By Dalal Street Investment Journal (DSIJ)
SEBI has proposed introducing mutual fund gift cards or PPIs to promote savings and financial inclusion in India. The initiative allows individuals to gift investments instead of cash or vouchers, with a cap of ₹10,000 per card and ₹50,000 annually. Aimed at boosting retail participation, the move encourages long-term wealth creation, especially among younger investors.
India is one of the most family-bonded countries in the world, and gifting is deeply embedded not only traditionally but also culturally, from heredity to weddings, birthdays, festivals and corporate/business milestones. Indians usually exchange not only tangible items like Gold/silver jewellery, consumer durables, or cars, but also intangible items like shopping vouchers that are often spent on immediate consumption. India is also a savings-savvy country, where ordinary people try to focus on saving rather than spending too much. Thus, to promote savings culture and financial inclusion, India’s capital market regulator SEBI (Securities and Exchange Board of India) is now also a transformative idea: turning mutual fund (MF) investments into giftable instruments, akin to popular shopping vouchers or prepaid cards.
On March 24, 2026, SEBI issued a consultation paper proposing the introduction of Gift Cards/Gift Prepaid Payment Instruments (Gift PPIs) exclusively for investing (subscription) in MF units. The SEBI proposal involves allowing purchasers of Gift Cards/Gift PPIs to gift such an instrument, which can be utilised for the subscription of mutual fund units by the recipient of the Gift Card/PPI. The concept, originally suggested by the Association of Mutual Funds in India (AMFI), aims to harness India's robust gifting culture to promote SAVINGS & long-term wealth creation rather than short-term spending, especially by Gen-Z. Public comments on the SEBI consultation paper are invited until April 14, 2026, after which SEBI is expected to finalise the framework.
The SEBI is expecting that such a concept will improve financial inclusion through the onboarding of new investors in the MF space. The SEBI is now actively promoting relatively safer instruments like MF for retail investors and discouraging rampant direct trading in the volatile capital market, especially in the risky F&O segment, where retail investors are losing trillions of rupees. Through such an innovative step, SEBI is trying to ensure long-term retail wealth creation rather than destruction. India’s MF/AUM (mutual fund assets under management) is now growing rapidly, achieving significant milestones in recent years, led by increasing retail participation, but still, there is significant space for growth in the coming years amid increasing penetration of the digital ecosystem, financial education, and rising disposable real income.
SEBI's consultation paper outlines a structured framework for Gift PPIs, designed as non-reloadable prepaid instruments that can only be used for subscribing to mutual fund units. The core idea is straightforward: the gift giver purchases a Gift MF PPI with a specified amount and transfers it to the Gift recipient, who then redeems the full value by investing in any MF schemes of his/her choice. The flow of money (funds) in the Gift PPI from the PPI issuer to the purchaser of the PPI to the redeemer of the Gift PPI shall be governed under the guidelines issued by the Reserve Bank of India (RBI). The subscription of units of the mutual fund from Gift PPI shall be governed under the SEBI guidelines.
The purchaser (P) receives (purchases) the Gift Card/PPI either in physical form or online (digital) from the designated PPI issuer upon payment through a banking channel.
The Gift PPI is then shared with the intended beneficiary (B) by the PPI purchase ─ the purchaser can transfer the PPI instrument or code to the beneficiary seamlessly, much like sharing a normal banking gift voucher.
The person (B) receiving the Gift PPI claims the ownership of the Gift PPI and uses the same for subscription of units of mutual fund from the Asset Management Company’s (AMC) website/apps (through designated e-wallets as per SEBI regulations)
Each Gift PPI is capped at ₹10,000 and is non-reloadable.
It remains valid for one year from the date of issuance. If unused within this period, provisions for refund or expiry handling are under discussion.
To ensure transparency, including the PMLA angle, and regulatory oversight, Gift PPIs can only be funded through electronic modes—bank transfers or UPI—from Indian bank accounts.
Cash loading is explicitly prohibited, aligning with anti-money laundering (AML) and know-your-customer (KYC) norms.
To prevent misuse and maintain the integrity of small-value investment routes, SEBI has proposed an aggregate limit of ₹50,000 per financial year per investor for investments made through Gift PPIs, e-wallets, and cash combined.
Registrar and Transfer Agents (RTAs), such as CAMS or KFintech, acting on behalf of AMCs, will monitor compliance and reject any transaction that breaches this threshold.
The recipient must utilise the entire amount to subscribe to mutual fund units—either in direct plans or regular plans (through distributors if chosen).
Partial usage or withdrawal as cash is not permitted.
The purchaser of the PPI may suggest specific MF schemes, but it’s not binding and does not constitute investment advice; the final investment decision rests with the recipient, preserving investor autonomy.
Recipients would need to complete standard mutual fund KYC requirements if not already done.
The process is expected to integrate with existing platforms like MF Central for a user-friendly experience.
SEBI guidelines: As per para 14.10 of the SEBI Master Circular for Mutual Funds dated June 27, 2024, the following is, inter alia, stated on the use of e-wallets for investment in mutual funds:
Mutual funds (MFs)/Asset management Companies (AMCs) are allowed to enter into arrangements with issuers of PPIs for facilitating payment from e-wallets to mutual fund schemes.
MFs/AMCs shall ensure that extant regulations, such as cut-off timings, time stamping, etc., are complied with for investment in MFs using e-wallets.
