Govt. nominee back on UTI Board

By Our Special Correspondent

NEW DELHI, JULY 25. In keeping with the swift moves being made after the Unit Trust of India (UTI) fiasco came to light, the Union Finance Ministry has got back its nominee on the UTI board. The Joint Secretary in the capital markets division of the Ministry, Mr. Jamini Bhagwati, will now be on the Board.

Under the UTI Act, the Government cannot directly place its nominee. Instead, the Industrial Bank of India (IDBI) has this power and even in the past, it was the IDBI which nominated a Finance Ministry official. The same process has been followed this time too.

In 1993-94, a move was made to withdraw the Finance Ministry nominee from the UTI board as it was felt that in a liberalised environment, the Government should give a free hand to the institution to function and take investment decisions. But the then Finance Minister, Dr. Manmohan Singh, turned down the suggestion.

A similar move was made in 1997 and the same arguments were forwarded that the Ministry nominee should be withdrawn. The then Finance Minister, Mr. P. Chidambaram, agreed and has also indicated recently that the UTI board was broadbased and professionalised and the Ministry nominee was withdrawn to send a signal that the UTI Chairman was the boss and not the Ministry nominee.

The present Finance Minister, Mr. Yashwant Sinha, has made much of the fact that the Ministry was handicapped without a nominee as it could not ascertain first hand what was happening at the board meetings and what items were on the agenda. During the debate in Parliament on the UTI scam, Mr. Sinha is expected to rub in this point to say that it was the United Front Government which withdrew Governmental supervision over the functioning of one of the largest mutual funds in India.

Meanwhile, the Insurance Regulatory and Development Authority Chairman, Mr. N. Rangachary, today cautioned the Life Insurance Corporation and the General Insurance Corporation and its former subsidiaries should adhere to the prudential norms if they decided to buy any of the UTI's bulk holding of equity.

Mr. Rangachary said at a meeting organised by a chamber of commerce that clear investment norms had been laid down and insurance companies would have to follow them. ``If they follow the guidelines, we have no objections to their buying the equity held by UTI,'' he said.

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