Sebi Weighs ‘Gift Cards’ For Mutual Funds To Draw First-Time Investors

A new proposal from the Securities and Exchange Board of India (Sebi) could change how people are introduced to investing. The regulator is exploring the idea of allowing prepaid “gift” instruments that can be used to buy mutual fund units, effectively turning an investment into something that can be gifted.

The concept is still at the consultation stage, but the intent is clear. By making mutual funds more accessible and less intimidating, Sebi hopes to bring in a wider base of investors, especially those who have not participated in markets so far.

Turning Investments Into A Gift

The proposed structure is simple in design. A person can purchase a prepaid instrument, similar to a gift card, using standard banking channels. This instrument can then be passed on to someone else, who can claim it and use the value to invest in mutual fund schemes.

On the face of it, the idea is simple. But in practice, it falls under two different sets of rules. The prepaid instrument would be governed by rules laid down by the Reserve Bank of India (RBI), while the mutual fund transaction itself would fall under Sebi’s regulations.

There are also limits already in place. Investments made through such prepaid routes, along with e-wallets and cash, cannot exceed Rs 50,000 per mutual fund per financial year. In addition, redemption proceeds must be credited only to the investor’s bank account, and the framework does not permit third-party payments.

Safeguards To Prevent Misuse

The draft also puts a few limits in place. Each gift card can carry up to Rs 10,000, cannot be topped up again, and cannot be used to take out cash or move money elsewhere. It is meant only for investing.

Before the investment goes through, there will be a check to see if the person using the gift card is the same as the one in whose name the mutual fund account is held. If there is a mismatch, the transaction would be declined.

There is also a time limit attached. The gift instrument would remain valid for one year. If it is not used within that period, the amount will be refunded to the purchaser’s bank account. Mutual funds would be required to track such unused instruments and notify users.

Interestingly, the person gifting the instrument may indicate a preferred scheme. But this isn’t compulsory. The person receiving the gift can ignore the suggestion, pick another scheme, or take advice before deciding where to invest.

A Step Towards Wider Participation

Seen more widely, this is part of Sebi’s push to bring more people into investing. By packaging mutual funds as something that can be gifted, the regulator is attempting to reduce the hesitation that often keeps new investors away.

Receiving an investment as a gift could serve as an entry point—one that feels less like a financial decision and more like a gentle introduction.

That said, the proposal is not final. Sebi has sought feedback on various aspects, including whether the safeguards are adequate and how certain operational elements should be handled.

If implemented, the idea could add a new dimension to how mutual funds are perceived, moving them beyond a purely transactional product to something that can be shared, introduced, and normalised in everyday life.