The Securities and Exchange Board of India (SEBI) has proposed allowing salaried employees to invest in mutual funds through salary deductions, similar to provident fund contributions. According to reports from Moneyfront, SEBI has proposed allowing payroll-based systematic investment plans (SIPs) under its new third-party payment framework, enabling employers to invest a portion of an employee's salary in mutual funds with the employee's consent. At present, mutual fund investments generally require the investor's bank account and payment source to match the investment account, but SEBI's consultation paper proposes allowing third-party payments in specific situations with appropriate safeguards. The proposal aims to make mutual fund investing as seamless as salary deductions, potentially bringing millions of new investors into the market.
Under a payroll SIP arrangement, a fixed portion of an employee's salary would be automatically deducted every month and invested in a mutual fund scheme. As reported by Moneyfront, this process would be similar to existing deductions for provident fund contributions or other salary-related deductions. According to experts, such a system could help employees develop disciplined investing habits and encourage long-term wealth creation. The biggest attraction lies in their simplicity - instead of remembering to make monthly investments manually, employees could choose to have a fixed amount deducted automatically every month. Unlike PF deductions, these investments would remain voluntary and market-linked, with employees needing to understand both opportunities and risks before signing up.
Market experts emphasize that while 10-year SIPs can significantly improve investment outcomes, they do not guarantee wealth creation. Prashant Mishra, founder and CEO of Agnam Advisors, believes time alone is not sufficient, stating that "staying invested in equity SIPs for 10 years definitely improves the chances of making money, but calling it a guarantee would be misleading." According to BankBazaar CEO Adhil Shetty, "Staying invested in equity SIPs for 10 years can significantly improve the chances of earning positive returns, but it should not be seen as a guarantee." Experts stress that fund selection, consistency, and investor behavior are crucial factors beyond the investment horizon. As Abhishek Kumar, Sebi-registered investment adviser, notes, "A decade-long investment horizon drastically lowers the probability of a negative return, but equity mutual funds remain market-linked instruments and always carry inherent structural risk."
According to the proposal, only listed companies registered with the Employees' Provident Fund Organisation (EPFO) would be eligible to offer payroll SIP arrangements. As reported by Moneyfront, experts said this requirement is intended to ensure stronger governance, transparency and compliance standards. Employees would be able to voluntarily opt into the scheme and would also have the option to exit, with the proposal currently open for public feedback and not yet implemented. The restriction to listed, EPFO-registered companies is intended to ensure stronger governance standards, greater transparency and better regulatory oversight, with listed companies generally having stronger governance frameworks and regulatory oversight.
The SEBI proposal addresses a critical challenge in India's mutual fund market - the proliferation of scattered, unclaimed SIPs that undermine long-term wealth building. As per AMFI–Crisil Factbook 2025, the number of unique mutual fund investors had roughly doubled to 5.4 crore from 2.1 crore in March 2020, representing one of the greatest success stories of Indian personal finance. However, this growth has created fragmentation issues, with investors maintaining multiple SIPs across different platforms and often forgetting about them. The payroll SIP mechanism aims to harness this inertia in favor of disciplined investing, potentially reducing the scattered investment problem that currently plagues many investors. The proposal's focus on transparency and portability ensures that investments remain visible and portable across job changes, addressing the fragmentation that has emerged from the convenience-driven growth in mutual fund participation.
