Nilanjan Dey

Kolkata, Dec. 10

The Government of Bihar, which plans to hire five lakh temporary teachers, is set to mandate UTI Mutual Fund for a scheme that will help them save part of their salaries in a fund that the country's largest asset management company now manages.

The State will have its Zila Parishads recruit these teachers, who will sign up in the savings programme that UTI MF proposes to devise. The idea is to enable them to put a fixed amount every month in a fund that has a certain track record and has provided market-linked returns.

UTI MF, said Mr U.K. Sinha, CMD, will soon draw up a format, which will then be referred to the Bihar Government. "We met the Chief Minister (Mr Nitish Kumar) recently. Clearly, the State will back our effort," he added.

The fund house intends to use its Retirement Benefit Pension Fund (RBPF) for the purpose. RBPF, which dates back to 1994 and has given 12.3 per cent since inception (as on October 31, 2006), is a balanced fund. It can have a maximum 40 per cent exposure to equities.

The underlying principle of RBPF relates to the provision of `pension' to an investor after he or she turns 58. This comes in the shape of cash flows courtesy a systematic withdrawal plan up to the extent of the repurchase value of the holding. The fund, incidentally, has close to 1.5 lakh unit holding accounts.

UTI MF expects a minimum investment of Rs 500 per month from each individual who takes to the scheme, Mr Sinha said.. "We have in the past tied up with a few organisations on similar lines," he said while referring to the earlier arrangements.

In Bihar, for instance, it had, a few months ago, sealed a deal with a milkmen's coalition. That initiative too was supported by the State Government.UTI MF has pointed out that SIP (systematic investment plan) returns from RBPF stand at 16.9 per cent and 17.38 per cent respectively on a three- and five-year basis (as on October 31, 2006). These have been worked out on the assumption that a monthly investment of Rs 1,000 is being done on the first working day for the two time periods. No load has been taken into consideration here.The fund, which is chiefly invested in long-term debt securities, has allocated part of the remaining assets to G-secs and various short-term instruments. Equity, at the end of October, comprised 16.3 per cent of the assets. Its size stood at a little over Rs 450 crore.

(This article was published in the Business Line print edition dated December 11, 2006)
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