Source: The post India simplifies recovering unclaimed money across multiple financial assets has been created, based on the article “Stumbling through the unclaimed assets maze ” published in “Businessline” on 26th July 2025
UPSC Syllabus Topic: GS Paper 3- Indian Economy
Context: The article highlights the growing burden of unclaimed financial assets in India, triggered by forgetfulness, red tape, and the complex process of transmission after an investor’s death. It discusses the magnitude of the problem, the regulatory steps taken, and the need for empathetic reforms to ease the claiming process.
Magnitude and Spread of Unclaimed Balances
- Unclaimed Bank Deposits: Bank deposits remain the largest pool of unclaimed assets. As of March 2025, the Depositor Education and Awareness (DEA) Fund held ₹97,545 crore, up 24% from ₹78,212 crore the previous year.
- Equity and Mutual Fund Assets: Equity investments show rising unclaimed balances. SEBI’s Investor Education and Protection Fund held ₹8,108 crore in unclaimed dividends by March 2024. Shares in unclaimed suspense accounts were worth ₹12,000 crore. Mutual funds had ₹918 crore in unclaimed dividends and ₹402.8 crore in redemptions by FY24.
- Insurance and Provident Fund Contributions: As of March 2024, unclaimed insurance amounts stood at ₹20,062 crore. The Employees’ Provident Fund reported unclaimed balances of ₹8,505.23 crore in FY24, a sharp rise from ₹1,638.37 crore in FY19.
- Other Investment Vehicles: Apart from these, unknown sums lie in REITs, InVITs, company fixed deposits, and small savings. Collectively, unclaimed balances have crossed ₹1.47 lakh crore and are still growing.
Regulatory Measures to Reclaim Assets
- Steps by the RBI and SEBI: RBI has mandated all bank branches to support KYC updates, video identification, and allow business correspondents to activate dormant accounts. The UDGAM portal helps investors view DEA-transferred funds. Banks must disclose unclaimed deposits on their websites.
- Equity and Insurance Regulations: SEBI transfers unclaimed shares/dividends after seven years to IEPF, accessible via its website. IRDAI requires insurers to shift policy dues pending over 10 years to the Senior Citizens Welfare Fund, claimable for 25 years.
- Mutual Fund and EPF Norms: While mutual funds and EPF accounts also allow claims, the documentation process remains cumbersome, especially for heirs of deceased investors.
Root Causes of Persisting Problem
- Investor Negligence: Dormant accounts often result from investors failing to close accounts or update addresses. These can be addressed through digital tracking and portals.
- Transmission After Death: A major cause of unclaimed assets is the complex process of transferring assets of deceased individuals. Heirs are often deterred by documentation demands.
- Documentation and KYC Mismatches: Discrepancies in names and signatures across KYC documents add to heirs’ difficulties. Physical shareholding further complicates the dematerialization and claim process.
Reforming the Claiming Process
- Empathy in Customer Service: Banks and financial institutions must handle transmission requests with empathy. Spelling or signature mismatches should be treated leniently and not as fraud risks.
- Simplification and Risk Categorisation: Accounts can be classified into high-, medium-, and low-risk categories. Low-risk accounts can follow lighter claim protocols. This reduces unnecessary burden.
- Centralised Claim Portal: A unified digital portal should be created to handle all claims for the deceased. It should allow document uploads and notify all relevant financial bodies.
- Regulatory Focus on User Hardship: To reduce unclaimed balances, regulators must first understand and simplify the practical challenges faced by legal heirs and elderly investors.
Question for practice:
Examine the key reasons behind the growing volume of unclaimed financial assets in India and suggest measures to simplify the process of reclaiming them.
