No reason to panic over US-64, says Sinha

By Our Special Correspondent

NEW DELHI, JULY 3. The Finance Minister, Mr. Yashwant Sinha, declared today that `appropriate measures' would be taken regarding the decision of the mutual fund giant Unit Trust of India (UTI) to suspend the sale and repurchase of its flagship scheme, US-64, for six months. Seeking to allay investors' fears about the decision announced on Monday, he said the Government would scrutinise all aspects of the issue.

Mr. Sinha assured investors that there was no reason to panic. ``We assure investors, especially small investors, that their interests will be safeguarded,'' he said.

Clearly indicating the Government's concern over the move to freeze the popular US-64 scheme which has had an impact on millions of small investors seeking to sell or repurchase units in July, he said ``the results announced yesterday are distressing''. Mr. Sinha said that normally the financial institutions should function on their own without interference. But in this case, he said the entire issue would be closely scrutinised. Not only would the freeze on sale be examined but also the sale of strategic holdings by the UTI, he said.

Regarding any time-frame for withdrawing the suspension decision, he said this would be premature since the Government had to first scrutinise the situation.

The Finance Minister was responding to questions by newspersons over the unprecedented move by the mutual fund major to suspend sale of shares in the US-64 scheme in the retail market though sales are allowed in the wholesale market through the National Stock Exchange and other selected exchanges. With this decision, as many as 20 million investors in the scheme had been prevented for selling their shares. Normally, unit holders wait for July every year to sell or repurchase units as this is the month when UTI declares its dividend and the repurchase price is at its annual peak. Many small investors who use these funds for urgent financing needs have thus been cut off from drawing on this source in one stroke by the UTI's latest decision.

The UTI chairman, Mr. P.S. Subramanyan, justified the decision saying it had to be taken due to fears that US-64 reserves might turn negative. The dividend announcement was also much lower at 10 per cent as against 13.75 per cent in the previous year. However, he has said that if the situation improves in the near future, he would not hesitate to revoke the suspension earlier than December.

The Finance Minister took the opportunity today to stress that the foreign exchange situation was fully under control and the fall in rupee value to Rs. 47.20 to a dollar should not cause concern.

He said the country's foreign exchange position was comfortable with substantial reserves of $43 billion.

Send this article to Friends by E-Mail

Section  : Front Page
Previous : Pak. for joint press meet at Agra
Next     : AIADMK continues damage control exercise