In accordance with the guidelines issued by the Ministry of Finance, Government of India, the Exchange has set up an Investor Protection Fund (IPF) on July 10, 1987 to meet the claims of investors against defaulter members.

The Fund is managed by the trustees appointed by the Exchange.

The members at present contribute to this Fund Re.0.15 per Rs.1 lakh of gross turnover, which is debited to their general charges account. The Stock Exchange contributes on a quarterly basis 2.5% of the listing fees collected by it. Also the entire interest earned by the Exchange on 1% security deposit kept with it by the companies making public/rights issues is credited to the Fund. As per the SEBI directive, auction proceeds in certain cases, where price manipulation / rigging was suspected, have been impounded and transferred to the Fund. Also, the surplus lying in the account of the defaulters after meeting their liabilities on the Exchange is released to them after transferring 5% of the surplus amount to this Fund.

As at the end of June 30, 2002, the corpus of the Fund was Rs 157.03 crores.

The maximum amount presently payable to an investor from this Fund in the event of default by a member is Rs.10.00 lakhs. This has been progressively raised by the Exchange from Rs.5,000/- in 1988 to the present level and is the highest among the Stock Exchanges in the country.

The arbitration award obtained by investors against defaulters are scrutinized by the Defaulters Committee, a Standing Committee constituted by the Exchange, to ascertain their genuineness, etc. Once the Defaulter Committee is satisfied about genuineness of the claim, it recommends to the Trustees of the Fund for release of the award amount or Rs.10.00 lacs, whichever is lower. After the approval of the Trustees of the Fund, the amount is disbursed to the clients of the defaulters from the Investor Protection Fund.