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Shaji Vikraman

NEW DELHI, Feb. 1

THE Finance Ministry has written to some State-owned financial and investment institutions and commercial banks to nominate professionals on the board of trustees of the Unit Trust of India (UTI).

The move to induct professionals on the board of UTI, replacing the chiefs of banks and financial institutions forms part of the reform measures which the trust had committed to undertake last month after receiving Government support.

The letter from the Government to the chiefs of Industrial Development Bank of India, Life Insurance Corporation of India, State Bank of India and Syndicate Bank besides the Reserve Bank of India management is being viewed as a polite reminder to them to make way for persons having special knowledge of or experience in commerce, industry, banking, finance or investment, as laid down in the UTI Act.

These FIs and banks had contributed to the initial capital and the unit capital of the UTI.

The purge in the board of trustees has been long overdue especially after July last year, when the trust suspended repurchase and sales in units of US-64 for six months. The Government, which was under severe pressure, had expressed unhappiness at the manner in which most of the trustees on the board had exercised their fiduciary responsibilities.

Despite several reports prior to the July 2001 UTI fall about the dud investments made by the UTI management; there is no record of any of these trustees having raised any objections. The record of attending board meetings by some of these trustees has also been poor, according to officials. There has also been the issue of conflict of interests with some of the banks and FIs themselves being sponsors of mutual funds.

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