It is raining dividends in mutual fund land. But what if for any reason, you fail to encash them, or they are not delivered to your bank account?
There could be several reasons why this could happen, but the most common is change of address. Not updating your mutual fund house about the change will have the fundhouse sending your dividend cheques to the old address. Whatever the reason for your miss, there’s no need to worry, the money is not lost.
Claiming it back
Pull out the papers of the mutual fund scheme you have not received dividends for. Find out your folio number. If you remember since when have you not received or encashed the dividend, note that too.
Send these details — name of the scheme, folio number, and time since last dividend — to either the mutual fund house, or to the registrar of your scheme. The name of the registrar too will be mentioned on the scheme’s papers, and if not, it can be found out on the fundhouse’s website. Currently, there are four mutual fund registrars — CAMS, Karvy, JP Morgan and UTI Technologies.
The fundhouse or the registrar will then check with the bank whether your dividend has been disbursed or is still pending, and take appropriate steps.
When you receive the dividend amount, there will be a fund management fee charged for that amount, depending on the number of years it has been pending. Sebi allows mutual funds to charge not more than 0.5% as fund management fee.
The net asset value (NAV) applicable for such dividends (these have to be invested in money market instruments for the period it was lying idle) would depend on when it is claimed.
If you claim the dividend within the first three years of its announcement, you would get the then-existing NAV. After three years, the money is transferred to a pool and the NAV applicable will be what existed at the end of the three years period, when it was being invested in the money market instruments. Some fund houses may ask you for an indemnity bond confirming your possession of the dividend when you make the claim.
Opt for growth
The other alternative would be to switch from the dividend option to the growth option (one can make the switch anytime except for the first three years in tax-saving mutual funds).
In the growth option, your dividend is reinvested in the scheme, instead of being paid out.
Moreover, fund houses give dividends at their own whims and fancies. Therefore, it’s best to take the growth option and give yourself a dividend whenever you want one.
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