The Centre is likely to refund State Bank of India and Life Insurance Corporation about Rs 600-800 crore (Rs 6-8 billion) for their initial stake in the Unit Trust of India, according to senior government officials.
The ordinance to repeal the UTI Act of 1963 had said the initial capital contributed by IDBI, LIC, SBI and its subsidiary banks and other institutions would be refunded by the Centre on the basis of the book value, and the assets and liabilities of the trust.
The finance ministry is, however, yet to take a final decision on refunding IDBI, which contributed 50 per cent to UTI's initial equity.
IDBI had a major influence in the decisions taken by UTI since, not only was the chairman appointed by the Centre in consultation with IDBI, four other trustees too were appointed by IDBI.
The institution is partly to be blamed for not taking timely corrective measures to prevent the mess in which UTI finds itself today, government officials said.
When UTI was floated with a paid-up capital of Rs 5 crore (Rs 50 million), IDBI contributed 50 per cent.
Subsequently, in pursuance to the Deepak Parekh recommendations, IDBI pumped in another Rs 250 crore of the total Rs 445.50 crore (Rs 4.455 billion). LIC and SBI had then chipped in Rs 75 crore (Rs 750 million) and Rs 51.50 crore (Rs 515 million), respectively.
Officials added that the split in UTI is likely to be effected next week with an approval already in place from the Registrar of Companies and a nod expected from the Securities and Exchange Board of India next week.
According to officials, Securities and Exchange Board of India is likely to give its nod to SBI, Punjab National Bank and Bank of Baroda for floating a second mutual fund shortly.
The three banks along with LIC are the new stakeholders in UTI AMC Ltd, with Rs 2.5 crore (Rs 25 million) contribution each for the company's paid-up capital.
Officials also said present UTI chairman M Damodaran is likely to continue as the new head of both UTI-I, the government-controlled part of UTI, managing all the assured return schemes and US-64 and UTI AMC Ltd, the new company comprising all the net asset value based schemes of UTI.
Finance secretary S Narayan had convened a meeting on Wednesday to discuss the progress on UTI.
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