New Investment Opportunity: Gift Cards to be Used for Mutual Fund Purchases

Introduction of Gift Cards in Mutual Fund Investments

Investors will soon have the chance to utilize gift cards or prepaid payment instruments (PPIs) for investing in Mutual Funds, as the Securities and Exchange Board of India (SEBI) prepares to release new guidelines. According to SEBI's consultation paper, individuals who purchase Gift PPIs can present them to recipients, who can then use these instruments to buy mutual fund units.

These PPIs will be funded exclusively through electronic bank transfers or UPI from Indian bank accounts and will remain valid for one year from the date of issuance. SEBI has proposed a limit of Rs 50,000 per investor for investments made via gift PPIs within a financial year. The regulatory authority stated, "The RTAs, on behalf of AMCs, will monitor the investment amounts per AMC per financial year through Gift PPIs, e-wallets, and cash. If a transaction from a Gift PPI redemption exceeds Rs 50,000, the RTA will deny the transaction, and the PPI's face value will be returned to the issuer's escrow account." SEBI is inviting public feedback on these proposals until April 14.

Understanding Gift Cards

Gift cards function as prepaid, stored-value cards that hold a designated amount of money, which can be used for purchases at retail outlets or online, much like debit cards. Their usage has surged in retail transactions, particularly with the rise of digital payments, which offer immediate delivery and improved security. Previously, the Association of Mutual Funds in India (AMFI) had proposed to SEBI the idea of allowing Gift PPIs as a means to invest in mutual fund units.