Rajlakshmi: UTI spared

Suresh Krishnamurthy

THE termination of the Rajlakshmi Unit Plan 1992 scheme has raised the ire of investors.

Investors were assured returns of 16.5 per cent up to 21 years, depending on the age of the girl child at the time of entry into the scheme. Now, the UTI says that since interest rates have come down, it may not be able to honour its promise. As such, it is forthwith terminating the scheme from September 2000 and paying the assured return till such time the scheme is in force.

The UTI's argument is not convincing. It has invested the funds it had mobilised mostly in equities. Therefore, a decline in interest rate is unlikely to alter significantly the returns the funds would generate. It may have been better if the UTI had either done away with the assured returns or set a lower floor rather than terminate the scheme unilaterally. The choice of staying with the fund or exiting from it should have been given to the investors.

What stands out in the entire episode is the silence of SEBI and AMFI. SEBI's inability to raise the cudgels on behalf of the investors and fight for equity can only be termed unfortunate. Even more inexplicable is the silence of AMFI, where private sector mutual funds play a significant role, instead of coming out in the open and denouncing the move. The silence of SEBI and AMFI amounts to connivance and, at a time when the UTI needs to be reined in, the fund has been spared. It is needless to say that a body-blow has been dealt to investor confidence.

In the end, investors have to realise that assuring returns is impossible, and that assured return products are not necessarily less risky. The mandate of SEBI and AMFI is to educate investors on such issues.