominee validations.
Under the new rules, investors can nominate up to 10 persons with percentage allocations; without specification, assets are equally distributed. In joint accounts, assets transfer to surviving holders without additional KYC unless previously requested, preserving existing nominations. Nominees act as trustees for legal heirs, with no inheritance rights for a predeceased nominee’s heirs. In case of an investor’s and nominee’s death, assets are distributed pro rata among remaining nominees. The framework supports digital and physical nomination channels, with 2-factor authentication and e-signatures for verification, per Sebi’s circular.
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Sebi’s move follows stakeholder feedback on system development delays, with CDSL reporting 70% compliance in Phase I for its 10.9 crore demat accounts.
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