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Gift PPIs: The Securities and Exchange Board of India (Sebi) has floated a proposal to increase the scope of participation in the mutual fund market through the issuance of ‘gift cards.’
In a consultation paper released recently, Sebi has proposed the concept of Gift Prepaid Payment Instruments (Gift PPIs), through which individuals can buy a gift card and then gift it to others. The recipient of the gift card can then invest in mutual funds.
What are gift PPIs and how will they work?
The proposal was originally put forward by the Association of Mutual Funds in India (AMFI) and aims to leverage India’s high propensity for gifting to build financial markets.
SEBI proposes rules and safeguards for Gift PPIs
The Securities and Exchange Board of India (SEBI) has proposed several guidelines to ensure that the new system is secure and complies with existing regulations.
Under RBI guidelines, Gift PPIs can have a limit of up to Rs 10,000. The cards will be non-reloadable and cannot be used for cash withdrawals.
It has been proposed that gift cards can be funded only through bank transfer/UPI to ensure better traceability and prevent misuse.
Gift PPIs: Strict ownership checks to prevent misuse
A key condition in the proposal is ownership verification. Before the funds can be invested, the recipient of the gift card must first claim ownership, which will be matched with their mutual fund folio details.
If there is any discrepancy, the transaction will be rejected, and the money will be returned to the original purchaser.
According to the Securities and Exchange Board of India (Sebi), this rule is designed to align with the existing “no third-party payment” norm in mutual fund investments.
Investment limits and usage rules for Gift PPIs
The Securities and Exchange Board of India (Sebi) has proposed clear limits and conditions for investments made through Gift PPIs.
As per the guidelines, investments made through Gift PPIs, along with other modes such as e-wallets and cash, will be restricted to only up to Rs 50,000 per investor for each mutual fund on a per financial year basis.
Moreover, the entire amount on the gift card must be invested in one go.
Sebi has also proposed two options for choosing investments. The person gifting the card may suggest a mutual fund scheme, but the recipient is not required to follow that suggestion.
Alternatively, the recipient can seek assistance from a distributor, in which case the investment will be made through a regular plan.
Importantly, Sebi has clarified that no cashback, rewards, or promotional incentives can be linked to such investments. This is intended to ensure that investors are not influenced by offers and that the investment process remains fair and transparent.
Gift PPIs: Public opinion invited
The regulator has asked for public feedback on the proposal. This includes views on the role of distributors, the refund process, and whether the safeguards are enough. Comments can be submitted till April 14, 2026.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
