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Panel against institution investment in US-64

The Tarapore Panel has said that institutions, including corporates, should be banned from investing in Unit Trust of India's US-64 scheme to curb volatility and redemption pressure in the flagship scheme.

The panel, set up by the Union government to look into the activities of UTI, has at the same time ruled out breach of confidentiality in large-scale redemptions in the scheme before cessation repurchase.

The scheme had witnessed large-scale redemptions before cessation of repurchase in out of total (repurchase) of Rs 37.67 billion in May 2001.

While institutions redeemed Rs 22.81 billion worth of units, redemption by individual investors stood at Rs 14.86 billion.

Whether the unprecedented large redemption in May 2001 accounting for as much as 62.30 per cent of total redemption during the whole year was triggered by widely-shared perception of breach of confidentiality is still a moot point.

However, the Tarapore Panel, in its report, a copy of which is available with UNI, said that there is no reason to believe that there was a breach of confidentiality.

The panel has reported that the list of institutions, which sought redemptions is spread over a wide range and covered public sector banks, financial institutions, public sector units and other corporates and this does not lend support to the view that they had access to previleged information.

While ruling out any breach of confidentiality in redemption, the panel has however recommended that the scheme should be opened strictly for individuals and stated that institutions, including corporates, should be debarred from the US-64 scheme.

The redemption during April-May 2001 by institutions covered 183 entities and out of these 129 were corporates, 47 banks and seven public sector units.

The Tarapore Panel has also said that 28 entities accounted for nearly 75 per cent of redemptions by institutions.

The State Bank of India had availed of the largest redemption in the scheme during May 2001 at Rs 3.55 billion and among others, large redemptions were made by Tata Power at Rs 2.56 billion, Bombay Dyeing at Rs 1.92 billion, Bank of Baroda at Rs 1.50 billion and Telco at Rs 1.36 billion.

UNI

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