Uti ( Unit trust of india

)

The Unit Trust of India is the largest mutual fund in the country created in 1964 through an act of Parliament. UTI's scheme of US-64 was set-up specifically to

channel

small

savings

of

citizens

into

investments

giving

respectable

returns/interest. The US-64 scheme had 2 crore investors, the bulk of whom were small savers, retired people, widows and pensioners. US-64 has been most popular, giving returns as high as 18% in 1993 and 1994. In 1998, the UTI crashed, and the BJP-led NDA government organised Rs. 3,500 crore bail-outs to UTI. BJP Government appointed P.S. Subramanyam as the new UTI chief, as he had the backing of the PMO.

It was also said that Jayalalitha had pressurized the NDA government for appointing Subramanyam. Subramanyam (UTI) purchased 3.45 lac shares of a relatively unknown company "Cyberspace Infosys Ltd. after prices of software stocks had begun to crash. showered favours on Government favourites. and invested huge amounts in junk bonds." at a huge price of Rs. in lieu of her continuing support to the Centre. . Subramanyam strengthened his relationship with corporate big-wigs with the help of Small investor’s funds deposited with UTI. 930 per share. In August 2000.

resulted in staggering financial losses to the UTI and investors.300 crores . when in fact its actual value (net asset value) was not more than Rs. 1. 4.20 per unit (face value Rs. amounting to Rs. agreed to the purchase.10). 8. after four days. This investment. coupled with other shoddy investments. UTI’s small investors lost a sum of Rs. In less than a year's time. 14. Initially the UTI hierarchy had opposed purchase but subsequently. the share price plummeted to just Re. The shameful part is that they were re-purchased at the price of Rs. As a result. Arvind Johri and Anand Johri have RSS connections.Cyberspace promoters. Within no time the bigwigs redeemed their investments with UTI.000 crores. 1.

The promoter of Cyberspace Infosys.and a stockbroker Rakesh G Mehta. . were arrested in connection with the 'UTI scam'.M M Kapur and S K Basu -.Former UTI chairman P S Subramanyam and two executive directors - . Arvind Johari was also arrested in connection with the case.

its investment delails are kept secret and the chairman has arbitrary powers to personally decide an investment upto a huge Rs 40 crores. Further liberalisation was pushed by Chidambram. removed all government nominees from the board of the UTI.Liberalisation of the economy immediately led to the liberalisation of the UTI. in 1997. . as the finance minister of the UPA government. the US-64 does not come under SEBI regulations. Besides. who.Such ‘liberalisation’ is tailor-made for frauds.

5 crores). bureaucrats and politicians taking their cuts. shares even when their market value began to crash in mid-2000. Global Tele. This amounted to nothing but handing over people’s money (investments) to the rich and powerful. . DSQ. with the UTI chairman. such as Himachal Futuristic. Zee Telefilms.5 crores).The UTI continued to purchase infamous K-10 list of Keten Parekh stock. The UTI also invested in junk bonds like Pritish Nandy communications (Rs. in order to prop up the share values of these stocks. Jain Studios(Rs. etc. etc. Thereby thousands of crores were siphoned off to big business and prominent individuals. 1.

dividend of 7% . The Chairman thereby duped the lakhs of small investors through false propaganda. the Chairman organised a high profile propaganda campaign promoting UTI .With knowledge that the UTI was in a state of collapse. 2001 the board of UTI took the step of freezing the purchase and sale of all US-64 UTI shares for six months. Simultaneously it declared a pathetic . which is even lower than the interests of the banks and post office saving schemes. 14 to Rs 8.while at the same time leaking information to the big corporates to withdraw their funds. . On July 4. In other words the 2 crore shareholders could not re-invest their money elsewhere — and would have to passively see their share price erode from Rs.

In the wake of these developments. . Finance Ministry did not order a probe into what went wrong with the investment pattern of the US-64. which resulted in the suspension of the scheme and loss to small investors. Subramanyam was forced to resign.

The entire middle class is being robbed of their savings by the govt.Imagine the plight of a retired person who would have put a large part of his/her PF. considering it the safest possible investment. in the US-64 scheme. Not only has the person’s income halved overnight. gratuity etc. he/she also stands to lose a large part of the investment. sponsored mutual fund. .

The final JPC report had recommended an enquiry of the secondary market transactions done by UTI in shares of 89 companies identified by the Tarapore committee. .Both the Union government and the Unit Trust of India (UTI) have failed to take any action against UTI officials. as well as against corporates exposed by the Tarapore committee way back in January 2002.

