SEBI Proposes Gift Cards, PPIs for MF Investments; ₹50,000 Cap

The Securities and Exchange Board of India (SEBI) has proposed allowing investors to use gift cards or prepaid payment instruments (PPIs) to invest in mutual funds in a move aimed at widening retail participation.

Under the proposal, a person can buy a gift PPI and transfer it to another individual, who can then use it to invest in mutual fund units. The regulator has suggested a cap of ₹50,000 per investor per financial year through such instruments.

The proposal, outlined in a consultation paper released on 24 March 2026, is open for public comments until 14 April.

How Will Gift Cards Work for Mutual Fund Investments?

The structure is built around a simple flow. A buyer purchases a gift card or PPI using a bank transfer or UPI. This is then passed on to a recipient, who can use it to subscribe to mutual fund units.

As explained in the consultation paper, the payment side of the transaction will follow Reserve Bank of India (RBI) rules, while the actual investment will be governed by SEBI regulations.

There are clear limits and conditions:

• Each gift instrument can have a value of up to ₹10,000

• These instruments cannot be reloaded

• Cash withdrawal or transfer is not allowed

• The full amount must be used for investment

The validity is capped at one year. If the recipient does not use the amount within this period, the money will be returned to the buyer’s bank account.

SEBI has said the buyer can indicate a preferred scheme, but the final call will be taken by the person receiving the gift.

What Safeguards Has SEBI Proposed?

There is a limit on how much can be invested through this route. An investor cannot put in more than ₹50,000 in a year in a single mutual fund using gift PPIs, e-wallets and cash together. If a transaction goes beyond this, it will not be processed, and the money will be sent back.

Before the investment is accepted, registrars will check whether the person using the gift card is the same person registered as its owner. If there is a mismatch, the transaction will be stopped.

The recipient will also need to formally accept ownership of the gift card before using it. This is to ensure that the payment is not treated as a third-party transfer.

The money will be routed through an escrow account. Only funds coming from a bank account can be used to load the card. Offers like cashback or rewards will not be allowed.

These rules are meant to keep the system controlled while still making it easy for new investors to come in.

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Why Is SEBI Considering This Move?

The idea is to bring more first-time investors into mutual funds.

Gift cards are already widely used in retail purchases. Their ease of use, especially with digital payments, has increased adoption in recent years. SEBI believes a similar model could work for financial products.

The proposal was first put forward by the Association of Mutual Funds in India (AMFI). According to the regulator, such instruments can help onboard new investors who may not be familiar with direct investment processes.

At the same time, recent data suggests that domestic activity remains steady, but participation in financial markets still has room to grow. Instruments like these could act as an entry point, especially for younger or first-time investors.

Sources:

SEBI

ET

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