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Yet another troubled bank
Here is yet another jolt to the finance ministry
following the UTI’s debacle. A public sector bank, Dena Bank,
has declared a net loss of Rs 253 crore. Further, it is reported
that the total non-performing assets of the bank are Rs 1,928
crore as on 31st March 2001 and losses for the current year
might cross Rs 500 crore.
Mr Finance Minister, any plausible excuse for the dismal performance
of the ‘oldest public sector bank’ in the country?
-- Satish Murdeshwar, on e-mail
Close down UTI
The financial press has been carrying numerous articles on the
US-64 imbroglio explaining why it should not be bailed out.
The argument is that there was sufficient indication that things
were not right and therefore there was adequate reason not to
invest in the scheme. This seems to to paint all those who remained
with the scheme as foolish, even greedy. I disagree.
The UTI marketed the scheme aggressively through advertisements,
brokers etc. How could it do so if it was aware that things
were not right? If an institution functioning under an Act of
Parliament continues by its various actions to convey that things
are under control, who is to be held accountable for a mess
which emerges subsequently almost overnight?
Who is to be held accountable if internal corporate governance
norms are so lax that nobody is willing to admit to any wrongdoing
or accountability? If the finance minister is not aware of the
mess, how is the investing public expected to know?
Today, what is the actual NAV of the US-64? We were always informed
that there are accumulated reserves to cushion any value shortfalls.
What has happened to those reserves? Can an expert body let
us know the actual NAV of the US-64 scheme as on June 30, 2001?
What happens to those who invested because this was an approved
scheme for various avenues such as capital gains, provident
fund investments etc? What is the state of an investor who invested
in June 2001 at the rate of Rs 14.25/unit? How have these artificial
valuations come about and what is the responsibility of the
Ministry of Finance and the Board of Trustees of the UTI? Is
the investor to suffer for dereliction of duty by them?
Suddenly, everybody is talking about providing an exit route
to the US-64 unit holders at around Rs 10 (the expected NAV
value). Is this really fair and should investors be penalised
for inefficient management of an organisation set up under an
Act of Parliament?
There is just one solution to this issue. UTI as an organisation
must be closed down immediately. An expert group must be set
up to liquidate UTI in 6 months. The expert group should sell
off other UTI schemes to national and international mutual funds.
All other investments held by UTI should be realised and/or
sold off to strategic buyers and other purchasers. It does not
matter if this affects India’s corporate management or financial
markets. The US-64 problem is directly linked to corporate withdrawals.
Let the corporates and the market feel the heat also. In the
interim period, systematically reduce staff numbers. There is
no reason to carry employee costs, endlessly. Finally, liquidate
all of the UTI’s real estate across India and sell off the assets
and other commercial rights that it possesses. The amounts so
realised should be systematically paid out to US-64 unit holders.
We, the US-64 unit holders are not asking for bailouts or budgetary
allocations. We are only asking for our invested capital to
be returned at it’s realisable value and if that means liquidating
UTI and ending the ‘social contract’, so be it.
-- H J Tavaria, on e-mail |
