CLAIM YOUR HIDDEN FORTUNE
An estimated 22,000 crore of investors’
money is lying unclaimed in investments that have long been forgotten. Find out
how you can get back this money.
When mutual fund distributor Bajaj Capital found that a
certain investor had not made any new investments in mutual funds for a long
time, it decided to check up on him. To their surprise, the officials found
that the investor had died a few years ago and his wife had no knowledge about
the 2 lakh he had invested in HDFC Mutual Fund. “The amount had grown to 9-10
lakh. The lady broke down because she was facing financial difficulties and the
money would help her tide over the problems,” says Surajit Misra, executive
vice-president and national head of mutual funds, Bajaj Capital.
Ajay Kumar Parmar had forgotten all about the Saradar
Sarovar Narmada Nigam bonds he had bought 20 years ago when he was living in
Ranchi. It was only when he heard about another investor getting a good price
for his bonds this year that he recalled his own investment.
Not everyone is as lucky though. An estimated 22,000
crore of investors’ wealth is lying unclaimed with insurance companies, mutual
funds, corporate houses, banks and the Employees’ Provident Fund Organisation.
These are investments that were made but never claimed by the owners after
maturity. “The investors who put small amounts in a number of instruments often
face this problem because the portfolio becomes too unwieldy and difficult to
monitor,” says Sandeep Shanbhag, director at Wonderland Consultants Tax &
Investment Advisory.
ET Wealthlooked at the unclaimed wealth lying across
various investment options. Insurance policies and longterm instruments top the
list of most forgotten investments. It’s a problem that afflicts almost every
investor. Every household will have a dormant bank account, or a long-forgotten
insurance policy or expired dividend cheques. In the following pages we tell
you how you can reclaim this money.
1 Life
insurance policies
This is a major black hole when it comes to investor
wealth. The life insurance industry has roughly 1,724 crore unclaimed funds
lying with it. Private sector insurance companies, which started operations
only 11 years ago, alone have more than 1,500 crore worth of unclaimed
benefits. These include policy benefits paid out, but not encashed by,
policyholders, maturity benefits lying unclaimed or death claims not filed by
nominees. LIC, which has been doing business for the past six decades, stands
at third place with 218 crore. The public-sector behemoth has some 1.8 lakh
policies for which the maturity benefits have not been claimed. Besides, there
are cases where the policyholders have died but the death benefit has not been
claimed.
Companies say they hold the unclaimed funds for a long
time. V Srinivasan, chief financial officer at Bharti AXA Life Insurance, says,
“Irda regulations don’t allow insurers to write off this money for a long
time. Currently, long has not been defined.” However, you won’t get more than
the due amount because it won’t earn any interest. “We don’t pay any interest
because it would incentivise forgetfulness by investors,” says
Srinivasan.
It’s best to file death claims as soon as possible. In
case the policyholder dies, a delayed claim raises suspicion of foul play or
fraud. The insurance company will then have to investigate the cause and
circumstances of death. “It becomes a sticky issue. It’s in everybody's interest
to make the claim on time,” adds Srinivasan.
To ensure that your investment in insurance is safe, be
sure to inform your family members about all the policies and keep a record.
The nominee will be able to claim the amount without any hassles. However,
problems crop up when no nominee is listed in the insurance document or if he
has not been informed.
1,724 crore worth of unclaimed funds of policyholders are lying
with life insurance companies. These include death claims not filed.
HOW
TO CLAIM IT
If you have the policy numbers and
documents, claiming the maturity benefit is not a problem. You should approach
the branch where the policy was bought. If you are staying in a different city,
approach the zonal officer or get help from an agent to get the money back.
2 Bank
accounts and deposits
More than 1,700 crore is languishing in dormant
accounts and unclaimed bank deposits across India. The SBI and its associate
banks alone have unclaimed deposits of 279.7 crore. Concerned about this forgotten
treasure trove, the Reserve Bank of India has asked banks to consider launching
a special drive to locate the customers or legal heirs of inoperative accounts.
From 1 July this year, all banks will have to list on their websites the names
and addresses of customers who have unclaimed deposits and inoperative
accounts. The RBI is very clear about how banks should treat this money. The
maturity proceeds of unclaimed FDs will earn the savings bank rate of interest.
Similarly, the interest on savings bank accounts is to be credited on a
regular basis whether the account is operative or not.
If you also have a forgotten fixed deposit, take heart.
You can get your money back along with interest. Some banks even offer
customers a higher interest than the savings bank rate. “If the investor wants
to withdraw the maturity proceeds of the forgotten FD, he will get the savings
bank rate from the time of maturity. However, if he agrees to reinvest the
proceeds, he will get the applicable FD rate from that date,” says Sunil Pant,
chief general manager, financial control, State Bank of India.
