SEBI released a consultation paper on May 20, 2026, proposing a draft circular to enable third-party payments in mutual funds under specific scenarios. The proposal aims to relax existing restrictions that currently mandate investors to make payments only from their own bank accounts. This regulatory change would allow designated third parties to make mutual fund investments on behalf of investors, subject to compliance conditions. The consultation seeks public comments to finalize implementation guidelines for this payment mechanism reform.

Currently, SEBI regulations mandate that mutual fund investments must be made only from the investor's own bank account, creating operational challenges for corporate treasurers, family offices, and institutional intermediaries. The proposed circular would allow third-party payments under defined scenarios - likely including employer contributions to employee welfare schemes, family member payments, and corporate treasury operations through authorized intermediaries. This reform addresses practical difficulties faced by distributors and institutional clients while maintaining investor protection through enhanced KYC and audit trails. The proposal reflects SEBI's effort to balance operational efficiency with regulatory oversight, particularly as digital payment systems evolve. Key safeguards would include mandatory investor consent, enhanced documentation, and strengthened distributor accountability. This change could significantly impact mutual fund distribution models, enabling more flexible investment structures while maintaining compliance standards. The consultation period allows industry stakeholders to suggest implementation modalities and risk mitigation measures before the final circular is issued.