Fin Ministry may permit public-sector banks to directly transfer unclaimed shares to IEPF

By Sneha Sengupta • Published on April 7, 2024 at 11:40 PM IST

2 min read

On the efforts to enable public sector banks (PSBs) to transfer shares to the Investor Education and Protection Fund (IEPF) in the event that investors do not claim the dividends from those shares for seven years in a row, the finance ministry is proposing to amend the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

“While Section 10B of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, allows the transfer of unclaimed dividends to the IEPF, it, however, does not mention a provision for transferring unclaimed shares and may now be amended by the next government to allow such transfers to happen,” said a person associated with the incumbent development.

The most recent IEPF annual report states that businesses contributed Rs 446 crore to the fund in 2021–2022; by the end of 2021–2022, the total amount available with IEPF was Rs 5,262 crore. Sanjay Agarwal, senior director at CARE Ratings, stated, “These measures by the government and various regulators work towards the objective of easing business and reducing compliance burdens for businesses”.

Mukesh Chand, senior counsel at Economic Laws Practice, added, “By mandating the transfer of shares in addition to unclaimed dividends, the proposed amendment enhances transparency and accountability in the management of unclaimed funds, fostering investor confidence and trust in the banking system”.

Under the firms Act, private firms, including private banks, are already required to transfer shares and unclaimed dividends to the IEPF.

The inclusion of a seven-year statute of limitations on the transfer of shares and profits that have not been claimed aligns with accepted legal doctrines, including those delineated in Section 108 of the Indian Evidence Act, 1872.

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