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Informist, Tuesday, Mar. 24, 2026

 

MUMBAI – The Securities and Exchange Board of India on Tuesday floated a consultation paper proposing the introduction of gift cards or prepaid payment instruments for investing in mutual funds, aimed at widening retail participation and improving financial inclusion.

 

The proposal would allow individuals to purchase a gift prepaid payment instrument and transfer it to a recipient, who can then use the instrument to subscribe to mutual fund units through an asset management company's platform. SEBI said the initiative, proposed by the Association of Mutual Funds in India, could help onboard new investors into the mutual fund ecosystem, especially first-time participants.

 

Alongside the proposal, the regulator has sought public comments on six key aspects of the framework. First, SEBI has asked whether a gift card purchaser should be allowed to suggest a mutual fund scheme to the recipient, while clarifying that such a suggestion would not constitute investment advice.

 

SEBI has also sought feedback on allowing recipients to use distributor services for scheme selection, with such investments being processed under the regular plan, as opposed to direct plans. The regulator has also proposed that unutilised gift instruments be refunded to the purchaser's bank account after the expiry of a one-year validity period, and has asked whether this mechanism is appropriate.

 

The regulator has invited views on safeguards including third-party validation checks, adherence to "no third-party payment" norms, and mandating full utilisation of the gift card value for mutual fund subscriptions. SEBI has also asked whether the proposed safeguards are adequate, including compliance with existing rules on e-wallet investments, limits of INR 50,000 per investor per financial year, and strict Know Your Customer and fund flow checks.

 

Lastly, the regulator has invited any additional suggestions from stakeholders on the overall proposal. Under the proposed framework, gifts would be funded only through banking channels such as UPI or bank transfers, and redemption proceeds would continue to be credited only to the investor's bank account, in line with existing norms.

 

SEBI said the framework would operate within the broader regulatory architecture laid down by the Reserve Bank of India for prepaid instruments and its own rules governing mutual fund transactions. Public comments on the consultation paper have been invited until Apr. 14.  End

 

Reported by Kabir Sharma

Edited by Ashish Shirke

 

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