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UTI asked to repay MIP investors promptly: SEBI chief

The Securities and Exchange Board of India on Friday sought to allay fears of possible default in payment by Unit Trust of India to investors of the Monthly Income Plan when it matures on April 30, saying the country's largest mutual fund was capable of meeting redemption from its reserve fund.

If UTI faces liquidity problems in redeeming MIP-97 units to investors, it can bridge the liquidity gap by paying from its Development Reserve Fund, SEBI chairman G N Bajpai told reporters on the sidelines of CII annual session in New Delhi.

SEBI, which took stock of UTI's position at a board meeting on Thursday, was also not averse to allowing the fund to enable MIP investors to switch over to other schemes.

Bajpai reiterated that SEBI would ensure that investors' interests would be safeguarded.

UTI is apparently facing liquidity problem, which led to speculations that the fund may default in repayment on MIP scheme.

The MIP, floated in 1997, had a corpus of about Rs 14 billion, while its value eroded to Rs 9.80 billion. This resulted in an additional burden of over Rs 4 billion to the UTI by month end.

UTI, it is believed, has approached FIs like LIC, SBI and IDBI to infuse additional funds to bridge the liquidity gap.

Even if the FIs do not agree to invest additional amount, UTI can dip into its Development Reserve Fund to bring in the additional Rs 4 billion.

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