Mumbai, May 22 -- The Securities and Exchange Board of India (Sebi) has proposed to relax restrictions on third-party payments in the mutual fund ecosystem.

In a consultation paper issued on Wednesday, the markets regulator recommended third-party transactions for mutual fund investments in certain scenarios, allowing employers and fund houses to facilitate investments on behalf of employees and distributors under a regulated framework with safeguards.

Mint explains whether such a payment mechanism poses any risks to investors and why it has remained off-limits so far.

The proposal would permit employers to invest in mutual fund schemes on behalf of employees through payroll deductions. Employees' Provident Fund Organization (EPFO)-reg...