Market regulator Securities and Exchange Board of India (SEBI) has introduced a voluntary debit freeze facility for mutual fund folios, allowing investors to temporarily block any debit transactions in their holdings to enhance digital security and prevent unauthorized redemption or transfer of units.
In a circular issued today, the regulator said the facility will be available across both demat and non-demat (statement of account) mutual fund folios. Once activated, no units can be debited from the folio until the investor chooses to unlock it. The move aims to strengthen safeguards against fraud and unauthorized access to investors’ mutual fund holdings. SEBI circular stated, "In order to promote digital security of units of Mutual Fund investors, in consultation with AMFI, it is decided that a voluntary debit freeze facility be introduced for Mutual Fund investors across demat and non-demat (i.e., Statement of Account) folios to ensure that no units shall be debited from such folios till the time they are unlocked".
According to SEBI, the debit freeze facility will initially be made available through MF Central, an inter-operable platform created by registrars and transfer agents to facilitate mutual fund transactions and service requests. In the first phase, investors will be able to lock their folios through the platform, subject to certain conditions.
The facility will be available only to KYC-compliant investors who have a registered and validated email ID and mobile number. These details are mandatory to enable authentication and ensure that the lock or unlock request is initiated by the rightful unit holder.
SEBI has asked the Association of Mutual Funds in India (AMFI) to prescribe the detailed operational process for locking and unlocking folios in consultation with the regulator. AMFI will also specify the list of financial and non-financial transactions that may still be permitted while the debit freeze is in place.
Further, asset management companies and RTAs have been directed to clearly disclose the procedures for opting for the facility and its impact on various transactions on their websites and in the Statement of Additional Information (SAI).
The regulator said the measure has been introduced to promote greater digital security of mutual fund units and to protect investors from potential misuse of their accounts in an increasingly digital investment environment.
The circular will come into force from April 30, 2026.
Also read: Performance verification agency PaRRVA to be operational by June, says SEBI WTM Varshney
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