The Cabinet Committee on Economic Affairs, chaired by the prime minister approved the long-awaited bailout package for the beleaguered UTI to meet liabilities on its flagship US-64 and assured return schemes.
The country's largest AMC would be split into two parts, and then privatised. UTI-I will comprise US-64 -- for which assured repurchase price has been announced -- and assured return schemes.
The UTI-II will comprise all NAV-based schemes, which will have a professional chairman and board of trustees. It will be privatised in due course of time.
The UTI Act will be repealed through an ordinance and both UTI-I and UTI-II will be structured as per SEBI regulations.
All commitments related to US-64 unitholders would be extended beyond May 2003. And the government also assured that it would honour redemption guarantees for US-64. The liability for US-64 has been estimated at Rs 6,000 crore, which may vary depending upon market conditions.
The government will meet its obligation annually to cover any deficit in UTI-I and will be managed by a government-appointed administrator and a team of advisors. For assured return schemes, wherever interest could be reset, it would be reset at a lower level. The total shortfall in the assured returns schemes amounted to Rs 8,561 crore.
The government will also consider extending some tax concessions to US-64 unitholders, to create a market, reduce redemption and keep people invested in the scheme.