By Shivanand Pandit
The amount of money lying with the government as unclaimed deposits has been enlarging every year. According to sources, investors’ assets worth Rs 82,025 crore are lying in dormant bank accounts as unclaimed deposits, maturity income of inactive policies in insurance organisations and life savings in idle Provident Fund accounts. There are also mutual fund investments, dividends and surpluses that have not been monetised for many years.
According to the Employees’ Provident Fund Organisation, money lying in unclaimed PF accounts is Rs 26,497 crore as on March 31, 2019. According to data of the RBI, money lying in unclaimed accounts is Rs 18,381 crore as on March 31, 2019, while in inactive mutual fund accounts it is Rs 17,880 crore as on March 31, 2021. According to the Insurance Regulatory and Development Authority of India, money lying in unclaimed life insurance policies is Rs 15,167 crore as on March 31, 2018. According to the estimates, money lying as unclaimed dividends is Rs 4,100 crore as on March 31, 2020.
As on March 31, 2021, the RBI’s Depositors’ Education and Awareness Fund (DEAF) had Rs 39,264 crore. This is up from Rs 33,114 crore as on March 31, 2020, and Rs 18,381 crore as on 2019. Despite strict Know Your Customer (KYC) norms in place, the continuous addition to DEAF is evidence to the insensitivity of a system that makes it problematic for funds to be transferred to legal claimants. In the case of death, each bank frames its own regulations to transfer funds to the next of kin and some even compel them to park it in fixed deposits there. Moreover, some banks insist two sureties from unrelated persons in addition to succession certificates. This is an irrational demand.
Insurance companies should transfer all policyholders’ money that remain unclaimed for more than 10 years to the Senior Citizens’ Welfare Fund, as per the directives of the Insurance Regulatory and Development Authority of India. Also, all unclaimed money accumulates under the Public Provident Fund, Employee Provident Fund, small savings, post-office savings accounts, senior citizens’ savings scheme accounts, Indira Vikas Patra and Kisan Vikas Patras. However, it is difficult for rightful heirs to lodge a claim if there is no will or nomination, although there is an online channel to make entitlements.
Every mutual fund has stringent KYC prerequisites. Therefore, the regulator of the mutual fund industry will need less effort to locate probable claimants who can be requested to submit the relevant documents to make a genuine claim. With this effort, a huge tranche of money in frozen demat accounts also can be transferred to lawful claimants. Dividends lying with the Investor Education and Protection Fund at the ministry of corporate affairs have grown 10 times in the last 20 years, although 15,000 claims have been settled in two years with the effort of intermediaries.
Many breathe their last breath without a proper succession plan and without notifying their family members about their investments, bank accounts, insurance policies, etc. This is the usual cause for funds remaining unclaimed. Moreover, nominees may not be aware of the investment details because many insurance and deposit applications only ask for the name of the nominee without any contact details. Prolonged litigation between heirs also drags the final settlement. In numerous cases, people are not able to withdraw funds owing to issues with KYC documentation.
So who should act now? The RBI, the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority of India should instruct all banks, mutual fund houses and insurers to show the details of those with unclaimed funds on their website. However, this bold move may not meet the objective if the legal heirs or claimants are not aware about the particulars of the investment.
Supervisory bodies must employ the huge possessions at their disposal to gather the data, organise it in a searchable manner by geography or pin code, names, organisation, etc, and present the dues online for examination. A few private establishments, such as Jeevantika Consultancy have placed the information of about 15 lakh investors on their website and app that can be retrieved free for Investor Education and Protection Fund claims. They have done the work that the government was supposed to do.
Therefore, like a private consultant, regulators also can do a lot more. The government should understand the troubles faced by heirs in making claims and make the process simpler. When the government is fast to embrace technology to collect direct and indirect taxes, trace people and facilitate payments for the benefit of fintech entities, why can’t it utilise it to make life and post-death processes easier for people?
Of late, businessman Harsh Goenka suggested through a tweet that unclaimed funds should be used to lessen the grief of those who were badly affected by Covid-19. Although this idea is praiseworthy, this money belongs to middle-class, tax-paying Indians. In a country where social security measures are absent, why should their money be appropriated instead of tracing the claimants?
In the last five years, every moneylender, whether a bank or finance company, has acquired the right to use manifold streams of data, namely social media accounts, Google, Aadhaar and other customer databases, legally and illegally, to track borrowers. So why isn’t the same technology being employed to repay unclaimed money by chasing claimants? Why has the finance ministry and its governing authorities assembled money under various funds and not done anything about it? Even the interest on these big pools of money is not being used to find ways to track down savers, investors or their heirs and nominees? All these questions remain unanswered.
The annual addition to unclaimed funds needs to be viewed as a national shame. The standing committee of parliament for finance, which is usually controlled by an Opposition member, should question regulators at constant intervals about their accomplishment in repaying money and put out a public statement on this. Importantly, when the government is so proud of information technology competence and many global tech giants are headed by Indians, leading-edge technology should be used to refund money that lawfully belongs to savers and investors.
The interest on the unclaimed deposits, even at 6 percent per annum would fetch nearly Rs 5,000 crore. This is more than enough to hire the best tech companies to locate legitimate claimants and far more than what private lenders spend to track defaulters.
—The writer is a financial and tax specialist, author and public speaker based in Margao, Goa