The Securities and Exchange Board of India (Sebi) has finalized comprehensive guidelines allowing depositories to utilize up to 5% of their investor protection fund (IPF) income for administrative and statutory expenses. According to The Economic Times, these new guidelines will be effective from June 29, bringing depositories on par with stock exchanges in terms of IPF utilization flexibility. The move addresses the previous regulatory gap where depositories had no such provision while stock exchanges were permitted to use up to 5% of IPF income for administrative purposes. The comprehensive framework covers the constitution and management of IPF, contribution requirements for both exchanges and depositories, and detailed utilization guidelines for operational expenses.
As of March 31, 2026, the investor protection fund corpus stood at ₹87.78 crore for NSDL and ₹95.18 crore for CDSL. As reported by The Economic Times, these figures represent the total IPF corpus held by the two major depositories in India. The new guidelines will allow depositories to utilize a portion of this substantial corpus for operational expenses, bringing them on par with stock exchanges in terms of IPF utilization flexibility. For CDSL specifically, this represents a significant financial impact as the company had an IPF corpus of ₹95.18 crore and a market capitalization of approximately ₹60,000 crore as of early May 2026, with its stock trading around ₹1650 and a trailing P/E ratio of 42x.
Sebi has specified that the 5% utilization limit applies to annual interest or income received from IPF corpus investments, covering expenses related to dedicated IPF trust employees, administration of Investor Service Centres, and other statutory and administrative expenses such as taxes, audit fees and charity commissioner fees. According to the new guidelines, depositories can use this portion for operational costs, maintaining the same expense categories as currently permitted for stock exchanges. Additionally, Sebi has introduced an overall cap of not more than 10% of the interest amount of IPF that can be spent on research activities related to commodities market. This new provision ensures that depositories cannot divert substantial portions of their IPF funds for non-core operational purposes, maintaining the fund's primary focus on investor protection.
Alongside the IPF utilization guidelines, Sebi has issued a Standard Operating Procedure (SOP) indicating the process and timelines for critical investor protection activities. As reported by The Economic Times, the SOP covers the declaration of default of a trading member, processing of investor claims out of IPF, and review of claims. This comprehensive framework ensures standardized procedures across all market participants and provides clear timelines for various investor protection measures. The new guidelines represent a significant shift from previous regulations where depositories must bear administrative costs from their own operational income, while stock exchanges have been permitted to use up to 5% of IPF income for administrative purposes.
