The Securities and Exchange Board of India (SEBI) has allowed mutual funds investments through digital wallets. However, it has a cap of Rs 50,000 per mutual fund per financial year. The regulatory approval was given to channelise household savings into capital markets and promote digital payments in the economy.

SEBI added the digital wallet players will not be allowed to offer any incentive such including cash backs directly or indirectly for investing in mutual fund scheme through them.

It further added that wallets balance loaded through cash, debit card or net banking, can only be used for subscribing to mutual funds and that balances through credit card, cash back, promotional schemes should not be allowed. However, redemptions from such investments have to be into the bank account of the investor. Note that SEBI has not clarified whether these wallets need to have full bank compliant KYC or not.

Wallets tying up with mutual funds does have precedence. In January, FreeCharge’s customers were able to invest in mutual funds through its partnership with Reliance Mutual Fund. The tie-up said users could invest in Reliance Mutual Fund’s ultra-short term debt funds and the companies said that these schemes were traditionally safer and give higher post tax returns than fixed deposits and savings accounts.

To invest through FreeCharge, a KYC compliant customer needs to enter their PAN number, bank account number and other details and the folio of the customer will be generated. For non-KYC customers, the KYC can also be done online through FreeCharge by using the Adhaar number linked with the subscriber’s currently active mobile number.

Mutual funds on e-commerce sites

In November 2015, SEBI was planning to allow online marketplaces such as Amazon, Flipkart and Snapdeal to sell mutual funds. This was being done to open up the mutual fund industry to more players and former SEBI chairman UK Sinha had expressed concern that distributors have tight control over the industry and were hesitant to promote the direct plan that allowed investors to buy units without paying a sales fee.