Investor Protection Fund
A fund maintained by each exchange to compensate investors for losses arising from a defaulting trading member.
Formula
Test: the claim arises from a declared default of a trading member and falls within the compensation limit set by the exchange
Unit
₹
In depth
The fund exists as a backstop when a broker defaults and the client's money or securities cannot be recovered from the member's own assets. Compensation is capped per investor, and the cap is well below the size of many portfolios, so it is a partial protection rather than an insurance policy. It does not cover investment losses, disputes over advice, or the failure of an unregistered entity — only defaults by exchange members. The stronger protection remains holding securities in one's own demat account, which keeps them outside the broker's estate entirely.
Worked example
A broker is declared a defaulter and a client claims for ₹18,00,000 of unrecovered funds. Compensation is limited to the exchange's per-investor cap, which leaves the balance to the insolvency process.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Investor Protection Fund” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.