A Whopping Rs36,000 Crore of People’s Unclaimed Money Lying with Just Three Financial Regulators
A whopping Rs35,914 crore of unclaimed funds are lying with just three financial regulators under various regulations that ensured centralisation of such money. 
 
In response to a question in Lok Sabha, finance minister Nirmala Sitharaman informed in a written reply that unclaimed deposits in commercial banks alone have increased to Rs14,578 crore in 2018, up from Rs11,494 crore a year earlier. This is a massive 26.8% increase. The sum was Rs8,928 crore in 2016. 
 
Of the total unclaimed deposits, the country's largest bank, State Bank of India (SBI), has the largest share of Rs2,156.33 crore in 2018. 
 
The money is pooled under the Depositor Education and Protection Fund (DEAF) by the Reserve Bank of India (RBI) to be used for investor protection activities.
 
However, large sums of the money probably remain unutilised because of RBI’s style of administration. 
 
There is also very little effort to push banks to trace the owners or beneficial owners of this money and to return it. 
 
Essentially, the government has asked banks to transfer the cumulative balances in all accounts which are not operated for a period of 10 years or more along with interest accrued and transfer such amounts to the DEAF. 
 
This happens when people die intestate, or without informing their families about accounts that they may have maintained in various banks. 
 
Similarly, unclaimed deposits lying with insurers are pooled with the Insurance Regulatory and Development Authority of India (IRDAI), based in Hyderabad. 
 
The finance minster said that unclaimed life insurance deposits stood at Rs16,887.66 crore in September 2018 (up from Rs15,229.53 crore), while those of non-life insurers stood at Rs989.62 crore (up from Rs847.54 crore).
 
But this is only a fraction of unclaimed money belonging to investors and depositors lying with financial regulators. 
 
The Investor Education and Protection Fund (IEPF), under the ministry of corporate affairs, was the first to start pooling unclaimed dividends, corporate deposits and interest. 
 
The ministry has created an IEPF authority, which is entirely controlled by government regulators and seems to distribute the money to institutes of accountants and company secretaries it has registered. 
 
According to the IEPF website, it had Rs3,460 crore in unclaimed benefits in 2017-18.  
 
In response to a Right to Information query filed by us, the IEPF Authority spent Rs18.76 crore in 2018-19 and Rs15.58 crore in 2017-18 but is unable to provide a detailed break up on how this large sum was spent. 
 
What is significant is that the IEFP also makes it difficult for genuine investors to reclaim their rightful money, which has been transferred to the pool after seven years, for various reasons. 
 
In addition to these pools of funds, the Securities and Exchange Board of India has a pool of unclaimed mutual fund investments along with interest. 
 
And the money lying with the insurance regulator is even higher than that with the RBI, and is rarely mentioned.  
 
Most of this money probably belongs to tax-paying Indians and ought to be used for their benefit or returned to legal heirs after a serious effort to track them down. 
 
Often unclaimed dividends and deposits get transferred to such funds because they are tied up in litigation for decades and cannot be claimed. 
 
The finance minister’s response said that Life Insurance Corporation (LIC) had the highest unclaimed deposits at Rs12,892 crore in September 2018.
 
In case of general insurance companies, the total such deposits were Rs535.12 crore as in September 2018. National Insurance Co Ltd had Rs102.85 crore, New India Assurance Co Ltd Rs180.66 crore, The Oriental Insurance Co Rs78.85 crore and United India Insurance Co Ltd had Rs172.76 crore in September 2018. Agricultural Insurance Company of India and the Export Credit Guarantee Corporation of India, which are specialised agencies, had Rs23.46 crore. Private insurers had a total amount of Rs431.04 crore as unclaimed deposits in the same period.
 
It is time that investors and depositors start asking questions about the utilisation of this money and ensure that it is used for the benefit of the specific economic category of people who have contributed to it. This group, usually taxpayers, is never on the radar of the government and does not even have any social security when bad times befall them.
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    COMMENTS

    paddy

    5 months ago

    It is same with the EPF too. ive older PF before 2010, this cannot be claimed online as it is old PF. the company is closed now. I couldnt claim it that time.Now, Ive submitted twice but not heard from either through text message or through letter. one of the very incompetent department..

