Investing in mutual funds could soon become easier and more engaging. Market regulator Securities and Exchange Board of India (SEBI) is planning a new system that will allow people to gift mutual fund investments instead of giving cash or physical gifts.
In simple terms, you will be able to give a special “gift card” that the receiver can use to invest in mutual funds. This idea could help bring more new investors into the market.
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What is SEBI’s Gift Card Proposal?
According to SEBI, a person can buy a Gift PPI (prepaid payment instrument) and gift it to someone else. The receiver can then use this gift to buy mutual fund units.
SEBI shared this plan in its consultation paper. These Gift PPIs can only be funded through an Indian bank account using electronic transfer or UPI. They will remain valid for one year from the date they are issued.
SEBI has also proposed a maximum investment limit of ₹50,000 per investor per financial year through these Gift PPIs.
How Will the Investment Limit Work?
As per the proposal, registrars and transfer agents (RTAs) will track how much an investor puts into mutual funds in a year using Gift PPIs, e-wallets, or cash.
This tracking will be done with the help of asset management companies (AMCs).
What Happens If You Cross ₹50,000 Limit?
If someone tries to invest more than ₹50,000 through a Gift PPI, the transaction will be rejected immediately.
In such cases, the money from the gift card will be sent back to the escrow account of the person who originally gifted it.
How Gift Cards Are Used Currently
Right now, gift cards and prepaid instruments are mostly used for shopping and retail purchases.
However, their usage has grown quickly due to digital payments, as they are easy to use, fast, and secure.
Why Was This Proposal Introduced?
This idea came after the Association of Mutual Funds in India (AMFI) suggested to SEBI that Gift PPIs should also be allowed for mutual fund investments.
This means people will now be able to gift investments, not just money or products.
How Will New Investors Benefit?
SEBI believes this system will help more people start investing in mutual funds. It can act as a simple entry point, especially for beginners, and support financial inclusion.
SEBI has asked for public feedback on this proposal, and people can share their comments until April 14. After that, the final rules will be decided.