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US-64 bail-out plan yet to be finalised -- IDBI, LIC, banks giving final touches

Our Bureau

NEW DELHI, July 12

INDUSTRIAL Development Bank of India, the Life Insurance Corporation of India and a couple of leading commercial banks are working out final details of a package to support the Unit Trust of India's US-64 scheme.

Although the UTI top management led by its Acting Chairman, Mr K.G. Vassal, and members of the consultative group on revamping the US-64 scheme met the Finance Minister, Mr. Yashwant Sinha, to discuss a few proposals, no final view could be taken.

Further meetings are scheduled over the next couple of days, involving banks and FIs and an announcement on the package is expected over the weekend.

Today's meeting was attended by the Finance Secretary, Mr Ajit Kumar, Advisor to the Finance Minister, Dr Rakesh Mohan, Joint Secretary, Capital Markets, Dr J. Bhagwati, LIC Chairman, Mr G.N. Bajpai, acting IDBI Chairman, Mr S.K.Chakraborty, members of t he consultative group such as Dr R.H. Patil, Mr Y.H. Malegam and Mr. Chitale, and the executive directors of UTI.

The bail-out is expected to feature an exit option for small investors by a partial lifting of the freeze on sales and repurchase of US-64 units. Banks and financial institutions will support the trust by providing a line of assistance and also helping i nvestors redeem their units.

Mr. Vassal told newspersons after the meeting that it was too premature to say anything concrete at this juncture. ``We are all engaged in finding a solution. It is difficult to put a timeframe to this. All I can say is it will be done shortly.''

Considering the variation in the earlier repurchase price and the net asset value (NAV) of UTI which is reckoned to be well below Rs 10, permitting the small investors to redeem their units at possibly the face value would call for borrowings by the trus t.

This year, UTI had written to the Finance Ministry saying that it would have to go in for a line of credit or to seek support from the Government, given the performance of some of the schemes, notably US-64.

Now, faced with a crisis, there is no option but to enlist the major financial institutions and a few of the bigger State-owned banks in this bail-out exercise. Otherwise, the Government will be forced to stand in for them as had happened in 1999.

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