The Joint Parliamentary Committee on the stock markets scam of 2001 has objected to the way the Centre has restructured the Unit Trust of India.
While the government has roped in the State Bank of India, Life Insurance Corporation, Punjab National Bank and Bank of Baroda as UTI-II's new sponsors, the JPC has said the new sponsors for UTI-II should be those that have not sponsored their own mutual funds.
The committee has cited conflicts of interests between these institutions and UTI while stressing the need for separating them from the Trust.
If this is not feasible, the report recommended that the government should spell out in detail through legislation and policy guidelines as to how UTI-II can be insulated from the inherent conflict of interests as regards the four institutions.
The report has also recommended that the schemes of UTI-I, comprising the assured-return schemes and US-64, be managed by independent fund managers, preferably from UTI-II through a fee-based relationship. The committee has said the government should refrain from involving itself in commercial decisions required for running UTI-I.
The committee's recommendation is in contrast to the proposed scheme whereby a government-appointed administrator and a team of advisers nominated by it would be managing UTI-I.
The committee has also recommended devising a suitable system for divestment of equity holdings of UTI-I and UTI-II so that investors get maximum funds.
The committee has said the selection of the chairman and board of trustees for UTI-II be carried out in a transparent manner, whether they are picked from the private or public sector.
The JPC has said the various civil, criminal, departmental and vigilance proceedings relating to UTI with regard to the irregularities in its investment decisions be concluded expeditiously.
The committee has asked the government to ensure that speedy action should not be hampered by the fact that the UTI Act, 1963, has not been repealed.
The committee has also said the Industrial Development Bank of India should be divested of its representation on the board of trustees as well as the power given to it under the UTI Act.
It has also said the State Bank of India and other public financial institutions should also withdraw from the board for the same reason and the Reserve Bank of India, whose role is of a regulator, should also not have representation on the board of trustees.
The committee has said IDBI, one of the key sponsors of UTI, should have withdrawn from control of UTI when in started its mutual fund in 1994.
