New SEBI proposal could help salaried investors build EPF-like discipline via mutual funds

The Securities and Exchange Board of India (SEBI) on Wednesday proposed permitting third-party payments in mutual funds in certain limited scenarios, including employer-led investments and commission payments by asset management companies (AMCs), subject to strict safeguards.

What is the current framework for payments in MFs?

After receiving feedback from the industry, the markets regulator said there was a need to review the existing framework to allow specific, well-defined cases where third-party payments may be permitted without compromising investor protection and compliance with the Prevention of Money Laundering Act (PMLA).

Three key scenarios proposed by SEBI

In its consultation paper, Sebi has proposed enabling third-party payments in the following cases:

Payment for investment in mutual fund units by an employer on behalf of employees through salary deduction.

“The proposed scenario acknowledges the established practice of employers offering various benefits and savings avenues to their employees,” SEBI said.

It added that this mechanism would allow AMCs to accept consolidated payments for mutual fund investments through payroll systems, with employee consent.

Payment of commission to empanelled mutual fund distributors (MFDs) by AMCs in the form of mutual fund units.

The regulator said allotting units instead of trail commission would provide a “convenient, seamless and disciplined way” for distributors to invest and would encourage long-term investing behaviour.

Only MFDs registered with AMFI and associated with AMC schemes would be eligible for this option.

SEBI has also proposed allowing investors to contribute a portion of their subscription amount or scheme returns towards a social cause through mutual funds.

It said the framework would help channel donations in a regulated and transparent manner, reducing the need for investors to independently identify and transfer funds to NGOs.

Can Sebi’s salary-linked mutual fund idea mirror EPF-style investing discipline?

Experts say the proposal could encourage systematic investing behaviour similar to EPF, where regular deductions help build long-term financial discipline among employees.

"The idea of allowing a part of salary in mutual fund units is interesting because it combines income with long-term investing discipline. For many young earners, wealth creation gets delayed not due to lack of income, but due to a lack of investment habits. A structured system like this could work as a behavioural nudge, much like EPF has done for retirement savings over decades," said CFP Shweta Shastri.

1. Employees may be able to invest in mutual funds directly through payroll deductions, similar to EPF or NPS contributions.

2. Automatic monthly investments can help investors stay consistent and benefit from rupee-cost averaging.

3. Many salaried workers who delay investing may start mutual fund investments if employers facilitate the process.

Safeguards proposed by SEBI

To address risks linked to third-party payments and money laundering concerns, SEBI has proposed strict safeguards, including:

• Robust KYC verification for both payee and beneficiary

• Clear written mandates for transactions

• Auditable, non-cash electronic fund trail through segregated accounts

• Regular reconciliation of transactions

• Full redemption and payout to verified beneficiary accounts

SEBI said, “The AMCs must perform due diligence and ensure transparency, guaranteeing beneficiaries full redemption liquidity.”

The regulator added that AMFI, in consultation with Sebi, will issue detailed operational guidelines for implementation.

"At the same time, salary is fundamentally meant for monthly liquidity and financial stability. Rent, EMIs, school fees, and daily expenses require cash flow certainty. Any such framework should therefore remain completely optional, with clear redemption flexibility and strong transparency around risks," said CFP Shastri.

"I think the bigger challenge is psychological as market volatility would now become part of compensation. Unlike fixed salary credits, mutual fund-linked payouts fluctuate in value. Employees must understand that short-term market movements can temporarily impact the value of these units, especially in equity-oriented schemes. SEBI’s focus on KYC, audit trails, and verified accounts is important. But investor education, risk profiling, and suitability assessment will matter even more. Financial innovation works best when convenience is balanced with clarity and informed participation," added CFP Shweta Shastri.

SEBI has invited public comments on the proposal till June 10, 2026, after which it will consider feedback before finalising the framework.

It refers to a situation where someone other than the investor makes a payment for mutual fund investments.

No. It will be limited to clearly defined and regulated scenarios only.

No. SEBI has issued a consultation paper and invited public comments till June 10, 2026.

"If implemented carefully, limiting it to a small allocation such as 5–15% and using diversified funds could make this a powerful long-term wealth creation tool. Over time, it may help employees accumulate meaningful assets through disciplined investing," concluded Shastri.