The President on Tuesday promulgated the Ordinances for repealing UTI Act and amending Sebi Act. This has paved the way for setting up of a company to manage the net asset value (NAV)-based schemes of the Trust (UTI-II) after the split of the countrys largest mutual fund.
A notification will now be issued for giving effect to the split of the Trust, which is expected within two months, during which the company handling NAV-based schemes is likely to take shape.
Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda will contribute Rs 2.5 crore each to the share capital of the company of Rs 10 crore.
The government will carry out due diligence for UTI-II to enable its privatisation by the proposed company, joint secretary (capital markets) U K Sinha told reporters.
Mr Sinha said that the company managing UTI-II would be a transitional arrangement and that NAV-based fund would be privatised within a fixed time-frame. The chairman and top executives of the proposed company would be appointed by the new management and the professionals will get market-linked pay package.
Till the issue of notification for splitting UTI into two, the mutual fund would continue its operation in the present form, said Mr Sinha.
The equity held by Industrial Development Bank of India, the leading stakeholder in UTI, along with other financial institutions and banks would be paid back. It has an equity base of Rs 5.0 crore but manages assets amounting to about Rs 42,000 crore.
Mr Sinha did not rule out the possibility of the present UTI chairman M Damodaran continuing as the administrator of UTI-I, which will manage US-64, assured return schemes, special unit scheme of 1999 and development reserve fund, after the split.
The UTI-II, handling about 25 NAV-based schemes, will have assets amounting to Rs 17,000 crore. The accruals from UTI-II privatisation will be used by the government towards meeting the liabilities of UTI-I.
The government has already assured an estimated support of Rs 14,561 crore to UTI to meet its liabilities on account of US-64 and other assured return schemes.