One must retrieve unclaimed dividend of MFs or shares at the earliest

Mutual fund investors stop getting the benefit of any appreciation after three years

2020 has been a tough year for many financially. But you can begin 2021 on a sounder note by demanding any unclaimed dividends of mutual funds (MFs) or shares you own. According to a recent media report, over Rs 1,100 crore of investor money is lying unclaimed with the top 10 mutual fund houses alone.

Why dividend remains unclaimed 

In the case of mutual funds, the dividend amount becomes unclaimed 90 days after it was declared. There are several reasons for this money remaining unclaimed. Pranjal Kamra, chief executive officer (CEO), Finology, says, “When there is a mismatch between your personal details and the records of the asset management company (AMC), then the dividend declared on your mutual fund units does not get credited to your bank account.” Sometimes, this money is sent by cheque. If the recipient’s address with the AMC is incorrect, the dividend does not reach her.  

Fund house invests the money 

Once 90 days are over, the money is transferred into an Unclaimed Dividend Plan account. There are two plans — less-than-three-years and more-than-three-years. First, the money is transferred to the former. Here, it gets invested in money market securities. AMCs can deduct only 50 basis points as a management fee in this plan. The NAV of the plan is calculated based on any appreciation that happens (after deducting the fee). Up to three years, investors get the benefit of appreciation in this fund’s NAV.

Once three years are over, the amount is transferred to the more-than-three-years plan. The amount transferred to this fund is the principal plus the appreciation in the NAV of the earlier fund.  

Priya Hariani, compliance officer, PPFAS Mutual Fund, says, “If an investor claims after three years, he gets the benefit as applicable up to three years only. Any appreciation that happens after three years goes into the investor education account.”  

Requests for such amounts can be made through the unclaimed dividend/redemption form available on each fund house's website. To ensure that the actual investor is claiming the amount, fund houses ask for a few details: folio number, PAN details, and the name mentioned in the folio. 

Seven years is the cut-off point in shares

To claim dividend within seven years, contact the company’s investor relations team or its Registrar and Transfer Agent (RTA). After this period, the money is shifted. Mrin Agarwal, financial educator and director, Finsafe India, says, “In the case of companies, the dividend amount goes into the Investor Education Protection Fund (IEPF) account after seven years.” To claim the money after seven years, you need to visit the website of IEPF (www.iepf.gov.in) and fill the e-form IEPF-5.

Keep personal info updated   

Investors should keep updating their personal and bank details with fund houses. They should also opt for the auto-pay facility so that the dividend proceeds get credited into their account directly.

Even in the case of shares, it is best to remain vigilant. Agarwal says, “Track your money regularly. Getting unclaimed dividend once it reaches the IEPF is easier said than done.”  

Finally, there are private consultancy services that help in retrieving unclaimed dividends of mutual funds and shares. If you decide to go with one of them, opt for a larger player.