SEBI eases IPF interest-utilisation norms for depositories
Depositories must plough back at least 95% of IPF interest to corpus and may use up to 5% for defined expenses from 1 September 2026
Change
On 7 July 2026 the Securities and Exchange Board of India (SEBI) modified the Depositories Master Circular so that, from 1 September 2026, at least 95% of interest or income from Investor Protection Fund (IPF) investments must be ploughed back to the IPF (down from 100% treated as corpus), with up to 5% usable for defined IPF Trust and administrative expenses.
Why it matters
The change replaces the earlier requirement that 100% of IPF investment interest or income be treated as corpus. Depositories must now contribute and plough back at least 95% of such interest or income each year, and may apply a maximum of 5% to dedicated IPF Trust employee costs and administrative and statutory expenses (taxes, audit fees, charity commissioner's fee). Expenses above 5% must be borne by the depository, and any unused portion of the permitted amount must be ploughed back within the same financial year. The measure aligns depository IPF norms with those for stock exchanges and takes effect on 1 September 2026, with MIIs directed to implement systems and amend bye-laws accordingly.
Implications
- — IPF Trust and finance teams at depositories must reconfigure IPF accounting so that at least 95% of annual interest or income from IPF investments is ploughed back to the fund and no more than 5% is applied to permitted employee, administrative and statutory expenses from 1 September 2026 — applying more than 5%, or failing to plough back unused amounts within the financial year, breaches the modified circular.
- — Compliance and legal teams at depositories must amend the relevant bye-laws, rules and regulations and put in place systems to implement the revised IPF norms before 1 September 2026, and disseminate the circular to market participants — the circular directs MIIs to make these changes for the provisions to take effect.
Who is affected
- — IPF Trust and finance teams at depositories
- — Compliance and legal teams at depositories (Market Infrastructure Institutions)
What to watch
- — Effective: 1 September 2026 — the revised IPF interest-utilisation norms (at least 95% ploughed back, up to 5% for defined expenses) come into force for depositories.