In a move to tap into India’s deep-rooted culture of gifting, the Securities and Exchange Board of India (SEBI) has proposed a new framework to allow Prepaid Mutual Fund Gift Cards.
The proposal, outlined in a consultation paper released on March 24, 2026, suggests using Prepaid Payment Instruments (PPIs)—digital vouchers or physical cards—as a vehicle for gifting investments to friends and family. This initiative, backed by the Association of Mutual Funds in India (AMFI), aims to lower the “initiation barrier” for first-time investors.
1. How the Gift Cards Will Work
The mechanism is designed to be as simple as buying a retail gift card but with the regulatory oversight of a financial investment.
- Purchase: A “Giver” buys a Gift PPI using UPI or Net Banking (Credit cards and promotional cashbacks are strictly prohibited).
- Gifting: The card is handed over to the “Recipient.”
- Redemption: The recipient registers the card on a Mutual Fund platform or AMC website.
- KYC & Investment: The recipient must complete KYC (if not already done) and claim ownership. The funds are then moved directly into a mutual fund scheme in the recipient’s name.
2. Proposed Rules and Limits
To prevent money laundering and misuse, SEBI has suggested strict guardrails:
| Feature | Proposed Limit / Rule |
| Max Value per Card | ₹10,000 |
| Annual Gifting Limit | ₹50,000 per recipient (includes cash/wallet/gift cards). |
| Reloadable? | ❌ No. These are one-time use instruments. |
| Validity | 1 Year. Unused funds are refunded to the purchaser. |
| Investment Rule | 100% Investment. No partial redemptions or cash-outs. |
3. Key Safeguards: “No Third-Party” Rule
A major hurdle for gifting in the past has been the “No Third-Party Payment” rule, which prevents people from investing money into someone else’s account.
- Ownership Verification: Before the units are allotted, the Registrar and Transfer Agents (RTAs) will verify that the person redeeming the card is the same person whose name is on the mutual fund folio.
- Funding Source: By requiring the purchaser to use a verified Indian bank account (via UPI/IMPS), SEBI ensures a clear “paper trail” for the source of funds.
4. Strategic Context: Corporate Gifting & Financial Inclusion
Industry experts believe this could unlock a massive new segment for the mutual fund industry.
- Corporate Rewards: Companies could use these cards as employee bonuses or performance incentives, moving away from traditional “box of sweets” or generic vouchers.
- The “Nudge” Effect: For Gen-Z or students who find the usual investment process intimidating, a pre-funded gift card acts as a “nudge” to complete their KYC and start their compounding journey.
5. What Happens Next?
The proposal is currently in the public consultation phase.
- Feedback Deadline: SEBI is accepting comments from stakeholders until April 14, 2026.
- Final Notification: If the feedback is positive, a formal circular is expected by mid-2026, making these cards available for the upcoming Diwali festive season.
“We want to make gifting an investment as common as gifting a gold coin,” a senior AMFI official noted. “The goal is to turn the ₹35,000 crore corporate gifting market into a wealth-creation engine for the next generation of Indian investors.”