• PAGE ONE
• INDEX
• HOME

UTI asked to work on small investor plan

Our Bureau

MUMBAI, July 6

THE UTI board is hopeful of working out an exit route for small investors to its US-64 scheme shortly.

The board of trustees of UTI which met here today to ``review the post-July 2 developments'' when the trust announced suspension of sales/repurchases of US-64 for six months, discussed these issues.

The trustees have advised the UTI management team to work out alternative proposals taking into account the Government's concern to satisfy the liquidity needs of small investors. The meeting was chaired by the IDBI nominee on the UTI board, Mr K.C. Chak raborty.

The proposals may include partial liquidity by way of restricted repurchase facility to US-64 investors, ``especially small investors who have been long-term investors in the scheme,'' the UTI Executive Director, Mr Brij Gopal Daga, said.

The board will meet on July 9 to discuss various alternatives in detail before these are forwarded to the Finance Ministry. UTI will work on the alternatives to provide liquidity to small investors.

``We cannot run away from our prime responsibility towards small investors which is enshrined in the preamble of the UTI Act,'' Mr K.G. Vassal, acting Chairman, UTI, said.

Mr Vassal said that during the first four days of the financial year (July 2-5) sales were Rs 153 crore and repurchases Rs 26 crore (excluding US-64) as against Rs 12 crore and Rs 16 crore respectively in the corresponding period last year which included US-64.

Mr Vassal reiterated that the decision to freeze sales/repurchases was taken considering the liquidity conditions in the secondary market. Further, there were large redemptions by corporates during April and May which were above the net asset value (NAV) of the scheme.

Mr Daga said that the number of investors under US-64 was about 45 lakh and not over 2 crore as was made out to be. ``US-64 has about two crore unitholding accounts and many investors have multiple accounts,'' he said.

SBI liquidity window

State Bank of India will provide a liquidity window for investors to US-64 units.

The bank, today, said that individuals could avail of loans upto 60 per cent of the face value of the units from branches of the bank.

The bank has fixed a margin of 40 per cent on loans against the units and an interest rate of 15 per cent would be charged on the loans provided. The maximum loan amount has been pegged at Rs 20 lakhs for units in the demat form.

``The loans will be given with the same terms and conditions applicable to financing against shares and debentures,'' a State Bank press release said.

Bank of India also intends to continue offering loans against US-64 schemes. However, margins are likely to increase to 50 per cent on loans against US-64 units as against 25 per cent earlier.

According to a Bank of India official, interest rate would be around 14 to 15 per cent as applicable to any other paper security.

Bank of Baroda is working out a strategy to continue to provide funds against US-64 units.

Pic.: Mr K.G. Vassal, acting Chairman, UTI, addressing a press conference in Mumbai on Friday.

Picture by Paul Noronha