Formalisation of UTI split this week

Unit Trust of India won’t be the same after January 15. The country’s largest mutual fund will be split into two — UTI-I and ...

Unit Trust of India won’t be the same after January 15. The country’s largest mutual fund will be split into two — UTI-I and UTI-II — on the day in the presence of Finance Minister Jaswant Singh after a series of bailouts and redemption woes in the last five years.

The agreement will be signed by UTI chairmen M Damodaran and the four sponsors of UTI-II — Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda. The agreement would pave the way for transferring all net asset value based schemes of UTI to the new asset management company (UTI-II) floated by LIC, SBI, PNB and BoB with an initial capital of Rs 10 crore.

“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),” UTI officials said.

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UTI-I will comprise the beleaguered flagship scheme US-64 and other assured return schemes. 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. UTI-I which manages assets worth over Rs 25,000 crore had been provided Rs 14,500 crore package by the centre, of which Rs 6,500 crore is being provided in cash to meet the shortfall in US-64 and the remaining Rs 8,000 crore through bonds to meet the obligations in assured return schemes as and when it matures in next few years.

The government had earlier indicated that UTI-II would be managed by a professional chairman and board of trustees and would be privatised. As part of restructuring, the government has repealed the UTI Act of 1963 to split the mutual fund into two.