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Even if you don’t claim the dividend declared by the fund house, it continues to earn interest

LiveMint logoLiveMint 19-04-2017 Lisa Pallavi Barbora

If there is any dividend or redemption amount that you have not been able to claim, it is most likely that the amount is lying unclaimed with the asset management company (AMC). And while you arrange to get it back, know that your money is not idle. It will get re-invested by the AMC and will earn you some return too.

Instances of unclaimed dividends or redemption could arise if the money was sent by a cheque and the recipient’s address details with the AMC are incorrect. Such unclaimed cases can continue for many years, unless the investor approaches the AMC to update the address or the AMC follows up to find the recipient’s correct address. In the meanwhile, the amount lying with the AMC can be reinvested in two ways.

An AMC has two options to reinvest the unclaimed amount. One is to take this amount in a collective pool and invest it in money market instruments or in call money. Whenever an investor reclaims the investment amount, it gets proportionately withdrawn from the pool and is paid along with the interest accumulated.

The second option came into existence in 2016, after the market regulator Securities and Exchange Board of India (Sebi), allowed it. Here, the amount is deployed in a separate plan that is started specifically for this purpose. This plan is typically a liquid or money market mutual fund. This means, for each investor who has an unclaimed amount, the investment will be in individual names, for exactly the unclaimed amount and under existing individual folio numbers with the AMC.

In this scheme, the expense ratio is capped at 0.5% and there is no exit load. The expense ratio is to be borne by the investor. The additional earning on the unclaimed amount accumulate up to 3 years from the due date, after which they go towards investor awareness spends.

If you are unsure about unclaimed amounts that you may have with an AMC, you can log on to its website and enter your details like PAN and date of birth to see if folios with your name have any unclaimed amounts.

In cases the amount is reinvested into a specific fund and units are created in the investor’s name, you will get an intimation about this new investment. You may receive the communication directly from the AMC, and it will also show up in the common account statement issued by the Registrar and Transfer Agent (RTA).

Not all AMCs prefer the same method to deploy the unclaimed amounts. Some asset managers prefer the first route, as they then don’t have to bother about issues relating to missing or incomplete Know Your Client (KYC) details, which arise if the money is invested in individual folios. This assumes relevance if the unclaimed amounts have remained with the AMC for a long period and tracing the investor is tedious.

In case of the second route, the transparency is higher and the investor through, account statement-based communications also comes to know about the unclaimed dividend easily. This could happen via an email or a letter directly from the AMC, and will reflect in the common account statement sent by the RTA.

Such account statement-based information to individual investors is not available with the first option.

The choice of routes is at the discretion of the AMC and there is no rule governing which option it chooses.

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