This window is open till seven years of maturity. If
the investor is not traceable during this period, the money goes into the
unclaimed money account. Similarly, a savings account becomes inoperative if
there is no activity for two years.
1,739 crore is lying unclaimed in more than 1 crore bank
accounts and fixed deposits.
HOW TO CLAIM IT
It's fairly easy if you have the FD receipt, savings bank passbook or the
account numbers. Just take it to the bank branch, along with a photo
identification proof. It can be an uphill task if the claimant does not have
the required documents or proof of being the legal heir.
3 Stock
investments and dividends
A Mumbai based investor was pleasantly surprised
recently to find out that the value of 500 shares of Diamond Power Trading
company that he had bought at 10 apiece in 1995 had grown 6,400% to 3.25 lakh.
Not all investing stories have such happy endings. There may be hundreds, even
thousands, of investors, who don’t know about the shares they have
inherited. Others may have forgotten about the stocks they bought long
ago.
The accidental discovery of shares made the
above-mentioned investor forget about the dividends declared in the past.
Companies send out dividend warrants (or cheques) to shareholders. If these are
not encashed by the investor within 30 days, the money is transferred to
another account. This is mentioned in the annual report as unclaimed dividend.
This account remains with the company for seven years,
after which the money is transferred to the Investor Education and Protection
Fund. So, if you have missed out on the dividends declared on your stocks a
long time ago, there is hope of getting them back.
800 crore unpaid dividend had been transferred to the Investor
Education and Protection Fund till 2010-11.
HOW TO CLAIM IT
Write to the company or to its registrar and share transfer agent, giving
details of the missed dividends, stock folio number and the date of purchase.
Give bank details for direct transfer. You can also ask for a duplicate
dividend warrant.
4 Income
tax refunds
Though income tax refunds are now sent directly to your
bank account, the Income Tax Department is continuing with the legacy of refund
warrants in the physical form. The income tax staff is notorious for
deliberately delaying the refunds so that they can squeeze some money out of
the taxpayer. It is important to note that the refund will not earn any interest
after the cheque has been issued. If the cheque takes 1-2 years to reach you,
and you spend another 2-3 months to get it revalidated, you will lose out on
the interest earned during the period. “You don’t get the interest for the
delay if you don’t follow it persistently,”
says Sunil
Talati, former president of the Institute of Chartered Accountants of
India.
Refunds are quicker if you e-file your returns. You get
your refund within 45-60 days. If you haven’t already received your refund,
write to the Bangalore Central Processing Centre. “If your request goes unheard
at the Bangalore CPC, you can approach the assessing officer. If that doesn’t
help, take up the matter with the grievance cell or the income tax oOmbudsman’s
office,” adds Talati.
1,300 crore of tax refunds are pending in the Karnataka-Goa
circle alone.
HOW TO CLAIM IT
If you filed an e-return, write to the Bangalore CPC with your e-filing
acknowledgement number. If you filed physical returns, approach the PRO of the
ward with the details of the return.
5 Mutual
fund investments
The mutual fund landscape has changed drastically in
the past 10 years. New fund houses have come in, older ones have been merged
and some have even closed shop. The Canbank Mutual Fund, for instance, is now
called the Canara Robeco Mutual Fund. ABN Amro Mutual Fund became Fortis Mutual
Fund in 2008 and was bought by the BNP Paribas Mutual Fund in 2010. Even
individual schemes get merged or change names. Investors need to keep track of
these changes so that their money isn’t lost in the maze of new names. Make
sure your address, contact details and bank account numbers are correctly
notified to the new fund house. “There are many investors who are still holding
units of the Alliance New Millennium Fund bought in 1999 at 10,” says Misra of
Bajaj Capital.
If you don’t remember your mutual fund investments, you
would also not have any inkling of the dividends paid on these investments.
Mutual funds have almost 340 crore of unpaid dividends and 113 crore of unclaimed
funds lying with them. “Dividend cheques go unnoticed due to changes in address
or bank account details. There was no system of ECS in the early 1990s when
many schemes were launched,” says Misra.
Mutual funds keep the unclaimed dividend for three
months. After the dividend cheque becomes stale, the funds are redeployed in
the money market. “The fund house can recover fund management charges of up to
0.5% a year on the dividend amount when the claimant finally withdraws the
money,” says Shanbhag.
453 crore worth of unpaid dividends and unclaimed
assets are lying with mutual funds.
HOW TO CLAIM IT
Write to the fund house, mentioning the folio number. The agent can be of
help here. Note that signature mismatches can prove problematic. If the
investor is no more, his nominee will have to submit proof of identity.
