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Abhrajit Gangopadhyay
C. Shivkumar

Bangalore , Dec. 12

PUBLIC sector banks have expressed reluctance in taking over stakes, that too at premium, in UTI Asset Management Company Pvt Ltd from its current sponsors.

The present sponsors, Life Insurance Corporation of India, State Bank of India, Punjab National Bank, and Bank of Baroda had expressed their desire to sell their stakes at premium if they found suitable takers. This is because all the sponsors have their own respective AMCs operating.

Consequently, there is a fear that there would be conflict of interest among the sponsors' mutual funds and the schemes operated by UTI AMC.

Moreover, PNB plans to float a tripartite joint venture asset management company with Vijaya Bank and Principal Plc, in line with their proposed foray into the insurance sector.

According to the SEBI mutual fund norms, no entity can float more than one AMC.

And in a bid to ensure compliance with the guidelines, the Finance Ministry had sought the views of some of the public sector banks which do not operate any mutual funds or have any interest in any of the AMCs for taking over the sponsorship from the present stakeholders. These include Syndicate Bank, United Commercial Bank, Union Bank of India and Oriental Bank of Commerce.

However, banking sources said, that these banks have expressed their reluctance to assume the stakes of the original sponsors. Instead, they have indicated their willingness to enter into arrangements with UTI AMC to vend their products across their counters and through their branch network. This was to be offered as an additional service by the banks along with the bancassurance arrangements being offered by them. This would be a fee-based service for the banks and it would not impose any form of liabilities on them as some of the banks had faced when redemption pressures mounted on their respective funds.

In fact, one top banker said, "We are prepared to offer all the bank sponsored schemes along with the UTI schemes through our counters." This was to maximise their fee-based incomes.

UTI AMC came into existence in February 2003, after the repeal of the Unit Trust of India Act of 1963. UTI AMC operates the largest mutual fund in the country, managing 42 NAV-based schemes and four offshore funds. The combined corpus of these funds is in excess of Rs 15,000 crore from about 10 million investors.

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