Mutual fund houses have started introducing a separate plan under their liquid funds to deploy unclaimed redemption and dividend amount. Unclaimed amounts of mutual funds are accumulated from non-encashment of dividends and maturity proceeds by investors.
Canara Robeco, DSP BlackRock and Invesco have introduced unclaimed redemption and dividend plan under their respective liquid funds to deploy unclaimed amount.
While Canara Robeco MF has introduced this plan under Canara Robeco Liquid Fund, DSP BlackRock MF has launched unclaimed plan under DSP BlackRock Treasury Bill Fund in April. Similarly, Invesco MF has introduced four separate plans under its Invesco India Liquid Fund in May.
Earlier in February, SEBI had allowed fund houses to invest the unclaimed redemption and dividend corpus in a separate plan of a liquid scheme which is meant exclusively for deploying unclaimed amounts from April 1. However, AMCs cannot charge any exit load in this plan and the TER is capped at 50 bps.
To ensure that mutual funds play a pro-active role in tracing the rightful owner of the unclaimed amount, SEBI had asked fund houses to publish a list of names and addresses of investors in whose folios there are unclaimed amounts. Many fund houses have started publishing information about the process of claiming the unclaimed amount on their websites.
So far, AMCs have been deploying unclaimed proceeds in money market securities after three months. Sometimes AMCs do not find it feasible to park money in money market. So they invest in bank fixed deposits.
According to the SEBI rules, if investors claim the money within three years then payment is based on prevailing NAV after adding the income earned on unclaimed money. If investors claim money after three years, the payment is based on the NAV at the end of three years. That means, no additional income will be given to such investors after three years. The income earned on such unclaimed amounts will be used for the purpose of investor education.
Today, most investors opt to receive their dividend or redemption proceeds directly in their bank accounts through electronic clearing service (ECS). But there are instances where the dividend or redemption cheques return to the fund house because investors have not updated their address with the fund house.