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UTI redeems MIP '97 at Rs 10 per unit -- Shortfall made good from Reserve Fund

Dinesh Narayanan

MUMBAI, April 30

UNIT Trust of India (UTI) has redeemed its Monthly Income Plan '97, which matured on Tuesday, at the assured rate of Rs 10 per unit.

The country's largest mutual fund is expected to begin despatching redemption cheques to investors in about 10 days time after internal clearances are through. The scheme has about 3.5 lakh investors.

According to UTI sources, the mutual fund would pay Rs 10 per unit as promised to investors by dipping into reserves.

The exact shortfall in the scheme could not be ascertained. The fund would make good the shortfall from the Development Reserve Fund (DRF) corpus, which is currently around Rs 1,500 crore.

UTI had sought permission of the capital markets regulator, Securities and Exchange Board of India (SEBI), to roll over the scheme with certain changes. The regulator, however, did not allow it and, last week, asked UTI to redeem the scheme at the assured price.

Though the fund is understood to have liquidated the assets of the scheme, the realisations could not be gathered. In early April, the asset base of the scheme stood a little over Rs 1,100 crore against the unit capital of Rs 1,600 crore.

UTI had given investors of MIP '97 the option to shift to its other schemes. The sources said several investors had opted for the UTI Bond Fund, which offers good returns as well as safety. It is also SEBI-compliant.

Though the fund will be able to meet the shortfall in MIP '97 by dipping into the DRF this time, it would have to raise resources to redeem other schemes that mature this year.

The issue of UTI's initial sponsors - IDBI, LIC, SBI, RBI, and Syndicate Bank - helping it bridge the gap in the schemes is still hanging fire with the institutions strongly refusing to bail out the country's largest fund.

The issue has been left to SEBI to decide after being "examined'' by the Finance Ministry, which ruled out a Government bail-out. The regulator, has, for the time being at least, favoured the "sponsors'' and asked UTI to fend for itself.

MIPs are close-ended schemes with assured returns which are reset every year and the capital is assured on maturity. The plans have a three-year lock-in period and are exempt from capital gains and wealth tax.

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