Public sector banks are now permitted to transfer unclaimed shares, interest, and bond redemption amounts to the Investor Education and Protection Fund (IEPF), effective August 1, 2025. This is in accordance with the provisions amended and notified on April 15, 2025. The government notified 19 amendments in the Banking Laws (Amendment) Act, 2025. The notified amendments were made in the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, State Bank of India Act, 1955, and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980.
The amended sections, which will be effective August 1, 2025, are Section 3, 4, 5, 15, 16, 17, 18, 19, and 20 of the Act.
Sections 3, 4, And 5
These are related to the Banking Regulation Act, 1949. Under these sections, the minimum paid-up capital for banks has been raised from Rs 5 lakh to Rs 2 crore. Further, the tenure for directors in the co-operative banks has been extended to 10 years, which was earlier eight years. It means they can serve for a longer tenure. It made changes in the rules for their representation at the state level.
Sections 15 And 16
Under these sections, the State Bank of India (SBI) has been allowed to transfer the unpaid dividends, interest, as well as unclaimed shares with unpaid dividends to the IEPF if the dividend remains unpaid for seven years. The Bank can appoint the auditors for this purpose and pay them a fee.
Sections 17 and 18 amend the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970:
Sections 17 And 18
These Sections amend the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. They stipulate that other nationalised banks can also transfer the unpaid dividends, interest, and shares with unpaid dividends to IEPF and appoint auditors as per the rules of the Companies Act, 2013.
Sections 19 And 20
These Sections prescribe the same rules for those banks that were nationalised later, and Covered Under The Banking Companies (Acquisition And Transfer Of Undertakings) Act, 1980.
What Is IEPF And How How Does It Work?
The government established IEPF under Section 125 of the Companies Act, 2013, for protecting investors’ interests. Under this, the unclaimed money of investors in companies is credited to the IEPF and utilised for spreading investors’ awareness and for other purposes stipulated in the Act.
The IEPF authority, which has one chairperson, a chief executive officer, and members not more than seven, administers the fund. When there is no transaction (no credit in a bank account) related to shares for a consecutive seven years, the shares are transferred to IEPF. However, before transferring the shares, investors are informed, and if there is no action from the investor, the shares or the securities are transferred to the IEPF. However, investors can reclaim their shares by applying to the IEPF Authority.
