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Tarapore to head panel probing UTI activities

The government on Friday appointed a three-member high level committee headed by former RBI deputy governor S S Tarapore to probe UTI activities including alleged insider trading in its flagship scheme US-64.

The committee, which has been asked to submit its findings within three months, would have National Institute of Bank Management chairman, M G Bhide and former CBI director R K Raghavan as the other two members, an official release said.

The committee has been set up in the face of Finance Minister Yashwant Sinha's decision to have an independent inquiry into the issue of insider trading and commercial decisions of UTI.

The country's largest mutual fund froze its flagship scheme US-64 on July 2 due to large-scale redemption of over Rs 40 billion in April and May and the committee will probe if there was any breach of confidentiality.

The committee has been given five-point terms of reference:

• To ascertain whether investment and divestment decisions taken by UTI, particularly regarding US-64 in the last ten years or so were based on commercial or extraneous considerations.

• To look into the level at which investment decisions were taken as also the appropriateness and transparency with which these were executed.

• The reasons, if these were other than commercial, for the high level of dividends declared by UTI for the US-64 scheme in the past and the decision to dip into reserves to fund the same.

• UTI's involvement, if any, in the Calcutta Stock Exchange payout crisis in February-March 2001.

• Redemptions of US-64 units in April-May, 2001 and if there was any breach of confidentiality.

The committee chairman, Tarapore, who was RBI deputy governor from 1992-96, was till June this year, chairman of the Advisory Board on Bank Frauds.

Bhide had served as managing director of State Bank of India and chairman cum managing director of Bank of India before taking over as chairman of National Institute of Bank Management.

On July 15, the government appointed M Damodaran as the new UTI chairman replacing acting chairman KG Vassal, who took charge after PS Subramanyam was asked to go in the face of UTI crisis, sending shockwaves among 20 million of investors..

Soon after his take-over, Damodaran announced a special package to provide limited liquidity to small investors by allowing repurchase of US-64 upto 3000 units from August 1.

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