- What Is SEBI Proposing?
- How Does It Actually Work? A Simple Walkthrough
- What Are the Rules Around This Gift Card?
- Why Is SEBI Pushing This? Three Reasons Behind the Proposal
- Things to Keep in Mind Before You Buy or Receive One
- Conclusion
India has over 50 crore bank account holders. But only around 5.33 crore people as of 2025 actively invest in mutual funds. That means roughly 9 out of every 10 people with a bank account have never bought a single mutual fund unit.
This blog explains a new proposal by SEBI that could change that, by letting you gift a mutual fund investment to someone, the same way you would gift an Amazon voucher or a Flipkart gift card.
What Is SEBI Proposing?
On March 24, 2026, SEBI (Securities and Exchange Board of India) released a consultation paper proposing the introduction of a Gift PPI, short for Gift Prepaid Payment Instrument, for mutual fund subscriptions.
In simple terms, this is a gift card that can only be used to invest in a mutual fund. You buy it, give it to someone, and they use it to invest in a fund of their choice.
The proposal was originally suggested by AMFI, the Association of Mutual Funds in India, and SEBI is now inviting public comments on it before making any final decision. The last date to submit comments is April 14, 2026. You can give your comments here.
It is important to note upfront: this is not a rule yet. It is a proposal under discussion.
How Does It Actually Work? A Simple Walkthrough
The process involves three steps.
Step 1: You buy the gift card. You purchase a Gift PPI from a PPI issuer, which could be a bank or a non-bank payment company authorised by RBI. You pay through an electronic bank transfer or UPI from an Indian bank account. The card has a fixed value loaded into it, up to a maximum of Rs. 10,000.
Step 2: You give it to someone. You share the gift card with the person you want to gift it to. This can be done physically or digitally.
Step 3: The recipient invests it. The recipient accepts legal ownership of the gift card. Once they do that, they go to the AMC's (mutual fund company's) website, complete their KYC if they have not already, and use the full value of the card to subscribe to a mutual fund scheme of their choice.
A practical example: Suppose you want to introduce your younger sibling to investing. You buy a Rs. 5,000 Gift PPI and send it to them. They log on to an AMC website, accept the card, and invest the Rs. 5,000 in a fund they pick. The investment is made in their name. When they redeem the mutual fund in the future, the money goes to their bank account, not yours.
The money flow has two separate parts. The movement of money from you to the gift card is regulated by the RBI. The moment that a gift card is used to buy mutual fund units, SEBI's rules take over.
What Are the Rules Around This Gift Card?
Before you think of this as a simple gifting tool, here are all the limits and conditions that apply.
| Rule | Detail |
| Maximum value per gift card | Rs. 10,000 |
| Annual investment limit (Gift PPI + e-wallet + cash combined) | Rs. 50,000 per AMC per financial year |
| Validity period | 1 year from date of issuance |
| Funding allowed | Bank transfer or UPI from Indian bank account only |
| Reloadable? | No |
| Partial use allowed? | No, full value must be used in one transaction |
| Cash withdrawal allowed? | No |
| What happens if unclaimed after 1 year? | Money is refunded to the buyer's verified bank account |
Why Is SEBI Pushing This? Three Reasons Behind the Proposal
1. Most Indians with bank accounts do not invest in mutual funds
India had approximately 58 crore Jan Dhan and regular bank account holders, but the mutual fund industry had only around 5.33 crore unique investors as of recent data. The gap is large. SEBI's stated objective in this consultation paper is to improve financial inclusion by bringing new investors into the mutual fund space. A gifting model is one way to do that because it removes the first step of self-motivation. Someone else starts the journey for you.
2. First-time investors often need a push, not just information
The paper specifically mentions that Gift PPI redeemers could be first-time investors who may be less familiar with mutual funds. To address this, the proposal includes two support options. First, the person who buys the gift card can suggest a scheme for the recipient, though this suggestion is not binding. Second, the recipient can choose to work with a mutual fund distributor to pick a scheme, in which case the subscription is processed under the regular plan. If they invest on their own, it goes under the direct plan.
3. This builds on a regulatory framework that already exists
SEBI already allows e-wallets to be used for mutual fund investments. The Gift PPI proposal is a structured addition to that existing framework, with extra safeguards layered on top. RBI also has existing guidelines for Gift PPIs under its Master Directions on Prepaid Payment Instruments. So this is not being built from scratch. It is an extension of rules that are already in place.
Things to Keep in Mind Before You Buy or Receive One
The full amount must be used in one shot. You cannot use Rs. 3,000 today and Rs. 2,000 later from the same card. The entire value of the gift card has to go into one mutual fund subscription at one time.
The recipient must complete KYC first. If the person receiving the gift card has never invested in a mutual fund before, they will need to complete their KYC before they can redeem the card. This involves identity and address verification. It is a one-time process, but it could be a barrier if someone is not digitally comfortable.
If unclaimed in one year, money goes back to the buyer, not the recipient. This is an important detail. If the recipient does not use the gift card within 12 months, the money is refunded to the buyer's bank account. AMCs are required to track unclaimed gift cards monthly and send reminders.
This is still a proposal. SEBI has not finalised this yet. Public comments are open until April 14, 2026. The rules could change before implementation. Do not wait for this product or build plans around it until it is officially announced.
Conclusion
If this proposal is implemented in its current form, it would make gifting a mutual fund investment as simple as sending a Swiggy voucher. The product is designed with guardrails: a Rs. 10,000 cap per card, a Rs. 50,000 annual limit, mandatory KYC for the recipient, no cash withdrawal, and a one-year validity window.
For a country where most people with bank accounts have never touched a mutual fund, the intent makes sense. But for anyone planning to use this product once it launches, reading the fine print carefully will matter more than the gifting idea itself.
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