By Sanjeev Sanyal and Srishti Chauhan
The Investor Education and Protection Fund Authority (IEPFA) was established in 2016 under the ministry of corporate affairs (MCA) as a custodian of investors’ funds unclaimed for over seven years. It pools these funds under the Investor Education and Protection Fund (IEPF) and administers refunds of unclaimed shares, dividends, matured corporate deposits/debentures, etc. to the rightful claimant.
The pool has more than tripled since 2016-17, but the speed of resolution remains tardy. Out of 11,450 lakh unclaimed shares lying with the fund, only 50.95 lakh were returned to the investors until October 31, 2022. Consequently, investors’ hard-earned money remains stuck with the IEPFA for years despite claimants making every effort to complete the formalities. This article explores the inefficiencies of the process.
To claim a refund, an investor or their heir has to apply online at the MCA portal and submit a copy of the e-application physically along with other documents to the company’s nodal officer. Thereafter, the company needs to send the verification report to the authority that, in turn, is supposed to examine it and refund the amount. This is the theory.
In practice, the process is extremely inefficient and requires a complete overhaul. Firstly, the portal is mired in frequent technical issues and the user interface is unfriendly. Companies have to switch to different modes for various signatories like nodal officer, authorised signatory, etc., and each time, several one-time passwords are generated. This makes the navigation complicated and confusing.
Secondly, there is no clear way to track the application status online by the three parties involved—the claimant, the company, and the IEPFA. As a result, verification and approvals are left to the coordination between the authority and the company, causing delays ranging from months to years, and claimants are rendered clueless about expected turnaround time at each stage.
Thirdly, some of the rules and documentation are too rigid and onerous. For instance, rectification of errors in claimants’ credentials online can be made only once and within 15 days, after which it becomes invalid. In case of bank/demat account details, changes aren’t even permitted. Similarly, in case of loss of original share certificates, the claimant needs to submit a first-information report (FIR), newspaper advertisement, and also an indemnity-cum-surety bond to the company. At the time of writing, this rule was still being applied by officials despite the Securities and Exchange Board of India (Sebi) relaxing the FIR and advertisement requirement for up to Rs 5 lakh, and doing away with the indemnity bond criterion altogether in 2022.
Lastly, we are told by many claimants that the IEPF email help desk and helpline are unresponsive to queries raised by companies and claimants. We confirmed that by trying the helpline numbers as part of our research (in the first two weeks of March 2025), and found that it needed many attempts before we got through. Moreover, the agents are not equipped to support technical challenges and claim-specific details. In the absence of an efficient grievance redress system, claimants are pushed from pillar to post to chase their applications.
As a result of these inefficiencies, claimants have to consult specialised agencies and “brokers” to get back what is legitimately theirs. We found that the fee charged for such intermediation ranges from 20% to 50% of the value locked up in the IEPF. This is not just expensive but raises the possibility of rent-seeking. The situation is clearly unacceptable.
Other countries too run processes for the return of unclaimed assets. For instance, the Australian Securities and Investment Commission maintains and publishes a database of unclaimed money for people to openly search. Similarly, the United States has the National Association of Unclaimed Property Administrators that represents the governments of all 50 states and provides free assistance to the public to search for unclaimed assets. In Canada, unclaimed property legislation imposes notice obligations on the companies to contact the apparent owner of the unclaimed property before sending it to the authority’s custody. The common thread in all these cases is that the system is designed for service delivery rather than a default that treats the citizen with suspicion.
Meanwhile, India’s market regulator Sebi has attempted to simplify the processes for nomination by investors to ease asset transmission and reduce future unclaimed funds. A circular dated January 10 simplified the nomination process followed by one on March 19 that tries to harness the DigiLocker app for reducing unclaimed assets. Even if this helps to reduce the future pipeline, the IEPFA needs to improve its performance.
The first step for improvement for the IEPFA would be to upgrade the information technology (IT) infrastructure in order to remove the multitude of technical glitches. Secondly, to ensure transparency, the portal should include timeline tracking of responses by all parties on parameters like queries raised, date, and release of claimed asset. These timelines can be based on internal standard operating procedures for IEPFA personnel and the portal can enable notification-based reminders to promote time-bound claim closure.
Thirdly, rules need to be streamlined for all steps, ranging from requirements for physical copies to the corrections in claimant credentials. Finally, there should be a robust grievance redress system to resolve investors’ grievances for both IT-related and subject-matter issues. A ratings-based feedback system from users could help evaluate the quality of service.
This is an area that clearly needs to be improved for ease of living. There have been some useful changes done made by Sebi. Even the IEPFA seems to be experimenting with a better search engine for unclaimed funds. However, a holistic improvement road map for investors’ experience needs to be implemented.
The writers are respectively member and young professional, Economic Advisory Council to the Prime Minister.
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