Sebi on Thursday said that e-wallets used for investing in mutual funds should be in compliance with KYC norms prescribed by the Reserve Bank of India (RBI).

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The capital markets regulator issued a circular on Thursday which states that the provisions related to e-wallets for investing in mutual funds will be applicable with effect from May 1, 2023.

Earlier, the Securities and Exchange Board of India (Sebi) in its circular dated May 8, 2017, allowed the use of e-wallets for investment in mutual funds within the umbrella limit of Rs 50,000 for investments by investors, especially the young generation -- to purchase these instruments through both e-wallet and/or cash per mutual fund per financial year.

The purpose of the move was to promote digital payments in the mutual fund industry and channelise household savings into the capital market.

Mutual funds are investment vehicles made up of a pool of funds collected from a number of investors.

The funds are invested in stocks, bonds and money market instruments, among others.

"The circular is issued to protect the interests of investors in securities and to promote the development and regulate the securities market," Sebi said.

(With inputs from PTI)