SEBI’s 2026 Reform: No More LOC, Direct Credit to Demat Accounts

The Securities and Exchange Board of India (SEBI) has introduced a major reform to simplify investor services. As per its circular dated January 30, 2026, SEBI has removed the requirement of the Letter of Confirmation (LOC) and enabled direct credit of securities into demat accounts.

This move is aimed at improving ease of doing investment and reducing delays in share – related processes.

What is the LOC Requirement?

Earlier, investors had to obtain a Letter of Confirmation (LOC) from the Registrar and Transfer Agent (RTA) to process requests like:

  • Duplicate share certificates
  • Transmission of shares
  • Transposition of shares
  • Claims from unclaimed accounts

This LOC was then submitted to the Depository Participant (DP) for dematerialisation.

SEBI

Issues with the Old Process

The previous system created multiple challenges:

  • Lengthy and time-consuming procedure
  • Risk of losing physical LOC documents
  • Increased paperwork and dependency on intermediaries
  • Delays in share recovery and transfer

What Has Changed in 2026?

From April 2, 2026, SEBI has simplified the process:

👉 Investors no longer need a Letter of Confirmation (LOC)

👉 Shares will be directly credited to the investor’s demat account

New Process:

  1. Submit request with required documents
  2. Provide ISR-4 form and latest CML
  3. RTA verifies details
  4. Shares are directly credited to demat account

Key Requirements for Investors

To benefit from this new rule, investors must:

  • Have an active demat account
  • Submit:
    • ISR-4 Form
    • Client Master List (CML)
      • Not older than 2 months
      • Attested by Depository Participant (DP)

Timeline for Share Credit

SEBI has mandated that shares must be credited within:

👉 30 days of valid request submission

This significantly improves turnaround time compared to the earlier process.

Applicable Cases Under New Rule

This update applies to:

  • Duplicate share certificate issuance
  • Transmission of shares (inheritance cases)
  • Transposition requests
  • Unclaimed shares recovery
  • Other investor service requests

Transition Guidelines

  • LOCs issued before April 2, 2026 remain valid
     👉 Investors can use them within 120 days from issuance

Benefits of SEBI LOC Removal

For Investors:

  • Faster share transfer and recovery
  • Reduced paperwork and documentation
  • Lower risk of fraud or loss
  • Simplified and digital-friendly process

For Companies & RTAs:

  • Streamlined operations
  • Reduced administrative burden
  • Improved compliance efficiency

Impact on Investors with Old or Lost Shares

This reform is especially helpful for:

  • Investors holding physical share certificates
  • Individuals with lost or forgotten investments
  • Families dealing with inheritance/transmission cases
  • Claimants of unclaimed or IEPF shares

The recovery process is now faster, easier, and more secure

Why This Update Matters

The removal of LOC aligns with SEBI’s goal of:

  • Digitization of financial processes
  • Enhancing investor protection
  • Reducing operational inefficiencies

It also opens new opportunities for investors and advisory firms to recover long-pending investments efficiently.

Conclusion

SEBI’s decision to eliminate the LOC requirement and introduce direct demat credit of shares marks a significant step toward simplifying investment processes in India.

With reduced paperwork, faster timelines, and improved security, this reform will benefit both investors and the financial ecosystem.