Five years after his passing, and nearly a decade after his 2015-16 Budget speech, India’s savers have many reasons to remember the late finance minister Arun Jaitley. His tenure marked the last time a serious conversation took place within the government about the vast reserves of unclaimed savings that remain captive in its coffers.
Over the past three years, Moneylife Foundation, our not-for-profit sister entity, has researched the issue of unclaimed money lying with various government departments. Even by conservative estimates, considering the poor reporting of such information, we calculated that over Rs2 lakh crore is locked in unclaimed assets. This figure is expected to grow further; at least another Rs1 lakh crore, from banks alone, is lying in dormant accounts and on the verge of entering this twilight zone of unclaimed money. (Read: Forgotten Wealth of Ordinary Indians: Over Rs2 Lakh Crore Locked in Unclaimed Assets).
But even our study did not really focus on the peculiar dilemma of low-income, formal sector employees whose money goes into employee provident fund (EPF) and Employee State Insurance Corporation (ESIC) accounts.
A Right to Information (RTI) application reveals that the plight of these savers is rather dire and the government is fully aware of it. In his Budget speech of 2015-16, Arun Jaitley himself said: “Madam Speaker the situation with regard to the dormant Employees Provident Fund (EPF) accounts and the claim ratios of ESIs is too well known to be repeated here. It has been remarked that both EPF and ESI have hostages, rather than clients. Further, the low paid worker suffers deductions greater than the better paid workers, in percentage terms.”
Nearly 10 years later, the government has done nothing to free these hostages. The last significant effort at addressing the issue was in 2014 when Mr Jaitley commissioned a report, leading to the creation of the senior citizens welfare fund (SCWF). But that, too, remains a largely underutilised.
Unlike many developed countries, the Indian government is under no legal obligation to actively reunite unclaimed assets with their rightful owners. (Read: Use Global Practices To Reunite Unclaimed Financial Assets with Their Rightful Owners). Instead, unclaimed money is collected into various government pools, where it continues to grow at an annual rate of 15%-20%, aside from the meagre amounts spent on ineffective financial literacy campaigns.
For low-paid workers, this presents a double whammy. As Mr Jaitley had pointed out, workers and employers suffer deductions which are notoriously difficult to claim.
In a recent column, well-known investment adviser, Harsh Roongta, put some numbers on these mandatory deductions. He explained that an employee earning Rs15,000 ends up sacrificing as much as 42% in deductions, which are largely illusory, because of the impossibly challenging claims process.
If the money is forfeited, it is as if these employees had been taxed at a rate equivalent to someone earning Rs5 crore annually. No surprise then thatBankbazar.com has estimated unclaimed funds lying with EPFO at Rs25,000 crore. According to Mr Roongta, EPFO has 500,000 dormant accounts and its pension scheme showed a deficit of Rs37,000 crore at the last valuation in 2019. This is akin to a Ponzi scheme, where unclaimed funds provide a buffer to bad management. But there is no public scandal, since people are largely ignorant about facts.
Mr Goel filed another RTI with the National Savings Institute (NSI) which operates under Ministry of Finance and is responsible for 10 small savings schemes, in September 2024. It is supposed, “To digitally collect, collate and maintain small saving data and to apply data analytics on it for better insights;” it is also charged with ensuring timely remittances and to reconcile information with Reserve Bank of India (RBI) data and use it for forecasting.
When asked about the unclaimed money in these schemes, NSI could provide only sketchy data. It provided unclaimed savings in nationalised banks for the years 2016, 2019 and 2021, but it was evident that only eight out of 20 banks in the list below had bothered to supply data to NSI. A sum of Rs1,195 crore was lying unclaimed with these eight banks at the end of March 2021; but, in the absence of information from key banks, including State Bank of India, the extent of unclaimed funds could be higher by a factor of 10. The disdain for NSI displayed by banks makes you wonder why this institution exists at the cost of taxpayers.
Similarly, SCWF disclosed unclaimed deposits of Rs19,828 crore including postal deposits, national savings certificates (NSC), and money lying in schemes that had been discontinued. It belongs to approximately 30mn (million) individuals (details below). This data is also patchy, as no information is available on the Sukanya Samriddhi account.
