The Securities and Exchange Board of India (SEBI) on May 20, 2026, issued a Consultation Paper on Draft Circular for Enabling Third Party Payments in Mutual Funds in certain scenarios.
The following has been stated:-
•The draft circular issued by the Securities and Exchange Board of India proposes allowing third-party payments in Mutual Funds in limited and regulated scenarios while maintaining safeguards against money laundering and fraud.
•It permits employers to invest in mutual funds on behalf of employees through salary deductions and allows AMCs to pay commissions to registered mutual fund distributors in the form of mutual fund units.
•The proposal also introduces a framework for facilitating donations or contributions to social causes through mutual funds, including investments in Social Stock Exchange-linked ZCZP instruments.
•AMCs and RTAs will be required to undertake strict KYC verification, validate relationships between payer and beneficiary, maintain audit trails, and ensure compliance with PMLA norms.
•The framework mandates that redemption proceeds and dividends must continue to be credited only to the beneficiary’s verified bank account.
•SEBI has invited public comments on the proposals and draft circular till June 10, 2026.
The detailed circular is given in the document below.
