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Suspension of schemes -- UTI board had okayed circular resolution

Our Bureau

NEW DELHI, July 12

THE Finance Ministry has now been informed by Unit Trust of India that the circular resolution, approved by its board of trustees just four days before the July 2 board meeting, had an enabling clause to facilitate a switchover to Net Asset Value (NAV)-b ased pricing of US-64 units.

The circular resolution also had an enabling clause that empowered the trustees to suspend both sales and repurchase of units under certain circumstances. These included fundamental changes to the structure of any scheme which was being operated by the U TI.

Although the circular resolution of June 27 incorporated several other enabling clauses, the UTI board which met on July 2 chose only to exercise powers relating to suspension of sales and repurchase of units of US-64. The resolution mentions that the pr oposed changes like moving towards a NAV-based pricing was aimed at conforming to SEBI regulations for mutual funds.

The circular resolution was moved by the UTI as the UTI Act, 1963 does not provide for suspension of repurchase and sale of units.

In fact, the trust got it approved from one of its trustees, Mr. Chitale by faxing the copy of the resolution to him in Singapore, it now transpires.

A copy of the circular resolution which enabled the UTI to take the controversial step to freeze sales and repurchase of units was passed on to the Finance Ministry finally on July 9, well after the crisis broke out.

Most of the trustees including the Chairman of the State Bank of India, Mr. Janaki Ballabh, the LIC Chairman, Mr. G.N. Bajpai, and the IDBI Chairman, Mr. S.K. Chakraborti, had approved of these amendments. Questions are now being raised as to whether the trustees actually realised the import of the proposed changes to the working of the schemes.

Pic.:Members of the consultative group for revamping US-64, Mr Y.H. Malegham (left) and Dr R.H. Patil, with the Advisor to the Finance Minister, Dr Rakesh Mohan, on their way to meet the Finance Minister in the Capital on Thursday.

Picture by Kamal Narang