Negative reserves in US-64 cost the fund manager
its credibility.
In a country notorious for shysters masquerading as
bankers -- one reason why nationalisation of banks in the '70s was welcome -- the Unit
Trust of India (UTI) shone as a beacon of hope. For savers and retirees, who had put their
hard-earned money in the trust's several schemes as unblinkingly as buying a gilt-edged
bond. After flying high in the funds business for 35 years and sucking in Rs 64,000 crore
from investors' chequebooks, UTI's zero-risk reputation hit an air pocket in October when
us-64, the flagship scheme with a portfolio of Rs 19,000 crore, reported negative reserves
of Rs 1,098.5 crore. The UTI was caught with its hand in the cookie jar, for the
"negative reserves" was the money that the scheme had paid out to investors in
excess of its earning. This unreal "dividend" was the bait for attracting new
investors with their contribution, in its turn, financing the payout. The scandal shaved 8
per cent off the stock-market index in one day and put a permanent question mark on UTI.
In a country notorious for shysters masquerading as
bankers -- one reason why nationalisation of banks in the '70s was welcome -- the Unit
Trust of India (UTI) shone as a beacon of hope. For savers and retirees, who had put their
hard-earned money in the trust's several schemes as unblinkingly as buying a gilt-edged
bond. After flying high in the funds business for 35 years and sucking in Rs 64,000 crore
from investors' chequebooks, UTI's zero-risk reputation hit an air pocket in October when
us-64, the flagship scheme with a portfolio of Rs 19,000 crore, reported negative reserves
of Rs 1,098.5 crore. The UTI was caught with its hand in the cookie jar, for the
"negative reserves" was the money that the scheme had paid out to investors in
excess of its earning. This unreal "dividend" was the bait for attracting new
investors with their contribution, in its turn, financing the payout. The scandal shaved 8
per cent off the stock-market index in one day and put a permanent question mark on UTI.
