Recovery Firms Thrive As Bureaucracy Keeps People From Claiming Their Own Money

Elaborate documentation processes to claim long-forgotten investments and deposits often force people to take the help of recovery firms. Claimants find the process of claiming their own money harrowing. Unclaimed deposit recovery firms are helping people track down their own money and with the documentation requirements. 

Take the case of 52-year-old Himendra Kumar Gupta, who has a garments business in Noida. Gupta had bought some physical shares sometime in 1992-93. He jointly held shares of several companies with his sister, elder brother, and mother. After demat accounts were introduced in 1996, he struggled for years to convert his physical shares into digital ones. He even visited the companies whose shares he had and completed the formalities they asked of him. However, after his mother died in 2022, things got complicated. All three children had to get evidence of them being the legal heirs of their mother. His elder brother lives abroad and his sister’s surname and address changed after her marriage. 

“I don’t want to name the companies but some companies are not responsive at all in this regard. There were no clear guidelines on how the shares could be changed into demat format. There is no concrete information available on how to claim the shares. For one company, I kept writing to them and even visited their head office in Delhi. But at the office, they told me that I needed to write an email and they could only follow up then. So there is no proper assistance and they don’t reply to the emails. I chased the matter for more than three years and finally gave up,” said Gupta. 

 

Hurdles In Claiming Own Money

Guwahati’s Kamal Kumar also had similar stories to tell. The 60-year-old pharmacist bought a few physical shares of some companies in 1999. But the amount he had invested in the shares continued to remain inaccessible for years.  

“I had some shares of companies of Hindustan Unilever (HUL) and a few others. But to transfer the physical shares to the demat account, I had to visit the individual companies separately and follow a lengthy process. I kept visiting the companies for years,” Kumar told The Core. In situations where investments are not claimed within seven years, the money automatically gets diverted to the Investor Education and Protection Fund Authority (IEPF). Some of Kumar’s investments also went into IEPF. It is only recently that he managed to recover all his investments with the help of a company that offers people services for recovering their unclaimed funds. 

Most people’s money is generally stuck as deposits in banks, in public provident fund schemes in post offices, and other government schemes. Several people find it difficult to recover investments made through physical shares. Women claimants have it worse because financial literacy is poor. Married daughters struggle to claim their parents’ money because of changes in surnames after marriage. 

“My husband had some physical shares, and some other investments. But he didn’t add my name or my daughter’s name as the nominee. So, we couldn’t even manage to recover the funds ourselves,” said Rupasree Sanyal, a 67-year-old housewife and resident of Kolkata. 

Despite the Reserve Bank of India (RBI) and the government of India introducing initiatives like Unclaimed Deposits - Gateway to Access inforMation (UDGAM) and IEPF portals, several claimants continue to struggle to trace and recover their unclaimed funds. In many cases, the investors died without being able to recover the funds, making things more complicated for their legal heirs.

 

Challenges Faced By Claimants 

The most obvious challenge is tracing these funds and completing the formalities needed by companies and financial institutions to release such funds. “Every company has a different policy and process that needs to be followed to claim the funds. I lost some of the certificates and I informed the company about the same. Some of these investments are so old that often the documents get misplaced. They told me that I needed to put out an advertisement in a national newspaper,’ Gupta said. After he put out an ad in a national daily, he was told that he also needed to publish an advertisement in a local paper. Being a resident of Delhi-NCR, he got an advertisement published in a Hindi newspaper.

“Later they told me that since the company is based in Maharashtra, they will consider advertisements in Marathi newspapers only. But this was not even conveyed to me earlier. Moreover, back in 2011, there were minimal options for getting in touch with a Marathi newspaper classified ad department sitting in Delhi. I eventually abandoned the thoughts of recovering the funds,” said Gupta. 

Gupta said that companies often did not clarify what documents were required and rejected the application for recovery without giving the actual cause in most cases. Processes get delayed for years on grounds of surname and address mismatch. 

“I was a resident of Mizoram when I invested in government bonds in the early 2000s to avail tax benefits. Later, I shifted to Guwahati and then it became difficult for me to travel to Mizoram repeatedly to recover the funds. Those days, nothing was digital, and formalities needed to be completed manually, so for most of the process, one needed to visit the respective branch several times. Especially for shares in some public service units (PSU) and investments in such government bonds, recovery becomes a challenge,” said Kumar. 

It is not just PSU companies that make the process too complicated, private companies like Tata Group and Reliance Industries also have cumbersome processes to recover funds. Their process of verifying the identity of the claimant is long-drawn and it sometimes takes decades to get people’s money back from such companies. 

