"Individual recovered 5,000 shares worth Rs. 1 crore held by his father in X Limited after a decade."
"A school teacher purchased a BMW from the proceeds of shares held by his grandfather, recovered after 20 years."
Stories like these aren't rare—many individuals have discovered and reclaimed ancestral shares or assets after decades. Often, people are unaware of investments or holdings that rightfully belong to them. In several cases, an entire generation passes before someone realizes they are entitled to certain financial assets.
Despite efforts by regulatory authorities to streamline asset recovery, a significant volume of investments still remains unclaimed in the financial ecosystem. The primary cause? A lack of awareness and communication. Some investors do add nomination details but fail to inform the nominees, while in other cases, nominees aren't notified of the investor's demise.
The Scale of the Problem
As of January 31, 2024, unclaimed funds in India's financial markets stood at a staggering Rs.323 Crore, with unclaimed securities amounting to Rs.182 Crore, according to SEBI data. One of the primary reasons behind this issue is a lack of awareness among investors. Many individuals fail to track their investments or appoint nominees for their Demat and bank accounts. When an investor passes away without clear documentation or nomination, investments remain unidentified and unclaimed after their demise.
Mergers, acquisitions, and name changes in companies further complicate the tracing of shares and dividends—adding to the volume of unclaimed investments.
While the Investor Education and Protection Fund Authority (IEPFA), which works under the aegis of Ministry of Corporate Affairs, Government of India, which is responsible for handling unclaimed shares and dividend, do undertakes awareness campaigns around unclaimed assets and facilitates recovery through website-based shares search facility but the same still eludes a larger audience.
SEBI's Digital Breakthrough: DigiLocker Integration
To address these challenges, SEBI has taken a step ahead by integrating investor's Demat accounts with DigiLocker, the government's digital infrastructure. This initiative aims to simplify asset transmission and reduce the volume of unclaimed securities.
How DigiLocker Integration Works
Under this framework, SEBI has instructed Asset Management Companies (AMCs), Registrar and Transfer Agents (RTAs), and Depositories to register with DigiLocker.
Though Depository Participants provide the facility to nominate, the problem of unclaimed assets persists—mainly because nominees are not notified of the account holder's demise, as a result they remain unaware of the investments for a long period of time. The API integration of DigiLocker with RGI's Civil Registration System portal can be a problem solver.
The key advantage of DigiLocker is its ability to automatically update the status of an investor's demise based on the information from Register of deaths of the Registrar General and Census Commissioner or certificate available in the KRA system. On updating the status of demise, the DigiLocker will then notify the nominee/s about the demise through SMS/E-mail and allow access to view digital information of deceased DigiLocker user.
Flow of Transmission:
What happens when different nominee details are provided in the Digilocker and demat account? SEBI has addressed this issue by giving supremacy to the nominee details provided in the demat account. The said can be understood by below given example:
Above table clearly demonstrate how the nomination facility works. If the nominee (A in above example) is also listed in the account or folio, they can initiate the transfer of assets into their name. If not, they can share the information with the legal heir or surviving joint holder to facilitate asset transmission. By establishing the mechanism for flow information of demise, DigiLocker integration targets the issue of lack of awareness among nominees.
What does an investor need to do?
Investors shall activate their DigiLocker and add the nomination details. It is advisable to keep nomination details similar to what has been provided in the Demat account. In case, no nomination details has been provided, then along side DigiLocker, investors should immediately add such details to their demat account, to facilitate quick recover of asset in case of death.
Beyond Claiming Inherited Assets: Other Investor Benefits
DigiLocker's integration with the demat account offers benefits beyond inheritance claims. Investors can now conveniently access:
- Holding Statements , as of the date immediately preceding the date of fetching.
- Transaction Statements for the last 30 days of mutual fund units and Demat accounts.
- the latest generated or last available Consolidated Account Statement (CAS) in the previous 12 months of the request, with an option to fetch CAS automatically on the 1st of January each year.
By bringing all financial holdings into a single digital account, DigiLocker enhances transparency and accessibility, allowing investors to stay informed about their portfolios effortlessly.
Conclusion:
SEBI's move to integrate AMCs, RTAs, and Depositories with DigiLocker is a good initiative to reduce volume of unclaimed assets. This system can definitely work towards eliminating the possibility of an investor's wealth becoming an unclaimed asset. However, the success of this initiative depends on two critical factors: firstly, the ability to create awareness about this process, and secondly, the timely updation of investors' demise status in the system.
SEBI should undertake necessary measures to create awareness about this facility. It shall also rope in IEPFA to do the heavy lifting in this respect, as being the premier agency for such objectives.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
