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SEBI Proposes Simplified Nomination Rules for Demat, MF Accounts

SEBI has issued a consultation paper proposing significant modifications to nomination norms for demat accounts and mutual fund folios. The key proposal is to make nomination the default choice for new single accounts, requiring investors to actively opt-out if they choose. To simplify the process, SEBI suggests reducing mandatory nominee details to just the name and relationship, making other information optional. The regulator also proposes aligning the nominee limit with banking standards by allowing up to four nominees, instead of the previously considered ten, to avoid operational strain.

Key Points: SEBI's New Nomination Rules for Demat & Mutual Fund Accounts

  • Nomination as default for new single accounts
  • Reduced mandatory nominee info to name & relationship
  • Nominee limit increased to four, matching banks
  • Clarifies nominee role only active upon investor's death
3 min read

SEBI proposes modified nomination norms for Demat and Mutual Fund accounts

SEBI proposes making nomination the default for new accounts, simplifying details required, and aligning nominee limits with banking standards. Public comments invited.

SEBI proposes modified nomination norms for Demat and Mutual Fund accounts
"the process of furnishing so many details of the nominee is onerous for investors - SEBI"

New Delhi, March 17

The Securities and Exchange Board of India has issued a consultation paper to modify nomination norms for demat accounts and mutual fund folios, aimed at simplifying investor on-boarding and aligning processes with banking standards. Released on March 17, 2026, the proposal seeks to address operational challenges identified after the issuance of a previous circular dated January 10, 2025. The regulator has invited public comments on these suggestions until April 7, 2026.

SEBI has proposed making nomination the default choice for all single accounts or folios opened after a specified date. Under this framework, any investor who does not wish to nominate will be "specifically required to choose 'opt-out of nomination'". This move is intended to prevent the creation of unclaimed assets.

If an investor chooses to opt out, a pop-up message explaining the benefits of nomination and a declaration will be displayed, and the investor must "provide consent in this pop-up message to opt-out from nomination".

SEBI has also suggested reducing the mandatory information required for a nominee to only their name and the nature of the relationship with the investor.

Other details, such as address, mobile number, email, and the percentage share of each nominee, are proposed to be optional. The regulator noted that "the process of furnishing so many details of the nominee is onerous for investors" and has led to many dropping off during on-boarding. If a percentage share is not specified, the assets will be "apportioned among the nominees equally".

Regarding the number of nominees, SEBI has proposed increasing the limit to four, matching current banking norms, instead of the ten previously suggested in the January 2025 circular. Data reviewed by the regulator showed that a very low percentage of investors actually opted for more than one nominee.

SEBI stated that "increasing the nominees to 10 may create a strain on the system leading to operational issues". While the nominee limit may increase, the maximum number of joint holders in an account will remain three.

The consultation paper further addresses the role of nominees during an investor's lifetime. The industry had represented that a facility allowing nominees to operate accounts in case of investor incapacitation was "challenging due to high implementation costs and the difficulty in maintaining audit trails".

SEBI observed that "a nominee becomes trustee of the assets only upon the demise of the investor". Consequently, it has proposed that the existing Power of Attorney mechanism should be used for situations where an investor is incapacitated but still has the capacity to contract.

- ANI

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Reader Comments

P
Priya S
Good step forward for investor protection. Aligning with banking norms makes it easier for common people to understand. The opt-out pop-up with an explanation is crucial—it ensures people are making an informed choice. Hope the implementation is smooth across all brokers and AMCs.
R
Rohit P
While simplifying the process is good, I respectfully disagree with the cap of four nominees. What about large joint families? The previous suggestion of ten was better for flexibility. The system should be robust enough to handle more nominees if needed. This feels like a step back for some investors.
S
Sarah B
As an NRI investor, I appreciate this. The on-boarding process for mutual funds in India can be very cumbersome compared to global standards. Reducing mandatory info and having a clear opt-out mechanism is a welcome change. Makes managing finances for family back home much simpler.
V
Vikram M
Finally! The clarification on the nominee's role during the investor's lifetime is much needed. Many people mistakenly think a nominee can operate the account if they are unwell. Using PoA for incapacitation is the right way. This will avoid future legal confusion for families. Good job, SEBI.
K
Kavya N
This is a very practical and investor-friendly proposal. The equal apportionment rule if percentage is not specified is a smart default. It will save so many arguments among siblings later! Hope they also run awareness campaigns so that every saathi in the market understands these new norms. 💡

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