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Unit Trust carve-up formalised

New Delhi, Jan 15: The government today formally gave management control of Unit Trust of India II (UTI-II), cleaved out of the erstwhile Unit Trust of India, to the asset management company (AMC) formed by three state-run banks and a financial institution.

Briefing reporters, finance secretary S. Narayan said: “Today's agreement is a completion of a process started by the finance minister that there will be a methodology to protect the small investors.”

UTI-II, which has an asset base of Rs 15,000 crore from 43 Net Asset Value (NAV) schemes, has been renamed as UTI Mutual Fund and will be made Sebi compliant.

UTI was the only mutual fund which did not come under the Sebi ambit — a special dispensation it drew from the fact that it had been formed under an Act of Parliament. Since the near collapse of the Fund in June 2001, the government has forced the country’s largest mutual fund to comply with Sebi regulations.

The AMC, which has a paid-up capital of Rs 10 crore, has been floated by State Bank of India along with Life Insurance Corporation, Bank of Baroda and Punjab National Bank with capital infusion of Rs 2.5 crore each. It will start operations from February 1.

“In accordance with the UTI Act 2002 the shareholders of UTI-II have set up a mutual fund along with a Trustee Company called UTI Trustee Company and the UTI Asset Management Company,” Narayan said.

The handover of UTI-II to the consortium of banks and FIs followed an agreement signed by U. K. Sinha on behalf of the government, LIC chairman S. B. Mathur, SBI chairman A. K. Purwar, PNB chairman S. S. Kohli and BoB chairman P. S. Shenoy.

“The government would redeem US-64 at Rs 12 per unit for the first 5,000 units and at Rs 10 for the remaining units from May when the unit price will be market driven,” said Narayan.

For institutional and large investors, the government is likely to provide an option of investing the redeemed units beyond 5,000 in tax-free bonds, finance ministry officials said.

The government today also issued four notifications. These are — transfer of NAV assets to the new AMC, operationalisation of UTI II from February 1, appointment of an administrator and board of four advisors for UTI-I which will compose of the Monthly Income Plan (MIP) schemes, four long term schemes and US-64.

The finance secretary said the four advisors would be D. Swarup additional secretary (budget), U. K. Sinha, joint secretary (capital markets), A. N. Shanbag, a chartered accountant, and N. C. Bhide.

In August, the government had bifurcated the fund into two parts — UTI-I and UTI-II — and provided a Rs 14,500 crore bailout package to meet possible liabilities from its fund schemes of assured returns comprising UTI-I worth Rs 31,000 crore.

Finance minister Jaswant Singh reiterated the government would protect small investors. “The main objective of the restructuring was to benefit and protect the interest of small investors and that trading in US-64 will be initiated very shortly,” Singh said.

IDBI, IFCI recast

Finance minister Jaswant Singh said today the government will soon restructure Industrial Development Bank of India (IDBI) as well as Industrial Finance Corporation of India (IFCI).

“It will be my effort to find a one-time and long lasting solution to the two institutions to have a strong, viable and vibrant financial sector in the country,” Singh said.

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