The Securities and Exchange Board of India (SEBI), vide Circular No. HO/47/14/13(4)2026-MRD-POD3/I/15577/2026 dated July 07, 2026, has revised the norms governing the utilization of interest or income earned from the Investor Protection Fund (IPF) of Depositories. The revised provisions bring uniformity and consistency between the IPF frameworks applicable to Depositories and Stock Exchanges.
Background
Paragraph 4.46 of Section 4 of the SEBI Master Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/168 for Depositories dated December 03, 2024, prescribed comprehensive guidelines for the Investor Protection Fund of Depositories. Paragraph 4.46.1.1(C)(i)(2) of the said Master Circular provided that 100% of interest or income received from investments made from the IPF was to be treated as corpus of the IPF.
Pursuant to representations received from Depositories, and to bring uniformity in the treatment of IPF-related interest or income across Depositories and Stock Exchanges, the matter was placed before the Secondary Market Advisory Committee (SMAC) of SEBI. Based on the recommendations of SMAC, comments received through public consultation, and subsequent internal deliberations, SEBI has now revised the applicable provisions.
Revised Provisions
The provisions under clause 4.46.1.1(B)(i)(c) and clause 4.46.1.1(C)(i)(2) of Section 4 of the Master Circular dated December 03, 2024, stand modified as follows:
4.46.1.1(B) — Contribution to IPF of Depository
The Depository shall contribute at least 95% of the interest or income received every year out of any investments made from the IPF.
4.46.1.1(C) — Utilization of IPF and Interest or Income from IPF
| SN | Particulars | Utilization |
|---|---|---|
| 2 | Interest or income received out of any investments made from the IPF | (a) At least 95% of the interest or income from IPF received every year shall be ploughed back to strengthen the IPF corpus; and |
| (b) A maximum of 5% of the interest or income from investments of the IPF received during the financial year may be utilized to meet expenses related to dedicated employees of the IPF Trust, and other administrative and statutory expenses such as applicable taxes, audit fees, and charity commissioner's fee. Where such expenses exceed the 5% limit, the excess shall be borne by the Depository. Where the 5% amount remains unutilized in the same financial year, it shall be ploughed back to the IPF. |
Applicability
The provisions of the circular shall come into effect from September 01, 2026.
Directions to Market Infrastructure Institutions (MIIs)
Depositories, as MIIs, are directed to:
- Take necessary steps and put in place necessary systems for implementation of the revised provisions;
- Make necessary amendments to the relevant bye-laws, rules, and regulations, wherever applicable; and
- Bring the provisions of the circular to the notice of market participants, including investors, and disseminate the same on their respective websites.
Statutory Basis
The circular has been issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Section 26(3) of the Depositories Act, 1996, and Regulation 97 of the SEBI (Depositories and Participants) Regulations, 2018, to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market.
Key Takeaway
Depositories must recalibrate their IPF fund management processes to align with the revised 95:5 utilization framework, ensure bye-law amendments are carried out well in advance of the September 01, 2026 effective date, and put in place monitoring mechanisms to track annual expense utilization against the 5% ceiling.
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