Redemption proceeds shall only be made in the bank account of the investor/unit holder.
Total subscription through e-wallet and cash for an investor is restricted to ₹50,000 per MF per financial year.
E-wallets shall not offer any incentives such as cashback, vouchers, etc., directly or indirectly, for investing in MFs.
MFs/AMCs shall ensure that only amounts loaded into the e-wallet through cash, debit card, or net banking can be used for subscription to MF schemes. Credit cards, cash back, and promotional schemes cannot be used.
MFs/AMCs shall also comply with the requirement of no third-party payment norm for investments made using e-wallets.
RBI guidelines: PPI instruments are governed under RBI Master Directions on Prepaid Payment Instruments (PPIs). The relevant provisions are summarised as follows:
Banks and non-bank entities can issue PPIs after necessary approval/authorisation from the RBI under the Payment and Settlement Systems Act, 2007.
PPI is defined as “Instruments that facilitate the purchase of goods and services, financial services, remittance facilities, etc., against the value stored therein.”
Guidelines provide for safeguards against money laundering.
PPI can be loaded by cash, bank account, debit card, credit card, etc.
No interest is payable on PPI balances.
All PPIs issued in the country shall have a minimum validity period of one year from the date of last loading/reloading in the PPI. PPIs can also be issued with a longer validity.
The PPI issuer shall caution the PPI holder at reasonable intervals during the 45 days before the expiry of the validity period of the PPI.
A non-bank PPI issuer cannot transfer the outstanding balance to its Profit & Loss account for at least three years from the expiry date of the PPI.
In case the PPI holder approaches the PPI issuer for a refund of such an amount at any time after the expiry date of the PPI, then the same shall be paid to the PPI holder in a bank account.
Specific guidelines for Gift PPI under RBI Master Directions
The maximum value of each such prepaid payment gift instrument (Gift PPI) shall not exceed ₹10,000/-. Such an instrument shall not be reloadable.
A cash-out or fund transfer shall not be permitted for such an instrument. However, the funds may be transferred back to the source account (the account from where Gift PPI was loaded) after receiving consent from the PPI holder.
KYC details of the purchaser of Gift PPI shall be maintained by the PPI issuer.
Separate KYC shall not be required for customers who are issued such instruments against debit to their bank accounts and/or credit cards in India.
PPI issuer shall adopt a risk-based approach, duly approved by its Board, in deciding the number of such instruments which can be issued to a customer, transaction limits, etc.
In addition to the abovementioned guidelines issued by RBI and SEBI, it is proposed to put in place the following additional safeguards for the implementation of Gift PPI as a mode for onboarding investors of mutual funds:
The PPI shall be funded only through electronic bank transfer or UPI from an Indian bank account.
PPIs offered by AMCs shall be redeemed for any of the mutual fund schemes managed by such AMC at the discretion of the redeemer.
In addition, considering that PPI redeemers could be first-time investors who may be less familiar with mutual funds, the following options shall be provided to assist PPI redeemers in selecting a scheme:
The PPI purchaser may select a scheme for the PPI; the same shall not be binding on the redeemer.
Also, in this scenario, the PPI purchaser’s selection of a scheme will not constitute any investment advice or a recommendation.
The mutual fund transaction executed by the PPI redeemer shall be processed under the direct plan.
The PPI redeemer may also avail themselves of the services of a distributor for selecting a scheme. In this scenario, the subscription will be processed under the regular plan.
While promising, the SEBI initiative is not without hurdles:
Awareness and Adoption: Success depends on widespread education. Many may still prefer traditional gifts or view mutual funds as risky. Robust marketing campaigns by AMCs and distributors will be crucial.
Operational and Technological Integration: RTAs must efficiently track the ₹50,000 annual cap across multiple instruments. Seamless integration with existing systems is essential to avoid friction during redemption.
Investor Protection: Safeguards against mis-selling or pressure on recipients to invest in unsuitable schemes must be strong. Clear guidelines on the role of distributors (who may earn commissions on regular plans) are needed.
Refund and Expiry Handling: Mechanisms for unutilised or expired PPIs require careful design to maintain trust.
Tax Implications: While the gift itself may not trigger immediate tax for the giver (subject to existing gift tax rules), any future gains upon redemption by the recipient would be taxed as per capital gains norms. Clarity on the taxation of the PPI transaction itself would help.
SEBI has invited stakeholder feedback precisely to address many such issues, including the extent of distributor involvement and additional safeguards.
SEBI's plan to introduce Gift Cards/PPIs for MF investments represents a forward-looking approach to blending cultural practices with modern financial concepts. By making investing as effortless and celebratory as gifting a voucher, the regulator aims to unlock new avenues for retail participation and long-term wealth creation. Ultimately, this proposal underscores a powerful truth: the best gifts are those that grow with time. Mutual fund Gift PPIs could help turn everyday gifting occasions into seeds of financial independence and prosperity for millions of ordinary Indians and boost financial inclusion meaningfully.
SEBI Registered Research Analyst (INH000006396).
Founded in 1986, Dalal Street Investment Journal (DSIJ) brings decades of experience in India’s equity markets. DSIJ's research combines fundamental analysis with price action, guided by disciplined risk management and capital preservation. They follow a structured, data-driven approach designed to help investors and traders make informed decisions beyond short-term market noise.
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