How SEBI, RBI decisions will impact mutual funds, fintech firms

by 5paisa Research Team Last Updated: Dec 14, 2022 - 06:10 pm 24.8k Views
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The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have issued separate diktats that could significantly impact the mutual fund industry and fintech companies offering non-bank wallets and prepaid cards.


SEBI has barred asset management companies (AMCs) from offering bundled insurance products with their mutual fund schemes, according to a report by the Mint newspaper.

In a June 17 letter addressed to the Association of Mutual Funds in India (AMFI), the markets regulator observed that some AMCs were proposing to introduce bundled products while some existing schemes have such bundles products, for example, insurance features with scheme investments such as SIP Insure.

“In this regard, it is informed that no existing schemes or one which are proposed to be launched shall have bundled products," SEBI said in the letter.

The regulator has advised AMFI to communicate the decision to all the AMCs, the news report said.


Meanwhile, the RBI has reportedly disallowed non-bank wallets and prepaid cards from loading their credit lines into these platforms, according to a notification from the banking regulator.

“The PPI-MD does not permit loading of PPIs from credit lines,” the regulator said in its communication. “Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007.," the notification said. 

So, which AMCs will be impacted by the SEBI order?

ICICI Prudential MF’s SIP Plus, Nippon India’s SIP Insure, Aditya Birla Sunlife’s (ABSL) Century SIP and PGIM’s Smart SIP facility are the well-known systematic investment plan (SIP) schemes that combined investments with insurance. Currently, only Nippon MF continues to offer this product to its new customers.

Notably, Aditya Birla Sun Life Mutual Fund had earlier announced that it will be opening its Century SIP feature for new registrations from June 16.

How do these SIP insurance plans work?

Usually, under SIP insurance plans, mutual funds offer a free life cover on starting SIP investments. The life cover, in most cases, was in the range of up to 100-120 times the SIP amount, subject to a Rs 50 lakh limit.

For instance, an SIP amount of Rs 10,000 per month could get you a free life cover of up to Rs 12 lakh, subject to other conditions.

What do experts say about bundled insurance plans?

Experts suggest that investors should always separate their insurance and investment requirements.

What is the expected net impact of the RBI notification?

The diktat by the banking regulator is being seen as an effort to clampdown on card fintech and firms operating as neo-banks who have tied up with banks to offer credit lines.

What do the prevalent RBI guidelines say?

As per the prevalent RBI guidelines, pre-paid instruments are allowed to be loaded using cash, bank accounts, credit and debit cards. The guidelines do not allow use of credit lines to top up these instruments.

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