6 Provident
Fund
Every time you change a job, you have the option to
either withdraw the provident fund balance or transfer it to the account with
the new employer. Many people opt for the third option—not do anything about
the PF account with the previous employer because the money will continue to
grow. However, it is high time you got the money transferred to the new account
otherwise you stand to miss out on interest. A new rule that came into effect
on 1 April 2011 says that no interest will be paid on PF accounts in which
there is no deposit for 36 consecutive months. The EPFO estimates that there is
roughly 16,000 crore lying in such dormant accounts. It believes this new rule
will jolt PF subscribers into action and make them consolidate their two or
three PF accounts into one.
16,000 crore lying unclaimed in some 3 crore dormant PF
accounts.
HOW TO CLAIM IT
Fill up the PF transfer form in triplicate and submit it to your present
employer. One copy of the form is sent to the regional provident fund
commissioner, another to your old employer for transferring the funds and one
is kept by your present employer. Withdrawal of funds will need another form,
which too would be available with your employer or at the regional PF
office.
7 Post
office investments
Post office deposits are another major problem area.
The quantum of investment may not be too large because these are generally for
small investors, but the sheer number of such forgotten investments with the
post office make it a big sum. The post office, however, is not lenient to the
Rip Van Winkles in the investor community. If the interest payable every month
on the postal time deposit, recurring deposit and monthly income schemes is not
claimed by the depositor, the interest will not earn any additional interest.
Also, the total maturity amount will earn interest only for two
years.
This will be simple interest and paid depending on the
savings bank account rate. A period of less than one month will be ignored. You
will be given this interest at the time of repayment and it shall not be
deposited in the account.
The strict rules apply even to the Senior Citizens’
Savings Scheme (SCSS). If the quarterly interest paid on the SCSS is not
withdrawn by the depositor, the interest will not earn additional interest. The
corpus too will invite the interest rate applicable to savings bank account if
not withdrawn on maturity.
Of the total 1.55 lakh Post Office branches in the country, only 24,015 are
computerised. The rest depend on manual record keeping of investments.
HOW
TO CLAIM IT
It is easy to reclaim the money if you
have the passbook or the certificates. However, you will have to visit the post
office branch where the account was opened. Unfortunately, earlier records are
not computerised and you may have to cajole the staff to look up old registers.
If the investor is no more, his nominee or legal heir will get the funds only
after completing the required, lengthy paperwork.
8 Bonds
You can fault an investor if he forgets the fixed
deposit he made 2-3 years ago. Can you blame him if the investment was for
15-20 years? Long-term bonds, which typically have terms of 10-20 years, often
end up in the unclaimed basket. These long-term bonds can be RBI Relief Bonds,
government securities, corporate debentures and the Nabard Bhavishya
Nirman Bonds. In 10-20 years, the investor may have changed his address or bank
and any notification from the issuing company may not reach him. The problem
multiplies if you lose the certificate. Before demat became the norm, all bonds
were issued in the physical form as certificates.
While unclaimed mutual fund dividends, tax refunds
and even bank fixed deposits earn interest for you even after maturity, the
bond issuer can refuse to pay more than the maturity amount. “Technically,
under bonds, no interest beyond the maturity period is payable. However, for
the IDBI bonds we paid the savings bank interest rate for the period beyond
maturity,” says RK Bansal, executive director, IDBI Bank.
As in the case of stock dividends, the 7-year time
limit is applicable to bonds. After this period, the money is transferred to
the Investor Education and Protection Fund. If you approach the company after
seven years, it may still get your money back but it will prove to be a
time-consuming affair.
The demat option was introduced in October 1996 with the setting up of the
NSDL. Before that, all securities were issued in the physical form.
HOW
TO CLAIM IT
Approach the issuer or its registrar
and share transfer agent. If you have the original bond certificate, it is
easy. Otherwise you should have the folio number or the bond number. Your bank
account number or a cancelled cheque may be needed.
How
to avoid this situation
Follow these tips to ensure that your investments don’t go unclaimed.
NOTE IT DOWN
Make a file where you note the details
of all your investments. Pen down all relevant folio and account numbers.
KEEP FAMILY IN LOOP
Inform your spouse and other family members about all financial
transactions. In this way, you ensure that even if something happens to you,
your family will be able to access your investments.
ASSIGN A NOMINEE
Mention a nominee in all financial investments. This ensures that the funds
are transferred to the nominee without any hassle.
REMIND YOURSELF
Set up reminders for premium payments and maturity dates of investments.
This can be done through various websites, your PC and even through mobile
phones.
GO FOR ECS
Give ECS mandates for direct credit of dividends, interest payments and
maturity proceeds into your bank account.
END THE CLUTTER
Close down bank accounts you don't use, transfer PF to the new employer and
avoid having too many mutual funds and insurance policies. The fewer the
investments, the easier they are to track.
Source
– KHYATI
DHARAMSI - ET Wealth – 21/5/12
