Securities and Exchange Board of India has simplified the transfer of mutual fund units by allowing such transfers in non- demat mode. With this, investors can gift or transfer units to family mem-bers, add joint holders after a minor turns major or include new joint holders after the death of an existing one all with- out the hassle of opening a demat account.
WHAT ARE SOME OF THE POSSIBLE REASONS INVESTORS WOULD WANT TO TRANSFER MUTUAL FUND UNITS?
There are many instances where investors may wish to transfer mutual fund units. Upon the demise of a unitholder, the surviving joint holder may want to add a new joint holder — which is now possible. At times, the nominee of a deceased unitholder may wish to transfer the units to other legal heirs, something that was earlier not allowed. With SEBI now permitting transfers, once the units are transmitted in the name of the nominee, they can subsequently be transferred to other entitled beneficiaries.
Current rules specify that a minor child can hold units only in a single name. When the minor turns 18 and the folio status changes from minor to major, the investor can now add a joint holder—such as a parent or sibling. Similarly, unitholders wishing to transfer units to siblings, gift them, or transfer them to third parties can now do so, as the transfer of units has been enabled.
HOW CAN THESE TRANSFERS BE DONE?
Transfers can be made only through the websites of registrars and transfer agents (RTAs) such as CAMS, KFintech, or MF Central. The transferors must log in using their PAN, select the scheme from which they wish to transfer units, and fill in the transferee’s details.
The consent of all unitholders is required, which is obtained through a one-time password (OTP) sent via mobile and email. The transferee must be KY-Ccompliant and have a folio with the same fund house. Once these prerequisites are met, the transfer can be initiated.
Transfers will be processed on a first-in, first-out (FIFO) basis, similar to how redemptions or switch-out transactions are handled in mutual fund schemes.
WHO CAN AVAIL OF THIS FACILITY, AND WHICH SCHEMES ARE ELIGIBLE?
All mutual fund schemes across fund houses will offer this transfer facility, except exchange-traded funds (ETFs) and units under solutionoriented schemes such as children’s funds and retirement funds that have age-based eligibility criteria.
All resident and nonresident individual unitholders holding mutual fund units in the Statement of Account (SoA) mode are eligible to initiate a transfer. However, transfers involving minor folios or vice versa are not allowed. Transfers from a resident Indian to a non-resident Indian (NRI) account are also not permitted.
WHAT ARE THE PREREQUISITES FOR AVAILING OF THIS FACILITY?
The units should not be under lien, freeze, or lock-in. Both the transferor and the transferee must have valid folios in the same mutual fund. If not, the transferee must open a ‘zero balance folio’ with the fund house before initiating the transfer. Both parties should have valid KYC status.
CAN THE TRANSFEREE REDEEM THE UNITS IMMEDIATELY AFTER TRANSFER?
No. Redemption of transferred units will not be allowed for 10 days from the date of transfer.