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Sarbajeet K. Sen
Hema Ramakrishnan

Investments made by insurance companies would, however, be within the investment regulations and the equity exposure caps laid down by IRDA.

NEW DELHI, Sept. 1

THE Government-appointed administrators of the proposed UTI-I will kickstart negotiations with public sector insurance companies and banks to offload the trust's equity holdings through bulk deals. UTI-I would comprise the troubled US-64 units and assured return schemes.

The assets of the government-managed schemes in UTI-I are likely to be offloaded to large insurers including Life Insurance Corporation (LIC), General Insurance Corporation (GIC) and the non-life nationalised general insurance companies, besides a few large banks and financial institutions.

"The Government or their nominated administrators cannot hold on to the assets that UTI purchased under the schemes. These stocks would have be offloaded to public sector insurance companies and banks through negotiated bulk deals," a senior Finance Ministry official said.

Investments made by insurance companies would, however, be within the investment regulations and the equity exposure caps laid down by the Insurance Regulatory and Development Authority (IRDA).

Officials said that the sale of UTI's holding would help generate funds that would go towards meeting the net asset value (NAV) component of the redemption price.

"The Government is committed only to meeting the difference between the NAV and the returns assured under each scheme. The proceeds realised from the bulk sale of these shares would be used to meet the NAV component of the redemption price. The insurance companies, which pick up the assets, would release payments as and when the Government requires funds," officials said.

Negotiations for bulk deals would take place soon after the repeal of the UTI Act. A time frame of three months has been set for kickstarting the process of reorganisation, officials said.

To start with, UTI would be spilt into two entities - UTI-I and UTI-II. UTI-I will cover the US-64 and Monthly Income Plan (MIP) schemes, while the various NAV-based schemes will be hived off to UTI-II. The Government will meet its obligations annually to cover any deficit in UTI-I. The market value of assets in the US-64 and MIPs is estimated at around Rs 25,000 crore - comprising around Rs 8,000 crore for the US-64 and Rs 17,000 crore for the MIPs. The current shortfall in these schemes is estimated at Rs 14,561 crore.

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