Kochi: What if a fixed amount for mutual fund investments could be directly deducted from your monthly salary? The Securities and Exchange Board of India (SEBI) is exploring a proposal to link mutual fund investments with salary payments, similar to provident fund or pension contributions.
SEBI has proposed allowing employers to make third-party payments towards employees’ mutual fund investments, subject to strict security and compliance norms. The market regulator is currently preparing a draft framework and is also seeking feedback from stakeholders and companies within the financial sector.
At present, mutual fund investments must be made only from an investor’s own bank account. Payments can also be processed only through RBI-authorised payment aggregators or SEBI-approved clearing corporations. Allowing third-party payments for mutual funds would mark a major shift from the existing rules.
Salary deductions for SIPs
According to SEBI’s consultation paper, employers may be allowed to deduct mutual fund investment amounts directly from employees’ salaries and transfer them towards their Systematic Investment Plans (SIPs). This means employees would no longer need to wait for their salary to be credited to their bank accounts before making monthly SIP payments.
The proposed facility would be limited to listed companies and firms registered with the Employees’ Provident Fund Organisation (EPFO). The deductions would be made only with the consent of employees.
SEBI has also proposed that mutual fund distributors be compensated in the form of mutual fund units instead of trail commissions. The regulator believes this could encourage distributors to remain invested for the long term and build wealth alongside investors.
Safety measures
To prevent risks such as money laundering in third-party payments, SEBI has proposed strict Know Your Customer (KYC) verification norms and mandatory consent documentation for both the payer and beneficiary.
The regulator has invited public comments and feedback on the proposals until June 10.
