Explained: Why holding mutual fund units in demat form makes sense

We live in an age where everything is becoming digital — faster, smarter, and more transparent. The financial sector has been relentlessly trying to innovate to make transactions seamless and investment journeys more efficient.

Those who’ve witnessed the open outcry system of stock exchanges will gladly recall how the shift to online trading and the dematerialization of securities marked a defining leap. What once took days and physical paperwork, now takes just minutes — with a few clicks on a screen. And now, we are witnessing the logical evolution in this journey: Mutual Funds in demat form.

Over a decade and a half ago, the Securities and Exchange Board of India (“SEBI”) enabled investors to hold Mutual Fund investments — earlier available only as Statement of Account (“SOA”) — in demat form through the stock exchange infrastructure.

Since then, the depository ecosystem has continually evolved, enabling investors to manage their Mutual Fund holdings with ease. Today, you can convert your Mutual Fund SOA into demat form through your existing account — without the need to open a separate one. This facility is available to the Non-Resident Indians too, offering a unified experience for all investors.

Each mutual fund scheme is assigned a unique ISIN, simplifying tracking and portfolio consolidation. Investors can subscribe to fresh units, Systematic Investment Plans, Equity Linked Savings Schemes, and/or New Fund Offers directly through their stockbroker and the units are credited straight into their demat account. Redemption is equally effortless—through your Depository Participants, broker, or electronically via NSDL’s SPEED-e services.

Holding Mutual Fund units in demat form offers several advantages: a single consolidated portfolio view, automatic updates across all holdings, the ability to pledge for margin or loans, simple off-market transfers for gifting, and unified nomination—all within one digital framework.In a nutshell, this evolution aims to bring greater control, efficiency, and transparency to your mutual fund investments. While investors should factor in demat maintenance charges and brokerage fees.At NSDL, we remain committed to trying to enhance investor experience by building digital infrastructure that aims to support financial inclusion and investor empowerment. We believe holding mutual funds in demat form is not just a technical upgrade—it is the foundation of a more connected, secure, and simplified future of investing.

So, start your investment journey by holding mutual fund units in your demat account.

(The author Vijay Chandok is Managing Director and CEO, NSDL. Views are own)

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