To help people recover unclaimed funds, the Reserve Bank of India launched the centralised web portal UDGAM in August last year and the government created the IEPF portal in September. According to the UDGAM portal, savings or current accounts that are inactive for 10 years and term deposits that are unclaimed for 10 years from the date of maturity are defined as 'unclaimed deposits.'  Similarly, all shares of companies where dividends have remained unclaimed or unencashed for seven consecutive years or more, are transferred by the company to the IEPF. However, there are no regulations to compel companies to fast-track the process of claiming funds.  

“Be it UDGAM portal or IEPF portal, the details of the funds won’t reflect on their websites unless it has been more than 10 years or 7 years, respectively. So, if any legal heir or any investor tries to track the unclaimed funds before 10 years or 7 years, they won’t be able to find the details on these portals. Also, no regulation could compel the companies to push the process to ensure the funds reach the legal claimants,” said Vikash Jain, co-founder, of Share Samadhan, an unclaimed funds recovery firm.

Lack of regulations, complicated bureaucratic processes, and lack of clarity in documentation needs make the process of recovery a nightmare for most of the claimants. The entire process being an offline exercise makes matters worse for claimants who have to visit bank branches repeatedly. In certain cases, they are required to submit necessary documents by post to companies and banks. Things get more complicated when the companies reject the application and post the documents back to the old registered addresses of claimants. Claimants complained that often companies demand original certificates and send them back to the wrong addresses, resulting in documents getting misplaced.

To avoid these hassles, several claimants are seeking help from unclaimed funds recovery companies and are often willing to pay a portion of the recovered amounts to these companies. 

 

Deposit Recovery Companies To The Rescue

Funds recovery is a relatively new business model that developed in the last five to eight years. Most of these companies are based out of cities like Delhi, Mumbai, and Jaipur. Interestingly, the founders of some of these companies faced similar challenges while trying to recover unclaimed funds for their families. Their own experiences encouraged them to solve the problem.

In India, financial literacy is poor and culturally, people usually do not discuss their financial history with their family members. In the event of the death of the patriarch, legal heirs are left clueless about finances. “In such cases, we ask the legal heir to get whatever documents they can find and start tracing gradually. For example, if someone hasn’t found any documents related to investments, then we go through the savings account transactions and figure out the details of dividend checks and back tracing the same to track the investment details,” Vikash Jain of Share Samadhan said.

The majority of the customers of these companies are from states like Gujarat, Maharashtra, and Delhi as most customers from these parts of the country have been investing in shares for quite a long time.  “We have clients majorly from central and western India as they have a maximum number of unclaimed deposits in physical shares. Gujaratis specifically tend to speculate and invest in shares and so has been the trend for ages,” said Khagesh Chitlangiya, founder and director at Jeevantika Consultancy, an unclaimed investments recovery firm.

All Is Not Lost

The recovery firms said that often their customers are not aware of the kind of succession certificate required to claim such funds. Depending on the nature of the funds that had to be recovered, one would have to either produce succession certificates under the Hindu succession law, a legal heir certificate issued by the district revenue office or a local municipality officer, or an affidavit issued by the local court or district magistrate. 

These recovery firms help claimants get these certificates too. Depending on how complicated the process is and the documentation involved in recovery, these companies charge 10-20% of the recovered amount in most cases. Most of the companies don’t charge any money for evaluation and if the customers agree to proceed, based on the kinds of charges incurred, a customer would be required to pay a fee. In some cases, the legal heirs aren’t aware of the registered addresses of their parents or grandparents. Tracing such investments becomes difficult if investment details are not linked to the voter card, Aadhar card, and PAN card. For instance, public provident funds accounts that were created in post offices have not been digitised yet, making it impossible to track the details of such accounts online. Thus, most of the work done by recovery firms involves collating and authenticating the information to determine which investments belong to which claimant and which department to reach out to for recovery. 

But things are gradually getting better. In November last year, the Securities and Exchange Board of India introduced a standardised documentation process for recovering unclaimed investments, making the process comparatively easier. 

“Old people also forget the investments they made. We have clients whose parents or grandparents have told them that they made some investments but couldn’t recall any details. Also, getting hold of the right address that the investor used back then during the investment is very important to trace it back. So, we asked the customers to give us a few addresses that could be linked to the investments. This is primarily the challenge for tracing the details of PPF, some government bonds, and unit trust investments (UTI) schemes,” said Shreyash Khandelwal, managing partner at Recoversy, an unclaimed funds recovery firm. According to him, nearly Rs 11,000 crore remained unclaimed under the UTI scheme. 

 

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