Shares worth Rs 25,000 crore lie unclaimed: Here's how you can reclaim your lost investments

Unclaimed investments not only deprive rightful owners of their potential returns but also pose challenges for the financial system.

India's financial sector has been experiencing phenomenal growth. And yet, amidst this progress, lies a persistent challenge: unclaimed investments. Millions of rupees remain dormant in stocks, mutual funds, provident funds, and other financial instruments for various reasons. Recovering these forgotten assets can be a complex process, leaving many individuals and companies frustrated. The need of the hour therefore is a system that ensures the common man’s wealth is not lost in oblivion.

But first, How big is this unclaimed investment pile?

Data from the Investor Education and Protection Fund (IEPF), a government body tasked with handling unclaimed investments, paints a troubling picture. As of March 2023, over Rs 25,000 crore worth of shares remained unclaimed in shares. This figure represents a significant loss of potential returns for investors and highlights the need for effective recovery mechanisms.

There are several factors behind investments in India remaining unclaimed:

Lack of Awareness: Many investors, particularly those new to the financial markets, may be unaware of the importance of maintaining updated contact information with companies and custodians.

Address change: Relocations or changes in communication addresses can lead to lost contact and undelivered dividend notices or account statements.

Inoperative accounts: Dormant bank accounts linked to investments or inactive Demat accounts can cause investments to remain unclaimed over time.

Death of investors: Without proper succession planning or failure to inform nominees, investments can remain unclaimed after an investor's demise.

Physical Share Certificates: Despite the shift to dematerialised accounts, many investors might still hold old physical share certificates that they haven't converted, leading to unclaimed dividends.

Unclaimed investments not only deprive the rightful owners of their potential returns but also pose challenges for the financial system. Dormant accounts can strain resources for companies managing them, and unclaimed dividends reduce overall market efficiency.

While the total figure for unclaimed investments is significant, the breakdown by category provides a deeper understanding of the issue:

Mutual funds: As of March 2023, over Rs 35,000 crore lies unclaimed in mutual funds alone [Source: Amfi]. This can be attributed to factors such as investors forgetting about small investments, SIP (Systematic Investment Plan) stoppages without account closure, or nominee details not being updated.

Insurance: The insurance sector also faces a challenge from unclaimed policies. The reasons include policyholders not updating their addresses, lack of awareness about maturity benefits, or lost policy documents. While exact data is unavailable, industry estimates suggest a substantial amount lies in unclaimed life insurance and endowment benefits. While Rs 21,500 crore is lying unclaimed with LIC of India [Source: LIC], there will be a huge amount lying unclaimed with private insurers as well.

Provident fund: Provident fund contributions deducted from salaries can remain unclaimed due to job changes, migration, or lack of proper claim filing after retirement. The Employees' Provident Fund Organisation (EPFO) is actively working to address this issue through online claim processes and awareness campaigns. An estimated Rs 48,000 crore lies unclaimed with the EPFO.

Bank deposits: Savings or current accounts that remain inactive for over 10 years and fixed deposits left unclaimed after maturity for a similar period are categorised as unclaimed bank deposits. The Reserve Bank of India (RBI) estimates that unclaimed bank deposits in India exceed Rs 62,000 crore [Source: RBI website]. This can happen due to account holders forgetting about dormant accounts, changes in address leading to lost communication, or lack of proper nominee registration.

Recovering unclaimed investments can be a tedious and time-consuming process. Investors often face a complex maze of legal procedures and paperwork, and have to deal with multiple entities. Limited awareness about the recovery process and the lack of readily available resources further impede successful claims.

Some companies have emerged to address this festering issue. These firms specialise in unclaimed investment recovery, offering individuals and companies a streamlined approach. Their services typically involve:

Investment identification: Assisting clients in identifying potential unclaimed assets through various channels.

Document collection and verification: Guiding clients in gathering necessary documents and verifying their authenticity.

Claim processing: Managing communication and liaising with companies and regulatory bodies on behalf of clients.

Success-based fee structure: These companies often work on a performance-based model, charging a fee as a percentage of the recovered amount, which serves as an incentive for a successful outcome.

Technology can play a crucial role in simplifying unclaimed investment recovery. Data analytics and artificial intelligence can help identify dormant accounts and facilitate easier tracing of unclaimed assets.