Sonia Gandhi loses Rs 10 lakh worth of bonds: Hasn't she heard of a demat account?

Amidst all the hullabaloo of electioneering, a small titbit that was flashed yesterday (24 April) in the newswires was that Sonia Gandhi had lost Rs 10 lakh worth of Indian Railway Finance Corporation (IRFC) tax-free bonds.

It’s not something over which anyone, including Sonia, need lose sleep over, given that she has declared assets of over Rs 9 crore in her Rae Bareli election affidavit. Rs 10 lakh is a drop in that relatively big pond of personal assets.

However, here’s the point of interest: how come the country’s most powerful woman, who should have financial wizards at her beck and call advising her what to do with her spare cash, has not heard of something called a demat account? Or does she have one and just forgot to get the IRFC bonds in demat form?

A demat (dematerialised) account is an electronic form of holding shares or financial instruments, and public sector tax-free bonds are offered mostly in demat form. Most high net worth (HNI) individuals buy only in demat form, even though you can also ask for physical bond certificate.

But physical certificates are difficult to trade in - with buying and selling becoming tougher than selling demat paper. Hence few prefer them, though your distrusting grandpa may prefer the bond in physical form. He can touch and feel them and feel happy about his paper wealth.

A PTI report yesterday quoted IRFCas saying that letters of allotment or bond certificatespertaining to its 86th A Series tax-free bonds had been “reportedlost” by Sonia - about 1,000 bonds. She has requested the issue of duplicate certificates.

Bonds purchased up to a limit of Rs 10 lakh earn higher interest, usually around 0.25 percent, whether you hold them in demat form or keep them under your pillow.

Why then would Sonia Gandhi want tax-free bonds in physical form? It couldn’t be because her financial helpers didn’t know about demat.

There is no particular advantage in holding paper bonds, except that it is tougher for the taxman to know who is holding what since he cannot easily audit physical holdings, whereas demat holders can easily be identified by checking with just two sources - the National Securities Depository Ltd and the Central Securities Depository Ltd. If all your financial accounts are linked with a Aadhaar card, anyone with the right authorisation can know your entire financial details.

To be sure, holding tax-free bonds in paper form may not hold any terrors for the individual who intends to hold them to maturity and not sell them after a while. Is Sonia a buy-and-hold saver or investor?

We don’t know for sure, but now that she has lost them, we can speculate. The country’s most powerful politician seems to be a Luddite when it comes to investing her personal money.