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Ordinance likely for UTI recast

BS Economy Bureau

The government plans to take the Ordinance route for repeal of the UTI Act, which will enable corporatisation of the Unit Trust of India.

According to finance ministry officials, the Ordinance would be moved after the monsoon session of Parliament. The primary reason for an Ordinance was to expedite the restructuring of the mutual fund and distance the government from it at the earliest.

Officials said in the new avatar, the UTI would have a three-tier Sebi-compliant structure with a board of trustees, a sponsoring company and an asset management company. The equity contributors in the sponsoring company will be the banks and institutions that had initially chipped in, including SBI, IDBI, LIC and the Bank of Baroda.

Provisions would be incorporated such that other institutions and banks too could be roped in later as promoters of the sponsoring company, officials said. However, with the government guarantee for UTI's borrowings of Rs 10 billion taking care of the trust's needs till August end, there was no urgency to bring in more partners, they added.

The UTI has already struck a deal with State Bank of India to borrow Rs 15 billion at 8.5 per cent to meet redemption pressure.

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