The big pile
Despite significant strides in the country’s financial ecosystem, it remains plagued by a staggering pile of unclaimed assets and a broken transmission system. According to the Investor Education and Protection Fund (IEPF), as of March 2023, over Rs.25,000 crore worth of shares were unclaimed, while AMFI indicates another Rs.35,000 crore unclaimed in mutual funds. An estimated Rs.54,000 crore is unclaimed with the EPFO, and as per the RBI estimates, unclaimed bank deposits in India exceed Rs.78,000 crore.
These amounts have been unclaimed for various reasons. Investors pass away without leaving proper wills, while the nominees and legal heirs are not informed about the assets. Many people simply forget older investments. Others do not provide updated contact information to service providers, resulting in accounts turning inactive.
Even when unclaimed investments are identified, recovering these can be tedious. Surviving family members of a deceased investor often face hardship in dealing with the transfer of assets. This deprives the rightful beneficiaries of the deceased person’s assets, affecting critical financial goals. To be sure, there are multiple service providers specialising in recovery of unclaimed assets. However, these agencies work for a fee, usually a fixed percentage of the assets recovered.
Who can initiate the transmission of assets in DigiLocker?
Harnessing technology
This is where DigiLocker—an initiative of the Ministry of Electronics and IT (MeitY) of the Government of India under the Digital India programme— comes in. It provides citizens access to authentic digital documents in their digital wallets. Sebi has now directed market intermediaries, including AMCs (and their RTAs), and recognised depositories, to register with DigiLocker as ‘issuers’ to enable users to fetch their holding statements. Users can access the holding statements as of the date immediately preceding the date of fetching, or transaction statements for the past 30 days of mutual fund units and demat accounts, respectively, in the DigiLocker account.
Further, users can now appoint a ‘data access nominee’ within the DigiLocker application, and provide the mobile number and email address of the nominee. The DigiLocker renominee would be over and above the nominations, if any, already made in their demat accounts and MF folios. However, the nomination mechanism in DigiLocker will not alter the norms governing the transmission of mutual funds or demat accounts.
Getting in touch
In the event of the user’s demise, these nominees will be granted read-only access to the DigiLocker account, ensuring that vital financial information is easily accessible to legal heirs. A mechanism has been created, whereby, on the user’s demise, the DigiLocker automatically notifies the DigiLocker nominee through SMS and e-mail. “This will solve a crucial problem. Many people don’t inform their loved ones about their investments, creating problems later. DigiLocker can now proactively reach out to nominees to enable identification of financial assets,” says Harsh Roongta, Founder, Fee Only Investment Advisers LLP.DigiLocker will update the status of demise of its user as ‘deceased’ either via its integration with the Civil Registration System (CRS) portal for accessing birth and death certificates, or captured by KYC Registration Agency (KRA) after intimation of the demise and furnishing of death certificate to any financial intermediary.
The notification from DigiLocker will allow the nominees to initiate the transmission process with relevant financial institutions if s/he is also the nominee in the account/ folio of the investor. If not, the DigiLocker nominee can pass on the information to the surviving joint holder or nominee of account or legal heir of investor. “This is a significant step forward, streamlining inheritance and asset transfer in India’s securities market. By addressing the global issue of unclaimed assets, Sebi and DigiLocker are demonstrating India’s leadership in leveraging digital public infrastructure for population-scale solutions,” says B.G. Mahesh, CEO of Sahamati, the not-for-profit body enabling the account aggregator system.
This facility expands the existing DigiLocker services, which include bank account statements, insurance policy certificates, and NPS account statements. The inclusion of MF and demat holding statements makes all the financial holdings available in a single account. DigiLocker currently facilitates obtaining and storing documents like Aadhaar, PAN, driving licence and death certificate. The issued documents in DigiLocker are deemed to be at par with originals as per Section 9A respectively, in the DigiLocker account. of the IT Act, 2000.