The govenrment on Wednesday bifurcated Unit Trust of India by handing over the net asset value-based UTI-II to State bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation.

Speaking at the signing of a memorandum of understanding with the new promoters, Finance Minister Jaswant Singh said trading in US-64 will be initiated very shortly and that the government would honour its commitments for the US-64 and other assured return schemes.

Singh said the objective of restructuring UTI was to benefit the average Indian investor.

In this regard, he said a massive nation-wide investor education programme would be launched on January 17.

Today's agreement would pave the way for transferring all net asset value based schemes of UTI (UTI-II) to the new asset management company floated by LIC, SBI, PNB and BoB with an initial capital of Rs 10 crore (Rs 100 million).

The four players would have 25 per cent stake each in the AMC that would take care of UTI-II, which will manage the
NAV-based schemes worth over Rs 17,000 crore (Rs 170 billion).

The government decided to split UTI into two as part of the restructuring drive with UTI-I comprising of the beleagured flagship scheme US-64 and other assured return schemes while UTI-II would have healthy NAV-based schemes.

The UTI-I would  continue to be managed by a government appointed administrator till the fund completes its commitments to the investors of US-64 and over 20 assured return schemes.

The agreement was signed by U K Sinha on behalf of the government, LIC chairman S B Mathur, SBI chairman A K Purwar, PNB chairman S S Kohli and BoB chairman P S Shenoy.

The government issued four notifications on Wednesday for transfer of NAV-based assets to a new AMC, operationalisation of UTI-II from February 1, appointment of administrator and board of four advisor for UTI-I.

Elaborating on the UTI bifurcation, finance secretary S Narayan said, UTI-II has become a Sebi (Securities and Exchange Board of India) compliant mutual fund with a three-tier structure comprising of the board of trustees,
sponsors and an asset management company with a paid-up capital of Rs 10 crore.

The four players would invest Rs 2.5 crore (Rs 25 million) each in the AMC. A chartered accountant would be soon appointed to carry out the due diligence of UTI-II.

Although Singh had stated in Parliament that UTI-II would be privatised after 3-5 years, Narayan said, "It was now up to the sponsors to decide on the fortune of UTI-II."

Asked whether there would be any clash of interest as pointed out by Joint Parliamentary Committee, which probed the
stock scam and UTI muddle, Narayan said, "We have gone through the JPC report in detail. The instructions of JPC will be followed. Accordingly, the government will come out with clear cut guidelines soon on UTI-II."