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`Bond scheme will deter unloading in US-64'

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CHENNAI, Jan. 30

UNIT Trust of India (UTI) hopes the proposed bond scheme for investors in US-64 will prevent a distress sale of equity and the consequent negative impact on the stock market.

The bond scheme "should prevent unloading", said Mr. M Damodaran, Chairman, UTI, at a press conference. He added that the bond scheme would, "defer the outgo from the Government, and the issue will get addressed partially".

Earlier, UTI had announced that unit holders in US-64, the troubled flagship scheme, who wish to exit the scheme at the end of May 2003 could either opt for cash or a 5-year tax-free bond. The interest rate on the bond, as well as the frequency of interest payment on the same is expected to be announced by the Government shortly.

According to Mr Damodaran, the current shortfall in US-64 is about Rs 5,000 crore that would have to be made good by the Government. Through the current scheme, UTI hopes that the Government's liability would be deferred.

Giving the background to the scheme, Mr Damodaran said UTI interaction with a cross-section of US-64 unit holders indicated that many of them invested with the objective of obtaining annual returns. Therefore, the present scheme has been designed to meet the objective of regular returns and liquidity (the bonds are tradable).

PTI reports: Mr Damodaran, who will be taking over as the Chief of UTI Mutual Fund after UTI's bifurcation (as UTI Mutual Fund and UTI-I) with effect from February 1, said that UTI mutual fund would be the largest mutual fund in the country.

He said UTI mutual fund would be a cent per cent SEBI- compliant company having the size of Rs 15,000 crore while UTI-I, would be of the size of Rs 31,000 crore after the bifurcation.To a question he said that NPA of UTI stood at Rs 7000 crore and there was provisioning for about Rs 6400 crore. UTI was utilising the Securitisation Act to the maximum for NPA recoveries.

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