Nomination To Be Default in Demat, MF Folios: SEBI Floats Simpler Framework, Lowers Number of Nominees to 4 from 10

Moneylife Digital Team 18 March 2026

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has proposed a sweeping overhaul of nomination rules for demat accounts and mutual fund (MF) folios, including making nomination the default option for investors, as part of efforts to simplify account opening and reduce unclaimed assets.

In a consultation paper issued on 17 March 2026, the regulator has invited public comments on proposed changes to the nomination framework introduced in January 2025, following feedback from industry participants on operational challenges.

One of the key proposals is to make nomination the default choice for investors opening new demat accounts or mutual fund folios.

Under the revised framework, investors who do not wish to appoint a nominee will have to explicitly opt out by submitting a declaration and consenting to a pop-up message explaining the benefits of nomination.

This marks a shift from the earlier requirement of one-time passcode (OTP)-based and video confirmation for opting out, which industry participants had flagged as cumbersome and difficult to implement.

The regulator says the move is aimed at improving investor onboarding and preventing the build-up of unclaimed assets in the securities market.

SEBI has also proposed significantly reducing the information required for nomination.

Under the new norms, only two details, the name of the nominee and their relationship with the investor, will be mandatory. All other details, including address, mobile number, email, know-your-customer (KYC) information and percentage share, will be optional.

In cases where investors do not specify the share of each nominee, the assets will be divided equally among them.

The regulator noted that the earlier requirement to furnish extensive details was leading to friction during account opening, with many investors dropping out midway.

In another significant change, SEBI has proposed limiting the maximum number of nominees to four, down from 10 allowed under the January 2025 circular.

The move comes after data showed that a majority of investors either opted out of nomination or chose only one nominee. Increasing the number to 10 had raised concerns about operational complexity and system strain.

The proposal aligns nomination norms in the securities market more closely with banking practices.

The regulator has also proposed removing provisions that allowed nominees to operate accounts in case of investor incapacitation, citing risks of misuse, fraud and legal disputes.

Instead, SEBI has suggested that existing mechanisms such as power of attorney (PoA) should be used in such situations.

It reiterated that nominees are essentially trustees who receive assets only after the investor’s death and do not have rights over the assets during the investor’s lifetime.

To improve compliance, SEBI has proposed that regulated entities send regular reminders via SMS and email to investors who have not provided nomination details.

Platforms may also display pop-up messages highlighting the benefits of nomination whenever such investors log in to their accounts.

The regulator says these measures are intended to encourage wider adoption of nomination and ensure smoother transmission of assets to legal heirs.

SEBI has invited comments from stakeholders and the public on the proposed changes till 7 April 2026 . The final framework will be issued after incorporating feedback.

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