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UTI chief sees funds crunch in short term

Janaki Krishnan & Rakesh Sharma

The Unit Trust of India is apprehensive about shortfalls in its assured return schemes, especially those which are maturing in the next 12 to 18 months.

UTI chairman M Damodaran said: "There could be a shortfall in some of the assured return schemes which are maturing shortly." For these schemes, steps would have to be taken to adjust for any shortfalls, he said.

There were however no apprehensions about the schemes maturing in two to three years "since for these, there are ample opportunities to make up the perceived shortfall," he clarified.

Among the various assured return scheme which are maturing in the next one year are: Master Value Equity Plan, a five-year close-ended equity scheme maturing on June 30, 2003; monthly income plans launched prior to 1999; Institutional Investors Special Fund Unit Scheme '98 which matures on May 31, 2003; IISFUS '97 which matures on June 30, 2002 and IISFUS 1998(2) which matures on December 31, 2003.

In the MIP series, there are around 10 schemes which are maturing between April this year and November next year.

The chairman said the schemes maturing shortly would be identified, the exact shortfall quantified and solutions found. "Once this is worked out and we put that behind us, there would be more confidence in the organisation to go forward," he said.

Damodaran promised that 12 to 18 months from now "UTI would be a dramatically different organisation."

At present, UTI's energies are directed towards settling the redemption pressure and coping with the demands of investors in its flagship US-64 scheme. While government funds are available for meeting any shortfalls in the US-64, the mutual fund can take recourse to bank funds to meet the liquidity requirement.

Two-member panel to look into key issues

The Unit Trust of India has set up a two-member committee of the board to look into three issues - tightening inter-scheme transfer guidelines, strengthening asset management committees and drawing up a comprehensive investment policy document.

UTI chairman M Damodaran said: "We have always had an investment policy, but the Tarapore Committee had recommended there should be several attributes to the investment policy." Damodaran said that while some of these have been put in place and are practised, they were in different documents.

"The task of the committee is to put all these between the covers of what we call a Comprehensive Investment Policy." The document is expected to be ready and complete by mid-February this year.

Damodaran admitted that violation of inter-scheme transfer guidelines had taken place and the newly constituted committee would draw up a roadmap to put systems in place so that there is very little scope for violations. "As it is, they are Sebi compliant, but they require further tightening," he said, adding, "it is not merely that the top management of UTI wants it to be done, but the systems will be put in place so that no violations are possible and nobody is able to take liberties with it."

"Once we ensure that the existing guidelines -- which are good enough -- are strictly complied with, then there is no problem," Damodaran qualified. Tarapore had said that inter-scheme transfers should be strictly based on double co-incidence.

Strengthening of the asset management committees is the third issue to be addressed "till such time as UTI is converted into a single asset management company," Damodaran pointed out.

The Tarapore Committee had recommended that the Trust should take immediate steps to formulate a comprehensive, cohesive and transparent investment policy, setting out objectives, investment and divestment norms, exit norms, strategies of risk management including stop-loss limits, a sound mechanism for identifying stickiness in investments, follow-up of NPAs, internal controls and asset allocation norms among others.

The committee had also recommended that coherent and revamped guidelines for inter-scheme transfers should be prepared which would be fully Sebi-compliant.

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