Sebi simplifies gifting of mutual funds. Here's what it means for investors

Market regulator, Sebi, has proposed to introduce Gift Card/ Gift PPI for subscription of mutual fund units which will allow the purchaser of Gift Card/ Gift PPI to gift such instruments which can be utilized for subscription of mutual fund units by the recipient of Gift Card/ Gift PPI.

This step by the market regulator aims to improve financial inclusion through onboarding of new investors in the mutual fund space.

In this new product, the purchaser of Gift PPI can gift the prepaid payment instruments to a recipient of the Gift PPI, who can utilize the instrument for subscription of units of mutual fund. The flow of money in the Gift PPI from PPI issuer to purchaser of PPI to redeemer of Gift PPI shall be governed under the guidelines issued by the Reserve Bank of India (RBI).


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The purchaser of Gift PPI receives the Gift Card either in physical form or online from PPI issuer on payment through the banking channel. The Gift PPI is then shared with the intended beneficiary by the PPI purchaser.

The person receiving the Gift PPI claims the ownership of the Gift PPI and use the same for subscription of units of mutual fund from the Asset Management Company’s (AMC) website.

The mutual funds (MFs)/Asset management Companies (AMCs) are allowed to enter into arrangement with issuers of PPIs for facilitating payment from e-wallets to mutual fund schemes. The redemption proceeds shall only be made in the bank account of the investor/ unit holder.

The total subscription through e-wallet and cash for an investor is restricted to Rs 50,000 per MF per FY (financial year) and E-wallets shall not offer any incentives such as cashback, vouchers etc., directly or indirectly, for investing in MFs.

Mutual funds or the AMCs shall ensure that only amounts loaded into e-wallet through cash or debit card or net banking can be used for subscription to mutual fund schemes. Credit cards, cash back and promotional schemes cannot be used.

Mutual funds or the AMCs shall also comply with the requirement of no third party payment norm for investment made using e-wallets.

The maximum value of each such prepaid payment gift instrument (Gift PPI) shall not exceed Rs 10,000. Such instruments shall not be reloadable and cash-out or funds transfer shall not be permitted for such instruments. However, the funds may be transferred ‘back to source account’ (account from where Gift PPI was loaded) after receiving consent of the PPI holder.

What expert say

Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance told ETMutualFunds that SEBI has implemented mutual fund gift cards to expand investor access to mutual funds, helping first-time investors start their investment journey.

Minocha further said that this is a very welcome step for financial inclusion. However, the initial investment limit of Rs 10,000 (and Rs 50,000 per investor per financial year per AMC) is very low and to make it more meaningful, it is hoped that this limit will be raised.

The PPI shall be funded only through electronic bank transfer or UPI from an Indian bank account.

Sagar Shinde, VP Research at Fisdom, told ETMutualFunds that SEBI’s move to enable mutual fund investments via PPIs (like gift cards) is a positive step towards financialization—it lowers entry barriers, makes investing more accessible and ‘giftable’, and can help widen retail participation. However, execution, KYC alignment, and misuse risks will be key to monitor

Funds transfer and validity

For each subscription of mutual fund units through Gift PPI, the PPI issuer shall send an electronic funds transfer from the PPI issuer’s escrow account to the relevant bank account for the use of funds by the mutual fund scheme.

Each PPI shall have a validity period of one year from date of issuance. If the PPI is not claimed within one year, the PPI issuer shall refund the face value to the purchaser’s verified bank account. AMCs shall track unclaimed PPIs on a monthly basis and regularly notify PPI holders for any claim of Gift PPI.

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The RTAs, on behalf of AMCs, will track how much each investor has invested per AMC per financial year through Gift PPI, e-wallets and cash. If the transaction resulting from a Gift PPI redemption crosses Rs 50,000, the RTA will reject the transaction, and the PPI face value will be refunded to the issuer’s escrow account.

The full value of PPI shall be utilized by the PPI redeemer for subscription to units of a mutual fund scheme. This will ensure that no funds remain unclaimed in the Gift PPI. The subscription value in the MF scheme of the PPI redeemer shall be equal to the value loaded in the PPI, subject to statutory levies on subscription to MF scheme, if any.

How will this step be helpful for investors?

Shivam Pathak, CFP and Founder of Asset Elixir told ETMutualFunds that Sebi’s Gift PPI proposal is a good step towards encouraging a shift from gifting consumption to gifting investments.

From a financial planner’s perspective, the intent to onboard first-time and younger investors is positive-since the first investment decision is often the hardest, and gifting can act as a trigger, Pathak said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)