    Ramachandran

    5 months ago

    Genuine efforts should be made by the govt. to return this money. If after 3 years of search they are not traceable, then a legislation should be made to use this money for the welfare of the poor or for widows of the jawans who can utilize the same for education of their children. Also this money can be used giving medical facilities to the poor people who are really suffering.

    arun adalja

    5 months ago

    something to be done for unclaimed money as institute will not use money and one day it will be vanished.banks are not cooperative and previous years nominee facility was not available so it is not done and if you go to bank they will ask you so many details which will be cumbersome and money is wasted.money life do something.

    ramchandran vishwanathan

    5 months ago

    the process of claim is very cumbersome , too many documents are seeked by the financial institution just to cover their risks . An effort must be made to ease the process in terms of submitting documentary evidence.

    Mahesh S Bhatt

    5 months ago

    Government shall raid our money like it did with RBI Mahesh Kirticorp

    ASHWIN AMRITLAL MEHTA

    5 months ago

    I do understand that bank should know first that the Depositor is passed away. And they can know only after the nominee approaches the bank with the Death certificate. So the Depositors also should take care to nominate and either inform the Nominee about the money or at least mention in the will.

    ASHWIN AMRITLAL MEHTA

    5 months ago

    To safeguard the interest of the common man, it should be made compulsory that without Nomination no account should be open. Second, at the time of opening only all details of the nominee like : Name, address, PAN CARD, Aadhar Card, email, contact no. etc.,his/her signature ( provided they are adult) and even a photograph should be uploaded in bank’s System, so even if Nomimee is not able to come forward for the claim, it should be bank’s Duty to reach the Nominee and hand over the money( of course after deducting the expense to reach the nominee by email/phone or in person. If their intentions are good.

    ASHWIN AMRITLAL MEHTA

    5 months ago

    Firstly the word “ UNCLAIMED MONEY” should be replaced with “UNCLAIMABLE MONEY” because of tidious procedures and asking for irrelevant details from the genuine Nominees. Recently I have to meet GM of DenaBank at BKC to request him to pull out an unfair questionnaire form from their website www.denabank.co.in
    For an FD kept with Dena bank having “No Nomination “, the bank was asking details like 1) Have the deceased made the will ? 2) Details of deceased insurance policies( Which particular Insurance is not mentioned). 3) Details of all other bank accounts and the money lying in there. 4) Details of deceased’s immovable property. Now assume the FD is say for 10 lakhs. The nominee is not in India, coming from USA/UK/AUSTRALIA/CANADA or any other outer country for a limited period just can’t collect all such details to claim his/her money and then such money finds its way under “UNCLAIMED “ category whereas in reality it’s “UNCLAIMBALE. What right the bank is having to ask for needless details as I mentioned earlier. Even in the claim form, they have shown their smartness. In claim form at the bottom they ask for “Claimant’s signature but on the final bank voucher they are asking for “Signatures of all legal heirs”. Such tactics by the bank with the general semi educated public of this country contributes to “UNCLAIMED DEPOSIT”.

    REPLY

    MDT

    In Reply to ASHWIN AMRITLAL MEHTA 5 months ago

    Thanks for your comments. Request you to share all details, along with documents, if any, to [email protected]. We will try to take up the issue with concerned authorities.

    SUNIL REBELLO

    5 months ago

    WHAT ABOUT LIC OF INDIA - sitting on the biggest of all people's money

    A BANERJEE

    5 months ago

    It is a mind boggling story about a govt just sitting tight over such huge unclaimed deposits of people of this very country for ages without ever trying to advertise widely about the procedures (which are cumbersome) in the national and local/district periodicals/newspapers. Your observation in this context is gravely relevant : What is significant is that the IEFP also makes it difficult for genuine investors to reclaim their rightful money, which has been transferred to the pool after seven years, for various reasons."
    In this context I may also raise another issue of interest for your investigation. I understand that the British Govt had raised huge funds through various Bonds during its regime and huge unclaimed deposits are still lying with the RBI on these accounts. I do not remember having seen any public notice/advertisement fro the GoI/RBI on this subject notifying the successors of the original subscribers to these Bonds (as the latter must have died a very long time back). A study of these unclaimed deposits by way of the Bonds issued in colonial rule should be rewarding.

