• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Shaji Vikraman
Hema Ramakrishnan

NEW DELHI, May 7

THE Government is set to extend the tenure of the present Chairman of the Unit Trust of India (UTI), Mr M. Damodaran, notwithstanding its plans to usher in structural changes in the Trust through legislative measures.

The Finance Ministry is in favour of extending his tenure by two years, according to a senior Finance Ministry official.

"The extension of the tenure of the present Chairman by at least a year or two is being considered in order to bring about stability in the management of the mutual fund,'' the official said.

Mr Damodaran was given a one-year tenure as Chairman of UTI last year following the sacking of the previous Chairman, Mr P.S. Subramanyam. At that time, the appointment was cleared for a limited tenure to ensure the transition of the UTI into a corporatised entity during the period.

The proposed structural changes for UTI entail putting in place a three-tier structure to comply with the Securities and Exchange Board of India (SEBI) norms for mutual funds.

The process would begin with the setting up of a sponsoring company for the mutual fund, followed by the constitution of a Trust and then an Asset Management Company (AMC).

The conversion of UTI - which was created through an Act of Parliament - from its special status into a mutual fund with a separate sponsor and an AMC is set to be done through a repeal of the UTI Act, 1963.

The objective behind repealing (rather than amending the UTI Act) is to ensure a distance between the Government and the management of the Trust. The proposed legislative changes will also address the issue of interim arrangements that need to be worked out till the three-tier structure is in place.

After providing support to the troubled mutual fund, the Government had in December 2001, announced that the UTI would carry out time-bound reforms including becoming SEBI-complaint by December 31, 2002.

While a series of deliberations have been held this year amongst the present stakeholders of UTI, i.e. the Finance Ministry and Board of UTI, the general view has been that it would be prudent to wait for the recommendations of the Joint Parliamentary Committee (JPC) probing the securities scam before taking a final decision on the legislative changes.

In any case, the Government has missed the ongoing Budget session to introduce these amendments, which will first have to be cleared by the Union Cabinet.

Send this article to Friends by E-Mail

Stories in this Section
MTNL blames ITI for Dolphin woes

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line