As I have been pointing out, the two largest pools of unclaimed public money reside with RBI and the ministry of corporate affairs (MCA). RBI's depositor education and awareness fund (DEAF) held Rs78,213 crore by the end of March 2024, while the investor education and protection fund (IEPF) held Rs82,199 crore by July 2023, along with an additional Rs5,714 crore in corporate benefits like dividends and interest. Unclaimed insurance and mutual fund deposits remain unquantified but are also expected to be substantial.(Rs82,199 Crore: That's IEPF's Investment in 1,561 Companies from Unclaimed Funds!)
Unclaimed funds with the government now total nearly three times India’s health Budget and at least double the education Budget. Despite the magnitude of this wealth, there is no public outcry. The lack of awareness and inertia around the issue has prevented any demand for a legal obligation on the government to track down the rightful owners. This unclaimed money could be better utilised by creating a centralised repository with robust verification and tracing mechanisms, revamping the issue of probating Wills and issuing succession and heirship certificates.
While the bulk of the money ought to be reunited with genuine claimants, global experience suggests that there will be plenty left over for public good. India must find ways to leverage these unclaimed resources to address pressing social needs. One such area requiring immediate attention is the ageing population. With the number of senior citizens expected to reach 173mn by 2025, India must channel these funds toward building infrastructure for their welfare.
The unclaimed wealth sitting in government accounts represents an enormous opportunity for the country. It is high time we demanded accountability and an obligation on the government to create systems to reunite this money with its rightful owners or, alternatively, to direct the utilisation of dormant funds toward vital national priorities such as healthcare, geriatric care and a semblance of social security for India’s ageing population.
Comments
gopalakrishnan.tv
1 week ago
The article is an eye opener to those authorities and Institutions to find reason and solution to identify the rightful owners of the unclaimed deposits and reunite the deposits to the owners or their legal heirs.Normally the banks and institutions do the exercise of verifying the Know Your Customers and update their records and follow up with the customers who do not update the KYC for some reason or other. It is time the Regulators should intensify their drive with the banks and institutions who hold such unclaimed deposits and ensure that some special efforts are made to locate the owners or their legal heirs . Even a small incentive / reward can be considered to locate the owners of such depositors and refund their entitled deposits . The involvement of banks /institutions and their commitments to take care of such depositors needs to be revived using the same modus operandi through which the deposits were canvassed. After all these monies belong to some hard savers who have sacrificed and helped the banks / institutions to grow, survive and serve the nation.
Referring to the earlier report on unclaimed money plus unnecessary demat accounts for illiquid shares there are a large number of shareholders in msei listed shares where there no transaction and also in calcutta stock exchange these people are stuck ...buy back too expensive, delisting under new and old options not possible for non traded share! Who knows how many shareholders involved Hotel California indeed!
the CBI is unnecessary stuck out death claim settlement. Please advise me how can I release this..i Have mail you RTI application and Bank reply any other requirement please let me know.
A good article. Hwever, by definition, money becomes an "unclaimed one only when it is remaining with the institution for more than 10 years from the due date. That's perhaps the reason there is nothing outstanding aginst SS Account. Perhaps if you can write about the global practices, it will be useful for social activists to press the Government to adopt them after some adjustments to suit our conditions. But at the end of the day, it is the person at the counter who needs to understand the gravity and adopt a helpful attitude to settle the claim. There should be realistic target for them to fulfill/
Please read the article's links, sir - A DEEP study has been done. That too has been linked here. A separate article about global practices is linked above. A white paper was prepared and its recommendations were endorsed by the Supreme Court committee looking into Adani's share spurt. Separately a PIL has been filed in the Supreme Court with the help of Adv Prashant Bhushan -- UNTIL the public feels the need to join the effort and do something, we will not make progress! First, people have to make the effort to read: https://www.mlfoundation.in/memorandum/challenges-in-transmission-of-assets-to-nominees-and-legal-heirs/389.html
Thanks, sir. I am going through the document sir./ I agree that people need to read and familiarise themselves with the enormity of the problem. and respond.
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If the money is forfeited, it is as if these employees had been taxed at a rate equivalent to someone earning Rs5 crore annually. No surprise then thatBankbazar.com has estimated unclaimed funds lying with EPFO at Rs25,000 crore. According to Mr Roongta, EPFO has 500,000 dormant accounts and its pension scheme showed a deficit of Rs37,000 crore at the last valuation in 2019. This is akin to a Ponzi scheme, where unclaimed funds provide a buffer to bad management. But there is no public scandal, since people are largely ignorant about facts. 
