Markets regulator Securities and Exchange Board of India (SEBI) has allowed depositories to utilise up to 5% of the annual interest or income earned from investments of their Investor Protection Fund (IPF) towards administrative and statutory expenses, marking a change from the earlier requirement that all such income be added back to the fund corpus.
Under the revised norms, at least 95% of the interest or income generated from IPF investments must continue to be ploughed back into the fund each year to strengthen the corpus. The remaining 5% can be used to meet costs related to dedicated IPF trust employees, audit fees, taxes, charity commissioner fees and other administrative expenses.
Depositories CDSL and NSDL together held more than Rs 211 crore in investor protection funds as of May 31. CDSL's IPF corpus stood at Rs 115.94 crore and NSDL's at Rs 95.53 crore.
SEBI said the change follows representations from depositories and was discussed by its Secondary Market Advisory Committee. The regulator added that the move is aimed at bringing uniformity and consistency in the treatment of IPF income across depositories and stock exchanges.
The regulator clarified that if administrative expenses exceed the permitted 5% limit, the excess amount will have to be borne by the depository. Any unutilised portion of the 5% allocation must be transferred back to the IPF corpus in the same financial year.
The new framework will come into effect from Sept. 1, 2026. Depositories have been directed to put in place the necessary systems and amend relevant by-laws, rules and regulations to comply with the revised requirements.
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