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UTI: Relief for small investors?

Jul 6, 2001

The UTI has confirmed that it has got a Rs 15 bn line of credit from State Bank of India. In a press meet today the UTI has stated that they are actively considering a plan to give the small investors an exit route. The board is expected to meet on Monday to discuss various modalities of the exit plan and submit a proposal to the finance ministry. The institution has assured that the plan would be through within the 15 days timeframe allotted to it. It was pointed out that the US 64 plan has 20 m certificates issued and not 20 m investors. The scheme is not folio based and hence actual number of investors may be much less. Individuals hold approximately 75% of the corpus of US 64, with corporates accounting for the rest. More than 50% of these individuals have holdings of less than 10,000 units and hence the definition of “small investors” has to be worked out.

The institution has denied receiving any directive from the finance ministry ordering it to continue holding its strategic investments. The institution said that it is considering various options for revival of the scheme and the decision would be taken in the best interest of all participants. A block deal of its strategic investment could be one of the options to revive the scheme.

The UTI has also stated that of the 21 recommendations of the Deepak Parekh Committee, only three were left unimplemented. This requires modifications in the UTI Act itself, which needs to be taken up by the central government.

The officiating UTI chairman, Mr. Vassal, affirmed that the worst is over for the fund. He said that the institution has collected Rs 1.5 bn between July 2 and July 5, whereas the redemptions have only been Rs 120 m. This was indicative of the fact that investors continue to hold confidence in the institution. He said that the institution had a consistent track record of 37 years and there was no question of investors losing confidence in the ‘Trust’.

Meanwhile, the board has approved the 10% dividend that had been announced. As on the record date, US 64 had a corpus of Rs 127.8 bn and a 10% dividend would thus work out to be Rs 12.8 bn. The institution affirmed that it has entered into an arrangement with SBI for Rs 15 bn line of credit. However, a very small portion of the same has been utilized.

The UTI’s press meet has solved some issues. However, the main issue i.e. the cause of the present situation and the steps being taken to ensure that the UTI does not land up in a similar situation again remains unanswered.

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