MUMBAI, Feb. 5 -- India's market regulator is considering extending automatic withdrawal and transfer facilities to mutual fund investors who hold their units in demat form, a move that would bridge a long-standing operational gap between demat and non-demat holdings.

In a consultation paper issued on Thursday, the Securities and Exchange Board of India (Sebi) sought public comments on allowing standing instructions for systematic withdrawal plans (SWP) and systematic transfer plans (STP) for mutual fund units held in dematerialised form. Such standing instructions are currently available only for units held in statement of account (SOA) mode.

SWPs allow investors to schedule periodic redemptions of a fixed amount or number of units fro...