India’s investor population has always been concentrated in the states of Gujarat, Maharashtra, Rajasthan and the larger cities in the south. But you would have a completely different notion, if you were to go by the list of 69 NGOs accredited and eligible to receive funds from the Investor Education & Protection Fund (IEPF)

India’s investor population has always been considered rather skewed and concentrated in the states of Gujarat, Maharashtra, Rajasthan and the larger cities in the south. But you would have a completely different notion, if you were to go by the list of 69 NGOs accredited and eligible to receive funds from the Investor Education & Protection Fund (IEPF) of the Ministry of Corporate Affairs (MCA). This Fund, of over Rs400 crore, carved out of unclaimed dividends, interest and other proceeds, is disbursed in driblets to accredited NGOs for investor education seminars. Of the 69 eligible NGOs, a dozen-odd are well known. The rest, going by their names and locations alone, probably have little or nothing to do with financial markets and investment. For starters, the highest number of accredited NGOs—as many as nine—is from Orissa. They have names like Basti Area Development Council, Centre for Community Development, Centre for Alternative Training, Evaluation and Research, Gania Unnayan Committee, Yuga Murti Seva Ashram, ODD Foundation, and March of Youth for Health, Education & Action for Rural Trust.

Similarly, there are four accredited associations from Kolar district of Karnataka which is known for its goldfields and rich politicians who control mining, but not for any significant investor population. These are: Environmental Research Institute and Human Care, Shree Jnanodaya Gramin Vidya Trust, Gram Vikas Society and Surya Rural Development Society. Consider some other accredited entities—Avadh Grameen Vikas Sansthan from Sultanpur, Kisan Bal Avam Mahila Kalyan Samiti from Gonda and the Bharatiya Mahila Kalyan Samiti from Barabanki (all in UP); Dompukar Human Development Society and Karimpur Social Welfare Society of West Bengal; Gram Vikas Parishad of Assam, Harihar Bahuuddeshiya Sanstha of Wardha in Maharashtra, Mahadev Vikas Samiti of Gwalior and so on. These may be great NGOs, but how do they qualify for a share of investors’ unclaimed funds? Is it any wonder then that India’s retail investor population has halved?

Gimme the Money
While the IEPF may have done little to further the investors’ cause, almost every ministry wants to adopt the same model to grab and collect public funds into a pool that can be distributed to favoured NGOs. On 31st December, we received a letter from Binty, a Delhi-based NGO which says it has “been assigned the task of formatting a Draft Bill for recovery and consolidation of unclaimed and un-remitted money of consumers lying in waste in various commercial set up, e.g., banking, insurance, telecom, pharmaceutical companies, airlines, and state sales tax departments.” It is not clear whether the consumer affairs ministry has specifically mandated Binty to prepare a draft bill, but it apparently has 10 weeks to complete the process and was clueless about the existence of IEPF. In order to get ideas in a hurry, it has sent out letters proposing a competition for ideas with three prizes of Rs10,000, Rs7,500 and Rs5,000. It calls this a ‘competitive consultation process’ which is backed by a vague and confused background paper, which makes a case for the ministry of consumer affairs to operate the ‘proposed fund’. If the consumer affairs ministry does get Binty and other NGOs to lobby for such a fund, it is bound to create a furore among all the ministries, since they too deal with consumers and could do well to use such funds to set up official ombudsmen or some other mechanism to redress grievances and educate their consumers. The irony was that Binty wasn’t aware that even the IEPF is not allowed to retain the unclaimed funds that it has collected. The finance ministry has ensured that the money goes into the Consolidated Fund of India and the IEPF can only seek what it hopes to spend every year by submitting an advance proposal of anticipated expenditure which is also restricted by stifling red tape.

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