    TIHARwale

    5 months ago

    similar huge amount will be with Regional Provident Commissioners office. Companies would have remitted Demand Drafts in the name of RPF Commissioner but RPF does not credit it to the account of concerned individual unless bribe is paid to lower level staff at RPF office.

    Parimal Shah

    5 months ago

    Plenty of the so called tax-paid money actually may be black money deposited under fake names during days of poor KYC norms when it was easy to befriend a bank officer to open account/s in fake names with imaginary data. Now with strict proof of identity demnded for operating such account money can not be claimed without self-incrimination. Hence the more than 26% rise in banks' unclaimed deposits.

    REPLY

    Meenal Mamdani

    In Reply to Parimal Shah 5 months ago

    This is the most likely explanation.
    Remember how Sahara CEO could not come up with names of people who had deposits with his company?
    Govt should utilize the funds in a transparent manner so that citizens know where these funds are being used.

    SURESH NAIR

    5 months ago

    Though it’s a good idea to pool the entire unclaimed deposits into a single account, only the interest generated from this account should be used for investor awareness and protection activities. In fact a part of the interest could be used to trace the original owners/legal heirs of such deposits and return their hard earned money to them! People have worked hard to save money for themselves and their families and the governments should make all efforts to return the same either to the depositors themselves or their legal heirs. The government cannot claim absolute right over such unclaimed money!

    Ramesh Bajaj

    5 months ago

    It is unfair that even dividends cannot be claimed after 7 years (how come this magical figure?). There can be many reasons (change of address, deaths, lost correspondence, not delivered by post office) that investors have lost track of this.

    REPLY

    R Murugan

    In Reply to Ramesh Bajaj 5 months ago

    If a person is unheard of for a continuous period of 7 years, the person is considered to be dead legally. A spouse of such a person can remarry and legal heirs can claim the property of the person. Why 7 is not known but some rule has to be there to deal with property of a missing person. There is also a law of limitation for enforcing claims. Regarding the need for limitation in law a judge observed," Law will only help the diligent and not the indolent". All banks have been asked to provide details of unclaimed deposits in their websites and one can enter the name and city and search for details of one's inoperative accounts. Many people fail to update change of address with the banks or mutual funds. They also do not provide details of their investments to their near and dear ones I think for some strange reason.

    Sucheta Dalal

    In Reply to Ramesh Bajaj 5 months ago

    You can make a claim. When IEPF was set up, there was no provision to do so, but it has changed now. Please go to the website of IEPF authority and explore
    https://www.iepfportal.in/iepf-contributions.html

    shadi katyal

    5 months ago

    Evidently Banks and insurance companies have no interest to track the relatives to disburse that.Digging deep into it one may find that red tape may have discouraged the recipient .
    Wonder since BJP is aware of such large amount,how long it will be there. The banks can always claim statute of limitations

    REPLY

    R Murugan

    In Reply to shadi katyal 5 months ago

    The limitation for filing suit against the bank for claiming a deposit lying with them is 3 years and the limitation starts running from the time the demand is made on the bank. That is the law so you can lodge the claim on the bank after any number of years. Banks were only supposed to send an annual return about unclaimed deposits not operated for more than 10 years to RBI as on 31st of every December and hold the amount in their books.

    ED attaches properties worth Rs 109 crore of Simbhaoli Sugar
    The Enforcement Directorate (ED) on Tuesday said it has attached the assets of Simbhaoli Sugars Ltd in Hapur in Uttar Pradesh worth Rs 109 crore for defrauding a bank.
     
    An ED statement said the properties included land, buildings and plant and machinery of the company situated at Simbhaoli.
     
    It said the attachment was made under the money laundering act.
     
    The agency registered a case on the basis of a FIR filed by the Central Bureau of Investigation against Simbhaoli Sugars Ltd and others for cheating and defrauding the Oriental Bank of Commerce on the pretext of financing sugarcane farmers.
     
    According to the CBI FIR, the company was given a loan of Rs 148.59 crore by the bank to give assistance to 5,762 farmers but the funds were diverted for other purposes.
     
