SEBI proposes mutual fund gift cards — Rules, limits, how it works

India’s market regulator, the Securities and Exchange Board of India (SEBI), is exploring a new idea to make investing feel less intimidating and a bit more personal. It wants to turn mutual funds into something you can actually gift.

In a consultation paper released on Tuesday, SEBI proposed a framework that would allow people to buy prepaid ‘gift cards’ and pass them on to friends or family, who can then use the money to invest in mutual funds. The move, supported by the Association of Mutual Funds in India, is aimed at bringing more first-time and younger investors into the market.

The proposal is carefully structured, with clear limits and safeguards in place signalling that while the idea is new, the approach remains cautious.

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What is SEBI’s ‘Gift PPI’ model?

At the heart of the proposal is something called a Gift PPI (Prepaid Payment Instrument) essentially similar to the gift cards people already use for shopping.

Here’s how it would work:

• You buy a prepaid gift card using UPI, net banking, or other banking channels
• You gift it to someone
• The recipient uses that amount to invest in a mutual fund scheme

While the person gifting can suggest a scheme, the final decision lies with the recipient. This keeps the choice flexible and in the investor’s control.

Caps in place: Rs 10,000 per card, Rs 50,000 a year

To keep things regulated and prevent misuse, SEBI has proposed clear limits:

• Each gift card can have a maximum value of Rs 10,000
• An individual can invest up to Rs 50,000 in a year through such instruments

This yearly cap includes investments made via gift PPIs, e-wallets, and even cash. If someone crosses the limit, the transaction will be declined and the money refunded.

These limits are in line with existing Reserve Bank of India (RBI) rules for prepaid instruments.

How the gift card can be used?

The usage rules are quite strict and intentional.

• The card cannot be reloaded
• It can be used only once
• The full amount must be invested in a single go
• Partial use is not allowed
• No cash withdrawal or transfers

In short, the money stays locked for investment purposes only.

One-year validity, or the money comes back

Each gift card will remain valid for one year from the date it is issued.

If the recipient does not use it within that period, the amount will be returned to the buyer’s bank account. This ensures the money doesn’t remain unused or stuck indefinitely.

Built-in safeguards to prevent misuse

Since this involves financial transactions, SEBI has proposed multiple layers of checks:

• KYC (Know Your Customer) will be mandatory for the recipient
• Investments can only be made in the recipient’s own name
• The source of funds will be tracked
• Mutual fund registrars (RTAs) will verify transactions
• Monitoring systems will be in place to prevent misuse and money laundering

Why SEBI is pushing this idea?

This isn’t just about convenience - it’s about changing how people start investing. It could also shift gifting habits from spending on consumption to building long-term wealth. Simply put, instead of giving a shopping voucher, you could gift someone their first investment.

Public feedback open till April 14

SEBI has invited public comments on the proposal until April 14, 2026. After reviewing feedback, it will decide whether and how to roll out the framework.