The government would liquidate the assets of US-64 "in due course" to get maximum value, U K Sinha, joint secretary in charge of capital markets in the finance ministry, said in Mumbai. However, he refused to give any deadline for this.
US-64 has assets of around Rs 10,000 crore (Rs 100 billion), with strategic holdings in a few blue-chip companies.
The government has so far pumped Rs 1,320 crore (Rs 13.2 billion) into the US-64 scheme, which was terminated on May 31 and its units were converted into tradable, tax-free 6.75 per cent bonds.
Sinha also said the government was exploring the option of giving bonds to the holders of monthly income plans, which are currently run by the Administrator of Specified Undertaking, UTI-I. "It has been a successful option for US-64 holders," he added.
The government is creating Chinese walls between the four sponsors of UTI Mutual Fund and the mutual funds individually promoted by them. The Securities and Exchange Board of India issued guidelines to avoid any conflict of interest.
Sinha said: "This initiative has been taken in line with the recommendations of the joint parliamentary committee on the stock scam of 2001."
UTI Mutual Fund manages around Rs 13,500 crore (Rs 135 billion) of assets, or 15 per cent of the industry's total assets under management.
Sebi has told the sponsors that there should not be any common director on the board of UTI AMC or trustee among UTI AMC and the mutual funds of the sponsors. The four sponsors are Punjab National Bank, Bank of Baroda, the State Bank of India and the Life Insurance Corporation of India. All these sponsors have their own mutual funds.
The Sebi guidelines also stipulate that 50 per cent of the directors and 60 per cent of the trustees should be independent. Besides, no employee of the sponsors should be in the asset management company. It has also said there should not be any common auditor.
Finally, the UTI trustees should formulate an independent investment policy for the asset management company so that the sponsors cannot take any investment decision in a concerted move.
The guidelines will ensure that the four sponsors of UTI Mutual Fund will have a hands-off relationship in the management of the funds. Although Sebi has issued the guidelines, the government will formally ratify them.
Sources at the sponsors told Business Standard that they would look at appointing employees at UTI Mutual Fund prior to hiring outside personnel. Sebi has also mandated the appointment of a separate CEO to look after the fund.
To ensure a hands-off relationship, the guidelines stated that the respective mutual funds of the sponsors should not subscribe to UTI-II schemes. However, the capital market regulator has clarified that a certain percentage of funds can be accommodated in each scheme run by UTI AMC.
The new order
- No common directors (on AMC board) or trustees among UTI AMC and SBI/LIC/BOB MFs.
- 50% of directors and 60% of trustees to be independent.
- No employees of sponsors will be on AMC or board.
- Common auditors ruled out.
- Independent investment policy for AMC.
- Sponsors not to subscribe to UTI AMC schemes.
