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May 10, 2001
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Money > Business Headlines > Report May 10, 2001 |
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UTI's new MIP may carry 8.5-9 per cent interestJanaki Krishnan & Rakesh P Sharma The Unit Trust of India is expected to peg the interest rate on its new monthly income plan in the 8.5-9 per cent range. UTI, which had filed for the scheme two months back, is waiting for the Securities and Exchange Board of India approval. UTI's MIPs assure returns only for the first year. The interest rate on a MIP is finalised just before the launch in line with the prevailing interest rates and with investors' needs in mind, said B G Daga, executive director, marketing, UTI. Industry sources said that the interest rate for the scheme is likely to be in the 8.5-9 per cent range. The estimates are based on the prevailing market scenario and after discounting the expected rate cut by the Reserve Bank of India. The MIP rates serve as a benchmark for later bond offerings by institutions such as the Industrial Development Bank of India and ICICI. Currently, a 12-month term deposit with public sector banks attracts rates between 7 per cent and 8 per cent, while some private sector banks offer higher rates of 10.25 per cent, though the average range is 8-9.5 per cent. With public provident fund rates at 9.5 per cent, UTI's MIPs will have to be competitively priced especially since it does not offer capital protection at the end of the first year but only after five years. Daga said: "The rate should not be too high, then we would not be able to handle it and if it is too low there will be no takers for the scheme.'' UTI is expecting the Sebi approval for the scheme by the end of the month. The trust's MIP 95(I) and MIP 96(IV) have declared dividends of five per cent for the current year. Last year it was 9 per cent and 9.25 per cent, respectively. MIP 95 (I) has given a 12.47 per cent pay-out (considering the current year) on an annualised basis, while that for MIP 96 (IV) was 12.99 per cent. S K Basu, executive director, UTI, said: "It is not easy to maintain a high return for a long period and the current return of both these MIPs is much higher than other schemes." Powered by YOU MAY ALSO WANT TO READ:
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