A whopping Rs35,914 crore of unclaimed funds are lying with just three financial regulators under various regulations that ensured centralisation of such money.
In response to a question in Lok Sabha, finance minister Nirmala Sitharaman informed in a written reply that unclaimed deposits in commercial banks alone have increased to Rs14,578 crore in 2018, up from Rs11,494 crore a year earlier. This is a massive 26.8% increase. The sum was Rs8,928 crore in 2016.
Of the total unclaimed deposits, the country's largest bank, State Bank of India (SBI), has the largest share of Rs2,156.33 crore in 2018.
The money is pooled under the Depositor Education and Protection Fund (DEAF) by the Reserve Bank of India (RBI) to be used for investor protection activities.
However, large sums of the money probably remain unutilised because of RBI’s style of administration.
There is also very little effort to push banks to trace the owners or beneficial owners of this money and to return it.
Essentially, the government has asked banks to transfer the cumulative balances in all accounts which are not operated for a period of 10 years or more along with interest accrued and transfer such amounts to the DEAF.
This happens when people die intestate, or without informing their families about accounts that they may have maintained in various banks.
Similarly, unclaimed deposits lying with insurers are pooled with the Insurance Regulatory and Development Authority of India (IRDAI), based in Hyderabad.
The finance minster said that unclaimed life insurance deposits stood at Rs16,887.66 crore in September 2018 (up from Rs15,229.53 crore), while those of non-life insurers stood at Rs989.62 crore (up from Rs847.54 crore).
But this is only a fraction of unclaimed money belonging to investors and depositors lying with financial regulators.
The Investor Education and Protection Fund (IEPF), under the ministry of corporate affairs, was the first to start pooling unclaimed dividends, corporate deposits and interest.
The ministry has created an IEPF authority, which is entirely controlled by government regulators and seems to distribute the money to institutes of accountants and company secretaries it has registered.
According to the IEPF website
, it had Rs3,460 crore in unclaimed benefits in 2017-18.
In response to a Right to Information query filed by us, the IEPF Authority spent Rs18.76 crore in 2018-19 and Rs15.58 crore in 2017-18 but is unable to provide a detailed break up on how this large sum was spent.
What is significant is that the IEFP also makes it difficult for genuine investors to reclaim their rightful money, which has been transferred to the pool after seven years, for various reasons.
In addition to these pools of funds, the Securities and Exchange Board of India has a pool of unclaimed mutual fund investments along with interest.
And the money lying with the insurance regulator is even higher than that with the RBI, and is rarely mentioned.
Most of this money probably belongs to tax-paying Indians and ought to be used for their benefit or returned to legal heirs after a serious effort to track them down.
Often unclaimed dividends and deposits get transferred to such funds because they are tied up in litigation for decades and cannot be claimed.
The finance minister’s response said that Life Insurance Corporation (LIC) had the highest unclaimed deposits at Rs12,892 crore in September 2018.
In case of general insurance companies, the total such deposits were Rs535.12 crore as in September 2018. National Insurance Co Ltd had Rs102.85 crore, New India Assurance Co Ltd Rs180.66 crore, The Oriental Insurance Co Rs78.85 crore and United India Insurance Co Ltd had Rs172.76 crore in September 2018. Agricultural Insurance Company of India and the Export Credit Guarantee Corporation of India, which are specialised agencies, had Rs23.46 crore. Private insurers had a total amount of Rs431.04 crore as unclaimed deposits in the same period.
It is time that investors and depositors start asking questions about the utilisation of this money and ensure that it is used for the benefit of the specific economic category of people who have contributed to it. This group, usually taxpayers, is never on the radar of the government and does not even have any social security when bad times befall them.