Search the Internet          Tips  Sites: Finance, Investment

Draw scheme to protect US-64 investors: Sinha tells UTI

Finance Minister Sinha has directed new acting chairman of UTI, K G Vassal, to work out measures to provide liquidity to small investors who put their money in US-64.

Soon after taking charge at the UTI, after the resignation of former UTI chief P S Subramanyam, Vassal met Sinha along with four other executive directors of UTI and the finance minister asked them to work out a scheme for protecting the small investors as the suspension of sales and redemption of US-64 had affected the liquidity of 20 million investors.

"Our first priority is to work out a scheme that will provide liquidity to small investors in US-64," Vassal said.

"We will come back to the finance minister with the details which will be put before the UTI board for approval," he added.

Asked if it meant a bailout package for UTI, provision of exit option for US-64 investors and revoking of the suspension, Vassal said the details had to be worked out after looking into the net asset value of the scheme.

Ruling out any run on US-64 scheme if the suspension was revoked to protect small investors, Vassal said solution to the crisis situation need not necessarily be similar to the one in 1998.

In 1998 when UTI faced a crisis a bail-out package was provided. "Though the concerns are now similar to 1998, solutions need not be the same," he said.

It was premature to say what options existed with UTI to protect small investors, Vassal said, adding that the review of UTI's functioning would be taken up subsequently.

Vassal said that the finance minister had given two weeks' time to come out with his recommendations.

Earlier in the day Sinha announced the resignation of Subramanyam, which was immediately accepted.

Vassal, who is appointed as acting chairman, flew to Delhi soon after taking charge to meet Sinha and senior officials.

Asked what sort of fact-finding exercise did the government propose to undertake on UTI, joint secretary J Bhagwati said that all these were part of the exercise.

Subramanyam sent in his resignation on Tuesday night after Sinha decided to scrutinize the entire functioning of India's largest mutual fund.

UTI had come under a cloud since the multi-billion stock market scam in March last in the face of allegations that it had tried to bail out big bull Ketan Parekh group of companies.

While assuring investors, particularly small investors, that their interests would be safeguarded, Sinha had said it was significant that ninety per cent of the redemption of US-64 in April and May this year were by big investors.

UTI's alleged role in the securities scam would come up for scrutiny of the Joint Parliamentary Committee which is probing the stock scam.

YOU MAY ALSO WANT TO READ:
The UTI Crisis

Tell us what you think of this report