SEBI Simplifies Nomination Process For Demat Accounts And Mutual Funds; New Rules From 1 September

The Securities and Exchange Board of India (SEBI) has relaxed the nomination process for demat accounts and mutual fund folios. The move aims to make account opening simpler for investors. It also makes nomination the default choice for all new single-holder accounts opened from 1 September 2026.

In a circular issued on Friday, SEBI said anyone opening a single-holder demat account or mutual fund folio must either provide nominee details or submit a declaration stating they do not wish to nominate anyone. If neither option is chosen, nomination will apply by default. The change does not apply to joint accounts, where adding a nominee will continue to remain optional.

The updated rules replace an earlier circular from January 2025. Market participants had flagged difficulties in putting those rules into practice, prompting the regulator to step back and rework the framework.

What Has Changed

Up to three nominees can now be named for a single account or folio. If the investor does not split the holdings between nominees, the assets get divided equally. Any leftover odd-lot portion after the split goes to whoever is listed first on the nomination form.

One of the bigger changes is around paperwork. Earlier, a witness signature was needed for physical nomination forms. That is no longer the case if the investor signs with a regular signature. A witness is only required when the investor uses a thumb impression.

The information required on nomination forms has also been cut down. Only the nominee's name and their relationship to the investor are compulsory now. Things like phone numbers, email addresses, identity documents and the percentage split among nominees are all optional. Date of birth only needs to be filled in when the nominee is a minor.

How Nominations Can Be Submitted

Both online and offline routes are available. Digital submissions can be authenticated through Aadhaar-based e-sign, digital signatures, other recognised electronic signature methods, or a two-factor process using a one-time password sent to the investor's registered mobile number and email.

Reminders For Those Who Haven't Nominated

Depository participants and mutual fund registrars will now be required to send reminders twice a year to investors who have not added nominees and have not opted out either. Online platforms will also need to show pop-up messages about the benefits of nomination the first time an investor logs in each day.

Investors choosing to skip nomination entirely will need to sign a declaration confirming they understand this could slow down the transfer of their assets to legal heirs after their death and may eventually result in those assets being classified as unclaimed.

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SEBI said the revised framework is aimed at making investor onboarding smoother, easing succession, and cutting down the pile of unclaimed financial assets sitting in the securities market. The circular applies to both new and existing accounts from September 1.

Sources:

The Hindu Businessline

Moneycontrol