Giving gifts on various occasions, such as birthdays, marriage anniversaries, festivals, etc., is very common. However, choosing a gift is often a challenge for many people. We often wonder whether the gift that we give will be useful to the recipient. Gift cards of brands like Amazon, Shoppers Stop, restaurants, etc., help address this challenge to a great extent. Using the gift card, the recipient can buy something of their choice. SEBI plans to take this idea forward and proposes introducing gift cards for subscription of mutual fund units. In this article, we will understand how SEBI plans to do this and whether you would prefer to gift mutual funds instead of regular gifts.
Gift cards for mutual funds
On 24th March 2026, the capital market regulator, SEBI, released a consultation paper on introducing gift cards/gift prepaid payment instruments (PPIs) for subscription of mutual funds. It involves allowing an individual to purchase a gift card/gift PPI and use it for gifting, just like traditional gifts. The gift recipient can utilise the gift card/gift PPI for subscribing to mutual fund units. The initiative is expected to improve financial inclusion by attracting new investors to invest in mutual funds.
How will the process work?
Suppose Akshay wants to gift a HDFC Mutual Fund scheme to Neha on her birthday. He can purchase the gift card either in physical form or online from a prepaid payment instrument (PPI) issuer. The payment must be made through an electronic bank transfer or UPI from an Indian bank. Credit cards cannot be used. The gift card will have a minimum validity period of one year. Akshay can select a specific HDFC Mutual Fund scheme (for example, HDFC Nifty 50 Index Fund) for the gift card.
Akshay can gift the card to Neha. Neha will have to visit the HDFC mutual fund website and redeem the gift card by subscribing to the units of a mutual fund scheme. Although Akshay selected a mutual fund scheme (HDFC Nifty 50 Index Fund, in this case) for the gift card at the time of purchasing it, it is not binding on Neha. Neha can redeem the gift card against any mutual fund scheme (for example, HDFC Nifty Midcap 150 Index Fund) of her choice from the list of schemes managed by HDFC AMC that offered the gift card.
The mutual fund scheme transaction executed by Neha shall be processed under the direct plan. If Neha doesn’t have knowledge of mutual funds, she can avail the services of a mutual fund distributor (MFD). In such a scenario, the mutual fund subscription will be processed under the regular plan.
The entire gift card balance will be used for subscribing to mutual fund units, ensuring no funds remain unclaimed in the gift PPI. The PPI shall have a validity of one year from the date of issuance. If Neha doesn’t redeem the PPI, on expiry, the PPI issuer shall refund the PPI amount to Akshay’s verified bank account.
SEBI guidelines
As per SEBI guidelines for mutual funds, an investor’s total subscription through e-wallet and cash is restricted to Rs. 50,000 per mutual fund per financial year. The maximum value of each gift PPI shall not exceed Rs. 10,000, and shall not be reloadable.
AMCs shall track unclaimed PPIs on a monthly basis and regularly notify the PPI holder for any claim of Gift PPI. It will ensure the PPI holder doesn’t miss redeeming the PPI before the expiry date.
The gift card must be legally owned by the person redeeming it. It will ensure the gift card cannot be misused even if it falls into someone else’s hands. At the time of redeeming a gift card for a mutual fund subscription, the RTA receives information about the registered owner of the gift card from the gift card issuer. The RTA verifies that the gift card registered owner is the same as the folio owner. If there is a match, the transaction is allowed; else it is rejected.
The RTAs, on behalf of AMCs, will keep a record of how much each investor has invested per AMC per financial year through gift PPI, e-wallet, and cash. If the transaction resulting from a gift PPI redemption crosses Rs. 50,000, it will be rejected.
Will you prefer to gift mutual funds?
SEBI has invited comments from the public on its proposal by 14th April 2026. After considering the public feedback, SEBI will issue guidelines on gifting mutual funds. As discussed earlier, many people find it challenging to decide what to gift because they are unsure whether the recipient will find the gift useful. In such a scenario, gifting mutual funds is an excellent option. By gifting mutual funds, you can contribute to the recipient’s financial goals and help in achieving them.
