Securities and Exchange Board of India (Sebi) has proposed a new way to bring more people into mutual fund investing by allowing investments through prepaid ‘gift cards’. The move aims to make investing simpler and more accessible, especially for first-time investors.
In a consultation paper released on Tuesday, Sebi has suggested introducing Gift Prepaid Payment Instruments (Gift PPIs).
These would allow a person to buy a prepaid card and gift it to someone else, who can then use the amount to invest in mutual fund schemes.
The idea is simple. A person can purchase a Gift PPI using bank transfer or UPI. This prepaid card can then be gifted to another person. The recipient can redeem the card on an asset management company’s platform and invest the amount in mutual funds.
The proposal was first suggested by the Association of Mutual Funds in India (AMFI) and is aimed at using the culture of gifting to increase participation in financial markets.
Sebi said this method could help bring in new investors who may find the usual investment process difficult or confusing.
Sebi has also proposed several safeguards to ensure that the system is not misused and follows existing rules.
The Gift PPIs will follow Reserve Bank of India (RBI) guidelines for prepaid instruments. At the same time, the actual investment into mutual funds will remain under Sebi rules.
As per RBI norms, the maximum value of a Gift PPI will be Rs 10,000. These cards cannot be reloaded and cannot be used to withdraw cash.
Sebi has also proposed that these gift cards can only be funded through bank transfers or UPI. This will ensure proper tracking of transactions and reduce the chances of misuse.
One of the key conditions in the proposal is ownership verification.
Before the money can be invested, the person receiving the gift card must first claim ownership. This will be checked against the mutual fund folio details. If there is any mismatch, the transaction will be rejected and the money will be returned to the original buyer.
This rule is meant to follow the existing ‘no third-party payment’ rule in mutual fund investments.
Sebi has kept limits in place for such investments.
Investments made through Gift PPIs, along with e-wallets and cash, will be capped at Rs 50,000 per investor per mutual fund in a financial year.
Another important rule is that the full amount on the gift card must be invested at one time. This means there cannot be any unused balance left on the card.
Each Gift PPI will also have a validity of one year. If the amount is not used within this period, it will be refunded to the buyer’s bank account.
Sebi has proposed two ways for deciding where the money will be invested.
The person gifting the card can suggest a mutual fund scheme. However, this will not be compulsory for the recipient to follow.
The recipient can also choose to take help from a distributor. In such cases, the investment will be made through a regular plan.
Sebi has clearly said that no cashback, rewards or promotional benefits can be linked to such investments.
This is to ensure that investors are not pushed into investing due to offers and that the process remains fair.
The regulator has asked for public feedback on the proposal. This includes views on the role of distributors, refund process, and whether the safeguards are enough.
Comments can be submitted till April 14, 2026.
The proposal, if approved, could change how people enter the world of mutual funds, making it easier for new investors to start through a simple gifting route.