How Sebi’s move to integrate DigiLocker will reduce unclaimed assets

The initiative is aimed at reducing unclaimed assets in the securities market, ensuring that family members of deceased investors are promptly informed of their holdings.

How does DigiLocker work?

DigiLocker, a government-backed digital document wallet, stores Aadhaar, PAN, driving licence, and insurance policies. By adding mutual fund statements and demat holdings to the platform, the markets regulator is enabling investors to consolidate their financial documents in one secure location.

Sebi has directed asset management companies (AMCs) and registrars to register as issuers on DigiLocker, allowing investors to fetch their latest mutual fund statements seamlessly.

How will this feature work?

Investors first need to register on DigiLocker and link their Aadhaar for authentication. Once registered, they can fetch their mutual fund statements by linking their mutual fund investments and demat accounts to their DigiLocker profile. This enables automatic updates of their financial holdings. Additionally, investors can nominate beneficiaries by providing the nominee’s mobile number and email ID.

Upon the demise of the investor, DigiLocker automatically notifies the registered nominee via SMS and email. After completing identity verification, the nominee can access the deceased investor’s mutual funds and demat holdings, allowing them to claim the investments.

“Starting 1 April, registrar and transfer agents will push your mutual fund unit holder data to DigiLocker, providing read-only access. The primary difference from existing platforms like AMC websites and RTA apps is that nominees can directly access holdings without needing access to the deceased person’s email account,” said Amol Joshi, founder of PlanRupee Investment Services.

How will investors benefit?

Investors often fail to inform their family members about their investments, leaving nominees struggling to track down assets spread across multiple fund houses and registrar platforms. Without clear documentation, nominees often have to go through complex procedures, visit multiple AMCs, and provide extensive paperwork to claim the funds.

One of the key advantages of this initiative is the prevention of unclaimed assets. Since nominees will receive timely notifications about the deceased investor’s financial holdings, the risk of assets remaining unclaimed is significantly reduced. Furthermore, by consolidating mutual fund statements in one digital space, the asset transmission process becomes more streamlined and efficient.

Sebi’s DigiLocker integration also allows investors to maintain privacy, ensuring that nominees or family members can only access financial information after the investor’s demise. “This is especially useful for elderly parents who wish to keep their financial matters confidential during their lifetime. Additionally, investors can grant access to nominees who can assist beneficiaries with the transmission process, particularly if the nominees are not financially savvy or if they are special needs dependents,” said Vivek S.G., a registered investment advisor and founder of Wealth Crafts.

Investors also gain flexibility in choosing whom to share this data with, whether select family members or relatives. This ensures both security and a smooth transfer of assets when needed.

For example, Mr. A, an investor, holds multiple mutual funds. He registers with DigiLocker, fetches his mutual fund statements, and nominates his wife as a beneficiary. Upon his unfortunate demise, his wife receives an automated notification from DigiLocker, informing her about his investments. Since she is both the DigiLocker nominee and the nominee in his mutual fund folios, she can directly apply for transmission. This seamless process ensures that Mr. A’s investments do not become unclaimed assets and are efficiently transferred to his legal heir.

However, if his wife were unaware of his investments or unable to access his statements, she would have to manually track down his mutual fund holdings by contacting multiple AMCs, RTAs, and banks—often without knowing where to start. This could lead to lengthy delays, extensive paperwork, and, in some cases, the investments going unclaimed indefinitely.

The Sebi’s new DigiLocker integration addresses this challenge. DigiLocker ensures she receives an automated notification upon his demise, making the process of accessing and transferring assets much simpler and more efficient.

Seamless transmission

It is important to note that while DigiLocker provides access to financial statements, it does not replace the legal process of asset transmission. If the nominee in DigiLocker is also the nominee in the mutual fund folio or demat account, they can directly apply for transmission. However, if different nominees are listed, DigiLocker nominees can pass on the information to the legal heirs or the official nominee, expediting the transmission process.