Demat Accounts for AIF Investments: What Changed and What Investors Must Do

AIF units used to be held as entries in the fund’s records. SEBI has moved them into demat form, as shares and mutual funds are. A SEBI circular dated June 21, 2023 mandated the dematerialisation of AIF units, with a phased timeline based on fund corpus.

For schemes with corpus above ₹500 crore, all units were to be dematerialised by October 31, 2023, and new units issued only in demat form from November 1, 2023. For schemes below ₹500 crore, the dates were April 30, 2024 and May 1, 2024.

What if you hadn’t shared your details?

SEBI created a fallback. Units of existing investors who have not provided demat details are credited to a separate “Aggregate Escrow Demat Account,” opened by the AIF solely to hold demat units on their behalf. The units are not lost, but they are held in a pooled arrangement. Some features of the escrow account matter:

• When you provide your demat details, your units are moved to your own account within five working days.
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• Units cannot be transferred from or within the escrow account except for that purpose.
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• Units in the escrow account can be redeemed, and proceeds go to your bank account with a full audit trail.
• Managers must keep investor-wise KYC details, including name, PAN and bank details. business-standard

The stated aims are transparency, easier monitoring and a better record of ownership. Demat units allow depositories to include AIF holdings in the Consolidated Account Statement, and make transfer and transmission easier. It also lays groundwork for listing of units of close-ended schemes, which the AIF Regulations permit.

What investors must do

1. 1- Open a demat account if you don’t have one. Use a depository participant (a broker or bank). Make sure the name and PAN match your KYC with the AIF.
2. 2- Share the details with the fund manager. This is usually the DP ID and client ID, as asked by the fund. Do this even if you invested years ago.
3. 3- Check where your units are. Ask whether your units sit in your demat account or the escrow account, and review your statements.
4. 4- Check the cost. There are annual charges for holding a demat account. They are small relative to a ₹1 crore ticket but worth knowing.
5. 5- Keep nominee details updated. A nominee on the demat account makes transmission easier.
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Special case: NRIs

During consultation, the cost and effort of opening demat accounts for foreign investors was raised as a concern. If you are an NRI, your demat account is typically linked to your NRE or NRO account depending on whether the investment is repatriable. Ask your broker about the right account type, and see our NRI guide for the funding rules.

A note on current rules

Timelines were revised more than once after the original circular. Some sources online claim further mandates from April 2026, but we could not confirm those against a SEBI circular. Always check the latest position with your fund manager and SEBI’s website.

Key takeaways

• AIF units are held in demat form, and new units are issued only in demat form.
• If you haven’t given your details, your units may sit in an escrow account. They remain yours.
• Open a demat account, share the details with the manager and check your statements.
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Disclaimer: This article is for general information only and is not legal or investment advice. SEBI requirements may change, so please verify the current position with SEBI circulars and your fund manager. Investments in AIFs are subject to market risks.