MF houses receive 3.94 lakh investor complaints in 2009-10, non-receipt of dividends tops the chart
Ravi Samalad 02 August 2010

Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors 

Non-receipt of dividends and redemption proceeds remains the biggest worry for mutual fund investors. For instance, if an individual has invested in four different schemes and has provided an incorrect address or pin code, the dividend warrant may not reach his/her correct address. 

In a bid to improve the grievance redressal mechanism, market watchdog Securities and Exchange Board of India (SEBI) had mandated fund houses to display investor complaints on their respective websites as well as the website of the Association of Mutual Funds in India (AMFI). According to data put up so far on the AMFI website, the 37 fund houses have received 61,604 'non-receipt of dividend' complaints in the financial year 2009-10. There were 51,509 complaints pertaining to non-receipt of redemption proceeds. Issues relating to non-updation of PAN, bank details, nomination, etc attracted 42,515 complaints from investors.

Industry experts point out that it is negligence on the part of the investor while filling up forms as the primary reason behind such complaints. Often, the agent or distributor also fills in the forms on behalf of investors, who may end up furnishing erroneous details.

The mutual fund industry has approximately four crore investor accounts. Many of them are multiple accounts held by single investors. According to the aggregated data available with AMFI, the 37 fund houses received almost four lakh investor complaints during the financial year (FY) 2009-10. If we compare that to the number of folios, the four lakh complaints amount to just 1% of the folios.

"Only bigger dividend amounts are sent by registered post and smaller amounts are sent by ordinary post. If the small dividend warrants are lost, then investors have to obtain a 'reconciled statement' from banks because dividend warrants are usually issued through a cheque payable at par. The 'non-payment certificate' comes easily when a single cheque is issued in favour of a single person at a single bank. But, for 'at par payable' cheques, it takes an average of six months to get a 'reconciled statement'. So even if one complains to MFs, the transaction cannot be retraced easily," Debasish Mohanty, head-marketing, UTI AMC, told Moneylife.  

"Recently, there have been cases where wrong people have claimed dividends on behalf of genuine investors. Therefore, to tighten that loophole, fund houses have applied further restrictions. For instance, if one requests change of address, we will ask the investor to provide proof of old address, new address, etc," added Mr Mohanty.

Industry experts say that the introduction of electronic clearing system (ECS) and core banking facility has helped in smoother distribution of dividends.

Redemption cheques are normally sent by registered post, where the amount involved is higher, unlike dividend cheques. Experts point out that investors do not provide details properly while filling up forms. Many application forms received by the registrar & transfer agents (RTAs) and fund houses are incomprehensible, which results in incorrect data entry. Most cases occur during the time of new fund offers (NFOs) wherein a distributor has to submit many forms.

1 decade ago
Credit to the account with a bank must be made compulsory to remove avoidable wastage of time, energy and money.
1 decade ago
I have handful experience handling the problems associated with mutual fund schemes. I would like list a few suggestions and observations. SEBI is a big talker and did nothing to bring standardization of service requets. Crying need is that irrespective of the scheme or fund house, common servcie request formats have to be undertaken and published by AMFI. Dont leave this to MF houses. The most confusing service request is on change of bank mandate. Each MF has its own rules and all are equally confusing. The problems encountered in this area are either due to data capture or investors wrongly/carelessly writing their bank manadates or genuine change in the bank mandate. List each possible situation and provide a clear cut requirement and let this be published by AMFI. Further, it has to be manadatory that every common chnage in rule be published by AMFI. For example, change in cut off in Liquid schemes. Why each MF has to spend lakhs of ruppes in releasing the same content? Instead AMFI should publish and MFs have to share the cost. Investors understand better if all industry releases, changes, requirements emanate from a single body. AMFI is just a sitting duck. In all this confusion, poor RTAs are made scape goats whenever investors' grievances are aired. RTAs cant be more efficient than the MFs they service. If MF houses have no keenness in bringing uniform services through AMFI, what these poor and hapless R&T agents would do. In fact, the RTA guys have been doing excellant but thankless job. For instance, I had an excellant welcoming and resolution oriented response from Mumbai office of Karvy and i am sure CAMS also must be doing a good job. Today an investor can pick a piece of paper, scribble for redemption, and expect outcome irrespective of teh manner he expressed in the request. Can any one sell shares through a DP like this? SEBI did nothing.
shamik tiwari
1 decade ago
SIR, my mother invested in reliance equity fund in folio no.42618944553in year 2006. on 25 aug 2010 she has submitted a request for redeemption. redeemption processed on 30 th aug. but the redeemption amount could not credited to account because of mistake on the part of the agent or distributor who filled in the forms on behalf of my mother. he did two mistake(I) he wrote cutomer name ASHA TIWAR insteadof ASHA TIWARI.
(II) the payment was done by my bank account cheque instead of my mother. so instead of my mother bak details he filled my bank detals.
suggest me the the right procedure to get rid of this problem.
1 decade ago
I feel it is only just to put this new comment on this forum.