    The ED had searched the offices of the company in Uttar Pradesh's Noida and Simbhaoli and seized incriminating documents.
     
    During investigation it was revealed that the company was facing a liquidity crunch and approached the bank for loan under the interest subvention scheme of RBI under a tie-up with 5,762 farmers to finance them for pre- and post-harvest.
     
    The agency said the funds meant to be paid by the company to the farmers were not remitted to the accounts of the farmers.
     
    It said that there were serious irregularities in the KYC documents. "The loan then turned NPA with Rs 98.7 crore (principal) outstanding and the bank filed a recovery suit before the debt recovery tribunal (DRT)," it said.
     
    The agency said the loan funds were diverted into other accounts.
     
    "The company thus laundered the funds intended for assistance to the needy farmers, in utter violation of the terms and conditions and the intent of the loan," it said.
     
    The ED said that instead of settling the entire loan liability, the company again induced the Oriental Bank of Commerce to withdraw the application before the Debts Recovery Tribunal and grant a fresh corporate loan of Rs 110 crore on January 28, 2015 to clear the previous dues.
     
    It said the company again deliberately failed to repay the said corporate loan and at the time of the FIR Rs 109.8 crore were outstanding.
     
    The company offered a One Time Settlement (OTS) amount of Rs 14.69 crore against the entire outstanding.
     
    "This highlights an ingenious modus operandi of money laundering by taking huge loans from banks and later settling them at heavily discounted sums, thereby causing huge wrongful losses to lender banks," it said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    The Ding-Dong Swing of GDP and ‘Bullshit Jobs’
    Gross Domestic Product (GDP) and its growth rate have become an obsession with Indians in recent years; GDP growth is a sexy metric that starts and ends every conversation about the economy, supposedly a panacea for all ills plaguing our country. Even a minor decimal point dip is presumably disastrous whereas a small move up could signal “all is well” with the economy. While there is a lot of merit in using GDP as a measure of a country’s progress and the well-being of its people, exclusive reliance on it, especially without an appreciation of its nuances, could be highly misleading. 
     
    In my article last year, I had given a detailed explanation of the concept of GDP, its wide acceptance and limitations. Sustained growth in GDP is a sin-qua-non for improvement in the living standards of people. No country has become rich without having experienced sustained, long term growth in its national income. China has grown at 9% annually for the last three decades, transforming the country beyond imagination. India’s relatively powerful rise also coincides with a substantial increase in GDP over the last two and a half decades. (Read: GDP: A Primer – I and GDP: A Primer – II)
     
    As always, economic truisms hide facts that can be critical. For instance, the rise in productivity has lately been rather muted, especially in Western economies. This has surprised many experts, including some economists. The wide penetration of information technology (IT) in the economy and the spread of automation were expected to boost productivity significantly. Statistics reveal such productivity improvements to be largely a myth. 
     
    One explanation is that corporate profits are derived increasingly from economic rents rather than through greater efficiency. Gaming of political rules and regulations plays a significant role in the revenues and performance of companies. In their study, economists Peter Orszag and Jason Furman have been effectively able to establish this fact, as have many other similar studies. 
     
    In a similar vein, more than thirty years back, economist William Baumal had warned against unproductive business enterprises generating profit by using influence and power, without adding real value. Such jobs, according to Baumal, may arise from competition for income and status by different people. It is now a well documented fact that capitalism and free markets are not as efficient as previously believed.
     
    One of the most interesting manifestations of the lack of productivity enhancement and capitalism’s inefficiency is the rise of what Professor David Graeber of the London School of Economics terms ‘the bullshit jobs’. 
     
    According to Graeber, bullshit jobs are those that hardly add value or make a difference to people’s lives, but continue to be an integral part of the economy.
     
    These jobs don’t seem to produce anything and have become an end in themselves. Many of us have often felt the futility of working and wondered, does my job add any value and what would happen if it did not exist. How many people would even notice if tomorrow fashion designers, consultants, public relations (PR) agents, telemarketers, lobbyists, middle level managers in the corporate sector and dare-I-say, a large number of government officials, were to vanish? The absence of teachers, doctors, bus drivers, garbage collectors and farmers, on the other hand, would make a huge difference to people’s lives. 
     
