SEBI Launches MITRA to Help Investors Trace Inactive Mutual Fund Folios

The Securities and Exchange Board of India (SEBI) has taken a significant step towards investor protection and financial inclusion by launching a new digital platform, MITRA (Mutual Fund Investment Tracing and Retrieval Assistant).

This initiative aims to assist investors in identifying and reclaiming inactive or unclaimed mutual fund folios. By encouraging investors to update their Know Your Customer (KYC) details, MITRA is expected to reduce the number of non-KYC-compliant folios and safeguard investments from fraudulent redemptions.

Need for MITRA: Addressing a Growing Concern

Over time, numerous investors tend to lose track of their mutual fund investments due to outdated contact details, lack of awareness, or negligence. These inactive folios may be left unclaimed for years, making them susceptible to fraudulent activities. SEBI’s launch of the MITRA platform is a proactive measure to provide investors with a centralized and searchable database, helping them retrieve forgotten investments while ensuring compliance with KYC regulations.

Many investors are unaware of mutual fund investments made in their name, either by themselves or by their family members. Additionally, outdated contact information, non-compliance with KYC norms, and lack of a centralized tracking mechanism contribute to the problem. Inactive folios also pose a serious financial risk as they are vulnerable to unauthorized redemptions.

Functionality of MITRA

MITRA is designed as an industry-wide initiative developed by Registrar and Transfer Agents (RTAs) to streamline the process of tracing and retrieving unclaimed mutual fund investments. This digital platform empowers investors by allowing them to search for inactive or unclaimed mutual fund folios efficiently.

Investors can log into the MITRA portal and enter their details to search for inactive or unclaimed mutual fund folios. The platform aggregates data from multiple mutual fund houses, ensuring a comprehensive search process. If an investor finds an inactive folio in their name, they can initiate a KYC update and reclaim their investment. Legal claimants of investments made by other individuals can also verify and claim rightful ownership of unclaimed investments. SEBI has mandated Asset Management Companies (AMCs), RTAs, Registered Investment Advisors (RIAs), the Association of Mutual Funds in India (AMFI), and mutual fund distributors to actively promote awareness about MITRA among investors.

Classification of Inactive Mutual Fund Folios

According to SEBI, a folio is considered inactive if there has been no investor-initiated transaction, either financial or non-financial, for ten consecutive years, despite a positive unit balance. This classification is intended to identify investments that may have been forgotten or left unclaimed due to various reasons.

Inactive folios include those with a balance but no transactions for ten years, non-KYC-compliant accounts, and those with outdated contact details. Many of these cases also involve unclaimed dividends and redemptions.

Role of the Unit Holder Protection Committee (UHPC)

In line with the launch of MITRA, SEBI has also expanded the mandate of the Unit Holder Protection Committee (UHPC) under mutual fund regulations. The UHPC will now review inactive folios, ensuring they are appropriately tracked and addressed. Additionally, it will oversee unclaimed dividends and redemptions to make sure investors receive their rightful dues. The committee will also conduct proactive investor awareness campaigns to minimize the occurrence of unclaimed mutual fund investments.

By strengthening the UHPC’s role, SEBI aims to create a more investor-friendly mutual fund ecosystem where lost investments are minimized and fraudulent activities are prevented.

Expected Impact of MITRA

The introduction of MITRA is expected to bring several positive changes to India’s mutual fund industry, improving transparency and investor security.

MITRA will increase investor awareness by educating individuals about their forgotten investments. The platform will significantly reduce the number of unclaimed mutual fund folios by actively identifying and reclaiming old investments. Enhanced security measures will minimize fraudulent activities related to inactive accounts, ensuring investor funds remain protected. The initiative also ensures regulatory compliance with SEBI’s KYC and security guidelines, while simplifying the investment retrieval process for investors and legal heirs.

Challenges and the Way Forward

While MITRA is a progressive initiative, certain challenges must be addressed to maximize its effectiveness. A significant number of investors may still be unaware of MITRA’s existence and benefits, which highlights the need for widespread awareness campaigns. Additionally, the success of MITRA depends on the proper integration of mutual fund records across different AMCs and RTAs. Investors who have not updated their KYC details for years may also face difficulties in completing the process, and legal heirs or nominees might encounter bureaucratic hurdles when claiming investments of deceased investors.

To ensure the success of MITRA, SEBI, AMCs, and financial advisors must collaborate to educate investors through digital marketing, financial literacy programs, and outreach initiatives. The platform should be periodically updated to enhance user experience, security, and data accuracy. Simplifying the KYC update process will encourage more investors to reclaim their investments effortlessly. Additionally, a dedicated support system should be established to assist investors in navigating the MITRA platform effectively.

SEBI’s launch of MITRA marks a transformative step in ensuring investor protection and financial transparency in India’s mutual fund industry. By providing a digital platform for tracking and reclaiming inactive mutual fund folios, MITRA will help investors safeguard their investments, update KYC details, and prevent fraudulent redemptions. With active promotion and technological advancements, MITRA has the potential to significantly reduce unclaimed investments and foster a more secure financial ecosystem in India. Investors are encouraged to utilize this platform to ensure their financial assets remain protected and accessible.