The gift card that could get more Indians investing

Summary: SEBI wants to make mutual funds giftable, like a gift card. But instead of shopping, the recipient invests. It's a small idea with a potentially large effect on who gets introduced to investing first.

Most of us have given or received a gift card at some point, a prepaid card loaded with money that can be spent at a specific store or platform. SEBI, India's markets regulator, is now proposing something similar: instead of spending it on shopping, the recipient would invest it in mutual funds.

It is a straightforward idea with a meaningful purpose: make it easier for people to gift a financial asset, and in doing so, bring more first-time investors into the mutual fund fold.

How it would work

Under the proposal, anyone can purchase a mutual fund gift card, either online or as a physical card, and hand it over to someone they want to gift it to. The recipient then takes ownership of the card and uses it to invest in a mutual fund scheme of their choice, directly through the website of the asset management company (AMC), the firm that manages the mutual fund.

To keep things simple for first-time investors, the person giving the gift can suggest a scheme. But the final call rests entirely with the recipient. They can also choose to invest on their own or take the help of a mutual fund distributor, an intermediary who helps investors pick and manage funds, if they need guidance.

Once invested, any returns or redemption proceeds, that is, the money the recipient gets when they eventually sell their mutual fund units, will be credited only to their own registered bank account.

The safeguards SEBI has built in

SEBI has proposed several rules to maintain a clean framework and prevent misuse.

The value of each gift card cannot exceed Rs 10,000, and the full amount on the card must be invested. No partial use, no leftover balance sitting idle. If the card goes unused, the money is refunded to the person who bought it after one year.

These gift cards will also fall under the Rs 50,000 annual limit that already applies to wallet-based mutual fund investments, so they cannot be used to route large sums outside normal investment channels.

On the payment side, only money loaded through cash, debit cards or net banking can be used. Credit cards, cashback rewards, and promotional credits are not permitted. This aligns with existing rules that prevent third-party payments for mutual fund investments, meaning the money invested in a fund must come from the investor's own verified source, not someone else's account or a promotional balance.

The cost of issuing the gift card will be borne by the AMC, not the recipient or the giver.

What this means for you

If this proposal comes into effect, it opens up a genuinely useful way to introduce someone, a young family member, a friend just starting out or even a first-time earner, to the habit of investing.

Rather than giving cash that may or may not be saved, a mutual fund gift card nudges the recipient directly into the investment ecosystem. The Rs 10,000 cap keeps it appropriate for gifting, and the flexibility to choose their own scheme means the recipient is not locked into something they did not pick themselves.

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