Additional Rs 500-cr fund for US 64 scheme

Our Markets Bureau
13 August 2002

New Delhi: The central government will shortly be providing an additional Rs 500 crore to Unit Trust of India (UTI) as part of the bailout package. This will enable UTI to meet its payment obligations under the US-64 scheme.

The fresh fund infusion is over and above the Rs 500 crore already committed in the supplementary demand for grants recently approved by the parliament. UTI was provided Rs 500 crore to make good the shortfall between the assured repurchase price and the net asset value of the US-64 scheme.

The government had earlier extended a Rs 1,000-crore guarantee to UTI to help meet the deficit in the assured return schemes, which were up for redemption in June 2002 and the monthly income plan (MIP) due for redemption in August 2002.

“The total package for UTI is around Rs 5,000 crore, but we are yet to decide on the manner in which it would be funded,” says an official.

The group of ministers, chaired by Finance Minister Jaswant Singh, had endorsed the finance ministry’s proposal for the bailout of US-64 and other assured return schemes and the restructuring of UTI. This includes a firm commitment to the new sponsors to fulfil any obligations arising out of the assured return schemes of the mutual fund such as the MIPs.

The urgency to improve the financial health of UTI follows the government’s commitment to make the fund Securities and Exchange Board of India-compliant by this fiscal. The government also intends to repeal the UTI Act and professionalise the operations of the fund.