SEBI Integrates DigiLocker to Curb Unclaimed Assets in Securities Market

Introduction

The Securities and Exchange Board of India (“SEBI”), in its latest regulatory push towards investor protection and digital transformation, has issued Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2025/32 on March 19, 2025 (“Circular”). The Circular mandates the use of DigiLocker—a flagship initiative under the Digital India program—as a tool to reduce the growing concern of unclaimed assets (“UA”) in the Indian securities market.

The measure is aimed at minimizing both the creation and persistence of unidentified unclaimed assets in mutual fund and demat accounts by utilizing DigiLocker’s document storage and nomination capabilities.

[1]Explanation

In its circular, SEBI reiterated its protective measures towards investors by focusing on unclaimed financial assets which remains unexplored due to lack of awareness of legal heirs or nominees after the death of an investor.

Key Highlights of the Circular:

What is DigiLocker?

DigiLocker is a digital document wallet initiated by the Government of India under the Ministry of Electronics and IT (“MeitY”). It allows users to access verified, legally equivalent digital copies of documents like Aadhaar, PAN, driving license, and now—mutual fund and demat holding statements.

Per Section 9A of the Information Technology Act, 2000, issued documents in DigiLocker are treated as original documents.

Problem of Unidentified Unclaimed Assets

Often, when investors pass away, dividends or interests may still be credited into their bank accounts if auto-credit mandates are in place. This leads to such investments not being flagged as “unclaimed,” and worse, not even being identified as belonging to a deceased investor, making recovery nearly impossible for heirs.

SEBI’s Technological Solution: DigiLocker

To resolve this, SEBI proposes an integrated approach involving:

• KRAs (KYC Registration Agencies): To identify and report instances of investor demise.
• AMCs, RTAs, and Depositories: To register as “issuers” on DigiLocker and make holding/transaction statements available.
• DigiLocker Nomination Feature: Nominees receive automated alerts (via SMS and email) upon the user’s demise and can access the digital account to obtain information necessary for asset transmission.

Data Sharing and Death Confirmation Mechanism

Information about an investor’s demise may come from:

1. The Registrar General and Census Commissioner’s register of deaths.
2. Verified death details and certificates reported to KRAs.

However, death information shared with DigiLocker will not be classified as an ‘Issued Document’ under the IT Act.

Regulatory Directions

1. Mutual Fund AMCs and RTAs are required to:
   • Register as DigiLocker issuers.
   • Provide options to investors to fetch:
     • Holding and transaction statements
     • Consolidated Account Statement (CAS) for the past 12 months
     • Auto-fetch of CAS on January 1st every year
2. KRAs must:
   • Electronically share demise details of investors with DigiLocker in a secure manner.
3. Advisory to Investors:
   • Investors are encouraged to:
     • Create a DigiLocker account
     • Nominate DigiLocker nominees (in addition to those in MF or demat accounts)
     • Fetch and store holding statements to avoid future untraceable investments
4. For Investors Holding Securities in Physical Mode:
   • SEBI encourages dematerialization to benefit from the digital infrastructure and avoid future complications related to unclaimed physical assets.

Conclusion

The Circular issued by SEBI are focused on resolving the issues regarding the investments of deceased investors. SEBI’s integration with DigiLocker gives access to ensure that investors, along with their families, can manage their investments in a straightforward manner. The efforts made by SEBI help integrate modern technology with the legacy systems in place, speed up the processing of the transmission of assets, and greatly lower the chances of assets being rendered unclaimed. Upon receiving the advanced regulations, all AMCs, KRAs, depositories and investors are required to reconfigure their systems so that the entire securities market is made easier to navigate and more secure for the investors.