The government will compensate for any liability, loss or damage that might be incurred by the new sponsors of UTI-II during the next three years and ensure that the interests of the employees are protected.

"Sponsors will be indemnified for a period of three years in respect of any liability, loss or damage that may be incurred, for actions pertaining to the period prior to the appointed day (February 1)," the agreement signed by the finance ministry with four the sponsors said.

The MoU was signed to transfer 43 net asset value based schemes of Unit Trust of India to a new asset management company floated jointly by LIC, SBI, PNB and BoB with Rs 10 crore (Rs 100 million) paid-up capital.

It also stressed that the interest of the employees and officials will be protected by complying with Section 6 of the UTI Act.

LIC and the three banks can also sell the right of managing the NAV-based fund to a third party.

"The sponsors will be free to sell the rights to manage assets held by them to any third party complying with the statutory requirements including protecting the interest of the employees," the agreement said.

The four sponsors are also given three years to pay government whatever sale consideration arrived at by independent valuers.