Post my comment on this article, promptly the Karvy machinery was put in action. The GM at Mumbai got in touch with me on my email and also left a standing instruction at UTI (where I am forced to frequent every few days), a very smart move indeed, I must say, to get my name and contact details the moment I came there next. The moment I visited UTI at Churchgate, I was asked for my contact details and promptly the GM contacted me and requested to meet me. We met the next day and I must say that he had come there with a determined and positive mind and desire to not only look into problems faced by me but thereby eliminating and/or reducing similar problems faced by lakhs of investors. In our talk of nearly 4 hours, it was apparent that the GM and Karvy management were very keen indeed to know the problems at the investor levels so that they can improve on them and become more investor friendly in their working, at their counters across and also on the web. So, though the web site as of today is yet to evolve to make it investor and user friendly, they have promised to work towards it and improve upon it asap.

What I have liked is their promptness, willingness to address investor issues at the grass root level.

Thank you Moneylife for this platform and thank you Karvy for your whoeheartedness in resolving issues.
1 decade ago
UTI is one of the worst amc's in terms of customer service.They donot have properly trained customer service executives to guide a investor on any of the customer service requests.
I had once given for a partial redemption , but my whole corpus was redeemed, but the problem doesnot end there though all my bank details were updated (ie my ifsc and micr) i got a warrant.This shows the professionalism displayed by AMC's.
I want SEBI to take some stringent action against the mutual funds who harass the customer in this way.
1 decade ago
The good thing first:
I have scores of folios in numerous schemes under multiple heads. Yet I hardly face a problem of dividend not being received. Almost all go directly to ECS.

CAMS is excellent and I applaud their services as well as online website which I use it extensively since last one year. Their website is simple to use and user-friendly and provides all useful reports in a jiffy. No, I am not their marketing person.

Having said that, I would now like to point out the problems: The problems I face is with KARVY. I face maximum problems with them. e.g. In Reliance MF, the data is almost always wrong. The name, address, bank name, address... practically everything would be misspelt. In Reliance's case the problems end here. I do indeed get dividends in time.

But the combination of KARVY and UTI spells disaster. First of all, all old holdings show wrong data. e.g. Out of three holders the second and joint holders will show as Nominees, Anyone or Survivor becomes Joint, Birth date goes haywire, and so on. Okay the problems do not end here. When I complained about this at their Churchgate office, the officer accepted that there is Data Capturing Error. When you want to redeem, you realise that UTI and your money have almost become inseparable and they are so reluctant to return your money that most of the redemption requests would come back as 'Signature not tallying' after many days. It is known that the re-presentation of redemption request will take quite some time. Till that time the money lies with UTI. So, you ensure that every signature is attested. But then you are under estimating the ingenuity of UTI+KARVY. Even though bank account number is mentioned properly and a cheque copy is attached with redemption request, you now receive cheques with wrong bank account numbers. I have just received three cheques the same way. So, again it is know that for re-validation it will take many days. This is how your hard earned money is used by them and you once again have to work hard to get it back.

When this issue was raised, a very evasive and round about answer was given that because of frauds taking place Karvy+UTI are very stringent. That is why REDEMPTION CHEQUES WITH WRONG ACCOUNT NUMBERS ?

I would request Moneylife to carry out an article and study on these dubious ways to retain investors' money for as long as possible.

Karvy is pathetic. Their website too is so complex and un-user-friendly that I have never been able to use it.
R Balakrishnan
1 decade ago
Involving the CDSL etc has created enormous problems. They do not uddate records in time. This is the biggest culprit. CAMS and Karvy were doing a good job.
Also, AMC's should send at least one yearly statement without demur. I never receive a statement except when any transaction is done. About dividends, if people give the bank account number correctly, there should be no problem. Half the time, the investor screws up and blames the AMC.
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