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UTI geared for redemptions

Our Bureau

MUMBAI, July 31

THE Unit Trust of India (UTI) is geared to meet the redemptions under Unit Scheme-1964 (US-64) beginning tomorrow. The UTI Chairman, Mr M. Damodaran, said that UTI is prepared even for the worst scenario where most of the investors line up for redeeming their maximum 3,000 units.

UTI has fixed a maximum limit of 3,000 units of US-64 per investor for redemption from August at a the fixed price of Rs 10 per unit. Thereafter, the repurchase price will be scaled up by 10 paise every month till May 2003.

UTI will need liquidity of about Rs 6,000 crore assuming 90 per cent of the investors opt for redemption up to 3,000 units per investor. ``We have tied for more than Rs 10,000 crore with a consortium of banks,'' Mr Damodaran said. This would cover over 9 0 per cent of the investor population in US-64.

UTI does not expect excessive redemption pressure as to warrant taking large recourse to the assistance from banks. Unless someone is in need of funds, it makes sense to remain invested in the scheme, he said.

UTI has entered into standby arrangements with a consortium of 20 banks, led by the State Bank of India (SBI) to tide over the liquidity in US-64. The banks have agreed to provide the liquidity support to UTI to meet US-64 redemptions at an interest rate equal to prime lending rate against collateral of securities.