A Whopping Rs36,000 Crore of People’s Unclaimed Money Lying with Just Three Financial Regulators
Moneylife Digital Team 02 July 2019
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.
Comments
paddy
3 years ago
It is same with the EPF too. ive older PF before 2010, this cannot be claimed online as it is old PF. the company is closed now. I couldnt claim it that time.Now, Ive submitted twice but not heard from either through text message or through letter. one of the very incompetent department..
Ramachandran
3 years ago
Genuine efforts should be made by the govt. to return this money. If after 3 years of search they are not traceable, then a legislation should be made to use this money for the welfare of the poor or for widows of the jawans who can utilize the same for education of their children. Also this money can be used giving medical facilities to the poor people who are really suffering.
arun adalja
3 years ago
something to be done for unclaimed money as institute will not use money and one day it will be vanished.banks are not cooperative and previous years nominee facility was not available so it is not done and if you go to bank they will ask you so many details which will be cumbersome and money is wasted.money life do something.
ramchandran vishwanathan
3 years ago
the process of claim is very cumbersome , too many documents are seeked by the financial institution just to cover their risks . An effort must be made to ease the process in terms of submitting documentary evidence.
Mahesh S Bhatt
3 years ago
Government shall raid our money like it did with RBI Mahesh Kirticorp
ASHWIN AMRITLAL MEHTA
3 years ago
I do understand that bank should know first that the Depositor is passed away. And they can know only after the nominee approaches the bank with the Death certificate. So the Depositors also should take care to nominate and either inform the Nominee about the money or at least mention in the will.
ASHWIN AMRITLAL MEHTA
3 years ago
To safeguard the interest of the common man, it should be made compulsory that without Nomination no account should be open. Second, at the time of opening only all details of the nominee like : Name, address, PAN CARD, Aadhar Card, email, contact no. etc.,his/her signature ( provided they are adult) and even a photograph should be uploaded in bank’s System, so even if Nomimee is not able to come forward for the claim, it should be bank’s Duty to reach the Nominee and hand over the money( of course after deducting the expense to reach the nominee by email/phone or in person. If their intentions are good.
ASHWIN AMRITLAL MEHTA
3 years ago
Firstly the word “ UNCLAIMED MONEY” should be replaced with “UNCLAIMABLE MONEY” because of tidious procedures and asking for irrelevant details from the genuine Nominees. Recently I have to meet GM of DenaBank at BKC to request him to pull out an unfair questionnaire form from their website www.denabank.co.in
For an FD kept with Dena bank having “No Nomination “, the bank was asking details like 1) Have the deceased made the will ? 2) Details of deceased insurance policies( Which particular Insurance is not mentioned). 3) Details of all other bank accounts and the money lying in there. 4) Details of deceased’s immovable property. Now assume the FD is say for 10 lakhs. The nominee is not in India, coming from USA/UK/AUSTRALIA/CANADA or any other outer country for a limited period just can’t collect all such details to claim his/her money and then such money finds its way under “UNCLAIMED “ category whereas in reality it’s “UNCLAIMBALE. What right the bank is having to ask for needless details as I mentioned earlier. Even in the claim form, they have shown their smartness. In claim form at the bottom they ask for “Claimant’s signature but on the final bank voucher they are asking for “Signatures of all legal heirs”. Such tactics by the bank with the general semi educated public of this country contributes to “UNCLAIMED DEPOSIT”.
MDT
Replied to ASHWIN AMRITLAL MEHTA comment 3 years ago
Thanks for your comments. Request you to share all details, along with documents, if any, to [email protected]. We will try to take up the issue with concerned authorities.
SUNIL REBELLO
3 years ago
WHAT ABOUT LIC OF INDIA - sitting on the biggest of all people's money
A BANERJEE
3 years ago
It is a mind boggling story about a govt just sitting tight over such huge unclaimed deposits of people of this very country for ages without ever trying to advertise widely about the procedures (which are cumbersome) in the national and local/district periodicals/newspapers. Your observation in this context is gravely relevant : 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 this context I may also raise another issue of interest for your investigation. I understand that the British Govt had raised huge funds through various Bonds during its regime and huge unclaimed deposits are still lying with the RBI on these accounts. I do not remember having seen any public notice/advertisement fro the GoI/RBI on this subject notifying the successors of the original subscribers to these Bonds (as the latter must have died a very long time back). A study of these unclaimed deposits by way of the Bonds issued in colonial rule should be rewarding.
TIHARwale
3 years ago
similar huge amount will be with Regional Provident Commissioners office. Companies would have remitted Demand Drafts in the name of RPF Commissioner but RPF does not credit it to the account of concerned individual unless bribe is paid to lower level staff at RPF office.
Parimal Shah
3 years ago
Plenty of the so called tax-paid money actually may be black money deposited under fake names during days of poor KYC norms when it was easy to befriend a bank officer to open account/s in fake names with imaginary data. Now with strict proof of identity demnded for operating such account money can not be claimed without self-incrimination. Hence the more than 26% rise in banks' unclaimed deposits.
Meenal Mamdani
Replied to Parimal Shah comment 3 years ago
This is the most likely explanation.
Remember how Sahara CEO could not come up with names of people who had deposits with his company?
Govt should utilize the funds in a transparent manner so that citizens know where these funds are being used.
SURESH NAIR
3 years ago
Though it’s a good idea to pool the entire unclaimed deposits into a single account, only the interest generated from this account should be used for investor awareness and protection activities. In fact a part of the interest could be used to trace the original owners/legal heirs of such deposits and return their hard earned money to them! People have worked hard to save money for themselves and their families and the governments should make all efforts to return the same either to the depositors themselves or their legal heirs. The government cannot claim absolute right over such unclaimed money!
Ramesh Bajaj
3 years ago
It is unfair that even dividends cannot be claimed after 7 years (how come this magical figure?). There can be many reasons (change of address, deaths, lost correspondence, not delivered by post office) that investors have lost track of this.
R Murugan
Replied to Ramesh Bajaj comment 3 years ago
If a person is unheard of for a continuous period of 7 years, the person is considered to be dead legally. A spouse of such a person can remarry and legal heirs can claim the property of the person. Why 7 is not known but some rule has to be there to deal with property of a missing person. There is also a law of limitation for enforcing claims. Regarding the need for limitation in law a judge observed," Law will only help the diligent and not the indolent". All banks have been asked to provide details of unclaimed deposits in their websites and one can enter the name and city and search for details of one's inoperative accounts. Many people fail to update change of address with the banks or mutual funds. They also do not provide details of their investments to their near and dear ones I think for some strange reason.
Sucheta Dalal
Replied to Ramesh Bajaj comment 3 years ago
You can make a claim. When IEPF was set up, there was no provision to do so, but it has changed now. Please go to the website of IEPF authority and explore
https://www.iepfportal.in/iepf-contributions.html
shadi katyal
3 years ago
Evidently Banks and insurance companies have no interest to track the relatives to disburse that.Digging deep into it one may find that red tape may have discouraged the recipient .
Wonder since BJP is aware of such large amount,how long it will be there. The banks can always claim statute of limitations
R Murugan
Replied to shadi katyal comment 3 years ago
The limitation for filing suit against the bank for claiming a deposit lying with them is 3 years and the limitation starts running from the time the demand is made on the bank. That is the law so you can lodge the claim on the bank after any number of years. Banks were only supposed to send an annual return about unclaimed deposits not operated for more than 10 years to RBI as on 31st of every December and hold the amount in their books.
Free Helpline
Legal Credit
Feedback