SEBI Proposes Allowing Depositories To Use Up To 5% Of IPF Investment Income For Administrative Expenses

The Securities and Exchange Board of India (SEBI) has floated a consultation paper proposing to allow depositories to use up to 5% of the annual interest or income earned from investments of their Investor Protection Fund (IPF) corpus to meet expenses related to the IPF Trust.

The move would align the framework applicable to depositories with that currently applicable to stock exchanges.

SEBI noted that stock exchanges are currently permitted to utilise up to 5% of the interest or income earned from IPF investments for expenses relating to dedicated employees of the IPF Trust, Investor Service Centers, and other administrative and statutory expenses.

However, no similar provision currently exists for depositories. The regulator said 100% of the interest or income earned from their IPF is treated as part of the corpus, requiring depositories to bear all related expenses from their own income.

As on March 31, 2026, NSDL's IPF corpus stood at ₹87.78 crore, while CDSL's stood at ₹95.18 crore.

SEBI said the proposal follows representations received from depositories seeking alignment with the framework applicable to stock exchanges. The matter was discussed by the Secondary Market Advisory Committee, which agreed with the proposal.

Under the proposal, depositories would be allowed to use up to 5% of the interest or income generated during the year from investments of the IPF corpus for expenses relating to dedicated employees of the IPF Trust, other administrative expenses, and statutory expenses such as applicable taxes, audit fees, and charity commissioner's fees.

If expenses exceed the prescribed limit, the excess would have to be borne by the depository. Any unutilised amount in the same financial year would be ploughed back into the IPF corpus.

SEBI has invited public comments on the proposal till June 1, 2026.