Some of the companies involved in these cases include Global Tele.Both the government and UTI have failed to finalize any proceedings against the accused other than referring a few cases to the Advisory Board on Banking. Essar Steel and HFCL. But no action has been taken against these companies or against the concerned UTI officials. DSQ Software. After the Tarapore committee report unearthed the deals between UTI officials and leading corporate. Essar Oil. Commercial and Financial Frauds . . Zee Telefilms. UTI ordered an audit of the investment decisions taken in 19 firms.

. "UTI is seeking an external legal specialist and further action will be considered on their advice. .chairman PS Subramaniam and other former UTI officials." On UTI's role in the Calcutta Stock Exchange payment crisis. The UTI administrator has informed the government that with reference to civil proceedings against ex. the government has directed SEBI to intervene in the matter.

The assets and liabilities were taken over directly by the Government in a new entity called Specified Undertaking of UTI. The UTI Act was repealed and the institution was bifurcated into two parts UTI Mutual Fund was created as a SEBI registered fund like any other mutual fund. .Fearing a run on the institution and possible impact on the whole market Government came out with a rescue package and change of management in 2001. SUUTI.

LIC. BOB and PNB. In order to distance Government from running a mutual fund the ownership was transferred to four institutions. namely SBI. .  Certain reforms like improving the salary from PSU levels and effecting a VRS were carried out . each owning 25%.

2001 Arvind johari. He was restrained from visiting offices of UTI and financial institutions such as LIC. GIC. S R mehra. held on the charge of misappropriating unit trust of india funds to the tune of rs 32. . on conditional bail by a special court.PROCEEDINGS Aug 14.08 crore. SBI capital market and BSE. the designated judge. The registrar of the court was directed to issue an urgent memo to the superintendent of central prison to hand over the custody of johari to the CBI so that he could be taken to lucknow for production in another case pending against him.5 lakh with one or two sureties of the like amount. johari was allowed to furnish cash bail of rs 7.5 lakh. promoter of lucknow-based cyberspace infosys ltd. released him on bail in the sum of rs 7. in the alternative.

perusing case dairies and remand application. "i am therefore inclined to grant him bail on certain terms and conditions. on the other hand. argued that johari was the brain behind the uti scam and would tamper with evidence if bail was granted. the judge remarked. "they show that investigation is progressive and regular. made it clear that if johari sought bail from the magistrate's court in lucknow he should make himself available to the cbi in mumbai as and when required in the uti scam case. the judge felt. however. the judge. Gopal sharan." remarked special judge s r mehra." .johari's lawyer Mahesh jethmalani argued that his client was in custody since july 24 and had cooperated with the investigating agency. his role vis-a-vis co-accused and his nexus with other persons or public financial institutions could be unearthed even if johari was not in custody. CBI prosecutor. his custodial interrogation was not required because documents had already been seized by the CBI.

the accused are charged with conspiracy to cause wrongful loss to uti to the tune of rs 32.08 crore by subscribing to 3.08 crore. . CBI alleged that uti officials.000 shares of m/s cyberspace infosys in a private placement at an exhorbitant price of rs 930 per share. s k basu and m m kapur (suspended uti executive directors) and broker rakesh mehta. opposing his bail.45. p s subramanyam (former uti chairman). kapur and basu had allegedly reversed their own decision taken earlier to reject the offer of buying these shares. subramanyam. .on august 7. the court granted bail to co-accused. the CBI said that johari was the main brain behind the entire conspiracy and had masterminded misappropriation of funds to the tune of rs 32. the agency alleged that johari had paid rs 50 lakh bribe to these officials through broker rakesh mehta to strike the deal.

when the new share-holders actually paid the consideration money to Government its market share had come down to close to 10%! A new board was constituted and a new management inducted Systematic study of its problems role and functions was carried out with the help of a reputed international consultant. . Fresh talent was recruited from the private market.UTI lost its market dominance rapidly and by end of 2005. organizational structure was changed to focus on newly emerging investor and distributor groups and massive changes in investor services and funds management carried out.

including the Best Infra Fund globally from Lipper.Once Some again UTI has emerged as a serious player in the industry. of the funds have won famous awards. has introduced Performance Related Payouts and ESOPs . UTI has been able to benchmark its employee compensation to the best in the market.

PRESENTED BY: Arun Gupta Isha bandral Lakhan khajuria Shivali sharma .

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