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UTI position will improve when stock market looks up, assures Sinha

Finance Minister Yashwant Sinha today rejected in the Rajya Sabha the demand for any parliamentary probe into the working of the Unit Trust of India because there was no scandal but only waning pressure on redemption.

Replying to a calling attention motion on the functioning of the UTI, he said there was an attempt to give a picture that there was something wrong in the UTI schemes.

He said the institution which was the best instrument to attract the small investments in the country could not allowed to be demeaned by such efforts. The government will not hesitate to protect the interests of the small investors, he asserted.

The UTI had suffered only 'notional losses' because of the fall of the value of certain schemes and there was no cause for concern for the investors who should have patience to hold on to their investments, he stated.

He said the investors had redeemed Rs 180 billion during the past three years and the organisation had been able to sustain such a scenario. The pressure had reduced in the past few weeks as the people had understood the reality.

Exhorting Parliament not to pressurise the government to intervene in the affairs of an autonomous financial institution, Sinha said speculation in the newspapers about the reports of the committee headed by Deepak Parikh was incorrect because the committee was yet to give its report. The committee had been appointed by the Assets Management Committee of the UTI.

He said UTI was running 77 schemes including six offshore funds and 41 assured return schemes.

He said that the UTI has already put on record that none of the schemes has a negative net asset value while certain schemes of the Unit Trust of India like Unit Scheme-64 , Unit Linked Insurance Plan and Charitable Religious Trust Scheme are not NAV-driven.

These funds have been regularly giving a good return to the investors while certain other schemes like Monthly Income Scheme and Children Schemes give an assured rate of return and are also not NAV-based.

The finance minister said the US-64 has over the years built up an overwhelming base of small investors and as of June 1998, the assets of the portfolio stood at Rs 217.38 billion and the investor base was approximately 21 million.

Sinha said what was needed in running the assured returns schemes was transparency which the government was amenable to.

References were made to the audit report which mentioned that the company reserves were not enough to take care of the redemption. Sinha said this point had already been answered and the pressure since the last few weeks had already eased. The audit reports of the organisation were published in the gazette, he added.

He said the depreciation to the tune of Rs 35.66 billion in the value of investment which was reflected in the balance sheet of US-64 is notional and as and when the stock market prices improve this ''notional depreciation'' would be finally recouped.

UTI's heavy depreciation was a fallout of the after-effects of worldwide as well as domestic adverse movements of stock prices, he said.

The domestic stock index fell by 21 per cent between May 5 and June 30, 1998. Since the UTI decided to charge the depreciation to the reserve account of US-64, the latter showed a negative balance of Rs 10.98 billion, he explained.

The finance minister said that on June 29 this year, when income distribution of 20 per cent amounting to Rs 31.25 billion was announced under US-64, it was out of the net income of Rs 32.22 billion earned during the year and income distribution was solely from the earning made during the year.

Gurudas Dasgupta of the Communist Party demanded amendment of the UTI Act to provide for accountability of the UTI which was neither under government control nor under the Securities Exchange Board of India.

Alleging that the UTI was in league with big corporate houses, he said its operations lacked transparency.

Janeswar Mishra of the Samajwadi Party said the government must do something to streamline UTI affairs as millions of small investors had invested their hard earned money in this financial institution.

UNI

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