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May 8, 2002 | 1155 IST
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Govt likely to get more sponsors for UTI

P Vaidyanathan Iyer & Subhomoy Bhattacharjee

The finance ministry is likely to ask some more banks and institutions to chip in as equity partners in the proposed sponsoring company of Unit Trust of India.

This will reduce the burden of the existing contributors, the Industrial Development Bank of India, the State Bank of India and the Life Insurance Corporation.

Finance Minister Yashwant Sinha has convened an internal meeting on Wednesday to decide who should be the new sponsors of the mutual fund in its new avatar.

The ministry has ruled out roping in private companies or multilateral institutions as shareholders in the sponsoring company.

Officials said the broad contours of restructuring UTI had been firmed up. UTI will be Sebi-compliant and will have a three-tier structure with a trustee company, a sponsoring company and an asset management company.

The need for roping in more banks or institutions as shareholders in the proposed sponsoring company has arisen because of the financial mess UTI finds itself in today.

IDBI, LIC and SBI, which hold 80 per cent of UTI's initial equity corpus of Rs 50 million, have already turned down the mutual fund's request to help meet it the shortfall in its assured-return schemes.

The finance ministry is likely to prevail upon the existing sponsors to stay with the trust by assuring them of reduced liability by introducing new partners in the sponsoring company. "They might require some persuasion," said an official.

According to officials, it is still not time for the mutual fund to be privatised.

"Multilateral institutions as partners are ruled out for the time being," said an official. UTI had to be managed by domestic banks and institutions, he added.

The ministry is of the opinion that the existing banks and institutions cannot wash their hands of the liabilities.

"They were controlling the trustees all these years," said an official. UTI faces a shortfall of Rs 29.27 billion on the 10 assured-return schemes set to mature between now and April 2004.

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