The Securities and Exchange Board of India (SEBI) is expected to propose allowing depositories to use a portion of the income generated from their Investor Protection Fund (IPF) for employee compensation dedicated to managing the fund. Sources familiar with the matter indicated this shift in policy.
The IPF, funded by penalties and interest income, serves as a mandatory reserve to protect investors by compensating them during defaults or disputes. Currently, stock exchanges can allocate up to 5 percent of the interest or income generated from their IPF to cover expenses such as staff salaries, administration of Investor Service Centers, and necessary statutory costs, including taxes and audit fees. Any additional expenses must be absorbed by the exchanges, while unspent amounts are reinvested into the fund.
In contrast, depositories operate under more stringent regulations, requiring that 100 percent of their IPF income is retained within the fund, allowing no allocation for administrative expenses.
NSDL (National Securities Depository Limited) has formally requested that a portion of the income from its IPF be used for covering the costs related to employees managing the IPF Trust, similar to the allowances granted to stock exchanges. The depository contends that both market infrastructure institutions have similar responsibilities toward investor protection and thus should have comparable access to fund resources for employee expenses.
“At the time, a similar enablement was absent for depositories, but considering the request, we will bring uniformity in provisions applicable to both stock exchanges and depositories,” a SEBI source commented.
To maintain investor safeguards, it is proposed that at least 95 percent of the annual income continues to be credited back to the corpus. This proposal has reportedly been discussed and agreed upon within industry and SEBI committees.
As of June 30, 2025, the IPF corpus stood at ₹80.47 crore for NSDL and ₹105.23 crore for Central Depository Services Ltd (CDSL). Any expenses above the 5 percent threshold would need to be covered by the depositories, with any unused funds reverting to the IPF.
Published on September 21, 2025.
