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Plan to revamp UTI board of trustees

Shaji Vikraman

NEW DELHI, July 4

THE purge in the Unit Trust of India is now expected to cover its board of trustees with a revamp planned shortly.

Although the Government does not have a single nominee on the board of trustees, as in 1999 when the first crisis in US-64 blew up and now, it has ended carrying the can for the functioning of the trust and also its investment decisions. Now with signs o f a bail-out in the horizon, the Finance Ministry is considering revamping the board of trustees.

This is expected to be done through the Industrial Development Bank of India (IDBI) which nominates four trustees, and through other institutions such as the Life Corporation of India, and the State Bank of India, whose nominees are all on the board. Eff ectively, the present trustees nominated by these institutions may well be pulled out or withdrawn, Government officials indicated.

The UTI Act clearly says that the trustee nominated by the development bank - IDBI in this case, or other institutions will hold office during the pleasure of the authority nominating him.

The UTI's board of trustees now includes besides the Chairman, the IDBI Chairman, the Chairman of the State Bank of India, the Chairman of the Life Insurance Corporation of India, the industrialist and Gujarat Ambuja Cements promoter, Mr Seksaria, and th e chartered accountants, Mr. Malegam and Mr.Chitale.

Even in 1999, when the Government worked out a bail-out package, featuring an infusion of Rs 3,300 crore, no nominee of the Government was placed on the board of trustees. Analysts reckon now that it was a mistake on the part of the Government not to hav e done that, considering that it was tax payers' money being deployed for the bail-out without any matching accountability.

Since 1997 when the last of the Government nominees - Mr. Arvind Virmani quit the board, the Finance Ministry has maintained a hands-off stance. This is because of the Ministry's belief that it should not be party to the investment decisions of an ostens ibly, independent board-run institution. The board of trustees ratify the investment decisions of the UTI's management.

Interestingly, the Finance Ministry representatives who served on the board over five years ago were all nominated by the IDBI as the Act does not explicitly provide for a Government nominee on the board.

But now with money being pumped in by the Government, a view is gathering within the Ministry that the Government should put its nominee on board, till such time that the trust is back on a sound footing.

The Finance Minister, Mr Yashwant Sinha, will have to take a view on this. The pressure for some drastic steps is mounting in view of the Joint Parliamentary Committee's deliberations and also the forthcoming monsoon session of Parliament. One of its mem bers, Mr Kirit Somaiya, a BJP member, had pounded the Minister with several letters on the functioning of the UTI since the scam broke out in March.

Mr Sinha, is sure to come in for flak as this is the second time during his tenure as Finance Minister that a major crisis has blown at UTI.