Investors can now buy mutual funds through ewallets
Sebi sets investment limit via wallets at ₹50,000
Investors will be permitted to purchase mutual funds worth up to ₹50,000 through digital wallets, with the Securities and Exchange Board of India (Sebi) on Wednesday approving the proposal.
The proposal, part of efforts to channelise household savings into the capital market as well as promote digital payments in the mutual funds industry, was approved by the Sebi board during its meeting here.
“Investments up to ₹50,000 per mutual fund per financial year can be made using e-wallets,” Sebi said. Redemptions of such investments can be made only to the bank account of a unit holder.
E-wallet issuers would not be permitted to offer any incentive such as cash back, directly or indirectly, for investing in mutual fund scheme through them.
Besides, the e-wallet’s balance loaded through cash or debit card or net banking can only be used for subscription to mutual funds schemes.
Balance loaded through credit card, cash back, promotional schemes would not be allowed for subscription to mutual funds.
The limit of ₹50,000 would be an umbrella limit for investment by an investor through e-wallet and/or cash, per mutual fund, Sebi said in a release.
Besides, mutual funds and asset management companies have been allowed to provide instant online access facility to resident individual investors in liquid schemes. In this case, the limit would be up to ₹50,000 or 90% of folio value, whichever is lower.
For providing such facility AMCs would not be allowed to borrow. Liquidity is to be provided out of the available funds from the scheme and AMCs to put in place a mechanism to meet the liquidity demands.
“This facility can also be used for investment in mutual funds through tie-ups with payments banks provided necessary approvals are taken from the RBI,” Sebi said.
Currently, any scheme providing the facility would reduce the limit to ₹50,000 immediately.
As many as 41 active asset management companies (AMCs) together manage assets worth ₹18.3 lakh crore and mutual fund investor accounts are over 5 crore. Mutual funds are investment vehicles made up of a pool of funds collected from a number of investors. The funds are invested in stocks, bonds and money market instruments, among others.
Besides, the market regulator also decided to bar resident as well as non-resident Indians from making investments through participatory notes, in an effort to curb black money.
The decision is also part of efforts to strengthen the regulatory framework for offshore derivative instruments (ODIs), commonly known as participatory notes (P-Notes), which have been long seen as being possibly misused for routing of black money from abroad.
While there are directions for NRIs and resident investors that bar them from using P-Notes in the form of frequently asked questions (FAQs), the Sebi board has now approved having a new provision in the regulations.
There was a view that the existing restrictions are only in the form of ‘FAQs’ and therefore the finance ministry has asked the regulator to impose this restriction through an amendment in the norms in order to give greater legal sanctity.
Following Sebi’s measures to check any misuse of P-Notes, the notional value of these instruments has declined over the years from 55.7% of overall FPI investments in June 2007 to just 6.7% in December 2016. There are also fears that the P-Note investments may start coming from other jurisdictions like the US, France and the Netherlands after tightening of rules for inflows from countries like Mauritius, Singapore and Cyprus.