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`Banks, cos redeemed Rs 1,800 cr in May'

Our Bureau

NEW DELHI, Aug. 1

STATE-OWNED banks and corporates accounted for over Rs 1,800 crore of the redemptions of US-64 units in May this year, just a few weeks prior to the UTI's decision to freeze repurchases on July 2, the Finance Minister has said.

In fact, redemptions by individuals constituted 42 per cent of the total repurchases of Rs 3,682 crore in May. The redemption figure works out to Rs 1,557 crore in the category of individuals.

Mr Yashwant Sinha, who could not complete his reply to the debate in the Rajya Sabha on the UTI fiasco for the third successive day, said the withdrawals in this scheme by corporates amounted to Rs 1,033 crore. PSU banks redeemed units of US-64 aggregati ng Rs 811 crore during May.

Redemptions of units by non-individuals such as corporates and banks were Rs 2,125 crore in this period, he said. In contrast, total redemptions during April this year were substantially lower at Rs 473 crore.

Mr Sinha said the Government would await the report of the three-member committee, headed by Mr S.S. Tarapore, mandated to look into allegations of insider information by either large corporates or PSU banks.

The Finance Minister's reply was drowned out shortly after he referred to UTI's decision to invest Rs 1,073 crore through a private placement in a Mumbai-based industrial house in 1994-95.

``To date, UTI has not made such large investments in a single company. It was an offmarket deal with a five-year lock-in. UTI bought the shares at Rs 385 and the company's scrip touched a low of Rs 77.50 on January 28, 1996,'' he said.

This investment was a reference to the Reliance Industries Ltd deal in 1994-95, when the Congress (I) was in power and Dr Manmohan Singh was the Finance Minister.

According to Mr Sinha, the investment decision was taken by the UTI board. ``The Ministry of Finance did not have anything to do with it and we are now talking of a Rs 32-crore investment.''

At this juncture, Dr Manmohan Singh sought to intervene but Mr Sinha did not yield despite requests from the Chairman, saying he would field supplementaries after his reply. Subsequently, with the Opposition refusing to let the Minister speak until Dr Ma nmohan Singh was given an opportunity, the House was adjourned for the day.

Mr Sinha also said several private mutual funds which had offered equity schemes reported negative growth in earnings during the last year. UTI's schemes in contrast fared much better.

He also drew on the example of leading international portals such as Yahoo! and Amazon, which lost massive values in market capitalisation. This only went to show that there could be reasons other than malafide for investment erosion.

The challenge now was to restore the confidence of investors in UTI, especially US-64, and also India's financial sector, he said.

Related links:
UTI geared for redemptions
Banks may offer to buy some PSU debt from US-64 basket

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