    A second set of bullshit jobs are those that may add value, but by snatching value from others; in a sense, they only perform a distributive function. Overall, the economy does not benefit. Think of hackers and those tasked with prevention of hacking, corporate accountants and government tax officials, corporate lawyers arguing opposing sides of a case, the reckless volume of financial trading, competitive marketing campaigns by two companies vying for market share; the net benefits to society from these activities are almost zilch. Some of these jobs and functions may be value additive at the individual level, but at the consolidated society level, they merely redistribute benefits amongst different people and companies. 
     
    A study by the UK government in 2012 conducted in the wake of the financial crisis concluded that “lots of finance is senseless zero-sum activity that drains investment away from useful enterprise.” 
     
    Finance is not the only activity that is guilty of distributive rather than value additive behaviour. In many other sectors too, companies are engaged more in carving out a larger chunk of wealth for themselves, than in creating value. 
     
    What is significant is how common these jobs are in the economy. According to Gaeber, they could be contributing as much as 30% of the value of GDP. Given the preponderance of such jobs in the economy, the estimation of GDP becomes misleading, if not an exercise in futility.
     
    India of course, as always, has its own perspective on such issues. We have our own unique problems and behavioural pattern that render the correlation between GDP and welfare rather tenuous. We have jobs and functions that may be essential but hardly add any value. Let me illustrate.
     
    One of the fastest growing sectors in India today is the security services. Our law and order is a mess; therefore, people hire private security services. Government offices, commercial establishments, malls, housing societies, private bungalows, the ATM and the banks, private security services are pervasive; they hit you in your face wherever you go. However, can we legitimately say that our life or welfare is improving if the security services industry grows annually at 25%? Efficient establishment of law & order by the government and better behaviour by people in general, can render these security services redundant, leading to reduction in GDP but overall improvement in welfare! In fact, while the security guard and his family may be badly in need of his job, I am not sure it can be described as high quality work that provides satisfaction and personal development. India must worry about not just the number but the quality of jobs too!  
     
    Such examples can be multiplied easily. Use of cars and other private vehicles is high because the government is unable to provide efficient public transport. Provision of potable drinking water is suspect; hence, people use bottled mineral water and water purifiers. When I see a traffic policeman manning a traffic signal, I often wonder why we need him. Why can’t people be self-disciplined in a manner that obviates the need for regulation? Given the absence of alternatives, these have become essential services. However, it is a moot point whether they add to our well-being. India thus adds a third dimension to Graeber’s bullshit jobs.
     
    While the emphasis on increase in GDP is warranted, it is important to appreciate the constituents of GDP growth. If the increase in GDP is due to growth in sectors that don’t add value, and are what we have termed bullshit jobs, it may not have much meaning. If the jobs being created are low quality ones, there is no concomitant improvement in welfare.
     
    The government has a significant role to play in two ways. It must ensure justice and security for everyone. And, it must deliver basic public services effectively.
     
    Without this, the link between GDP and welfare will remain fragile. While there is not much we can do about some of ‘the bullshit jobs’ that exist, we can certainly ensure that other non-value additive constituents of GDP that are typically Indian, are taken care of. The quality of the GDP is as important as its quantum.
     
    (Sunil Mahajan, a financial consultant and teacher, has over three decades experience in the corporate sector, consultancy and academics.)
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    COMMENTS

    shadi katyal

    5 months ago

    The article does shed some light on the world economy but we in I(ndia are still stuck in changing our basket of goods and what looks good. The fact is that Western nations are far ahead in calculating various factors while we still stuck in our way of thinking.
    One cannot deny that GDP presented in past 5 years was not the truth

    Ali Jariwala

    6 months ago

    Nice article. Never thought from this perspective. Would food delivery companies and the logistics companies for e-commerce, who employ thousands of people, qualify as Bullshit jobs ??

    K V RAO

    6 months ago

    Extending the writer's thesis from the perspective of the world, why can't nations come together and do away with their defence forces? That would save millions of resources. Defence expenditure is a wasteful expenditure that does not add any value. This require highly creative and civilised thoughts among world leaders.

    BALRAJ AMARAVADI

    6 months ago

    Good one - Food for thought.

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