IBMF scheme to be bailed out

MUMBAI, JUNE 15: Indian Bank, the sponsor bank of Indian Bank Mutual Fund IBMF, has proposed to shell out Rs 70 crore as the unpaid dividend liability on IBMF8217;s Ind Prakash Scheme even though the scheme has only indicated the return. The bank has approached the Reserve Bank of India for necessary permission. The fund is also proposing the preclose of Ind Prakash scheme subject to the approval of unitholders and the Securities and Exchange Board of India SEBI.

Ind Praksash scheme of Indian Bank Mutual Fund had offered indicative returns to investors at the time of floating of the scheme in June 1992. The scheme is to be redeemed on November 30, 1999. The scheme performed very well till March 1996 and in fact the total dividend declared by the scheme from June 1992 till March 1996 exceeded the total indicative dividend for the said period. Owing to subsequent poor market conditions, the scheme could not generate the required surplus to pay the indicative dividend for 1996-97, 1997-98 and 1998-99. NowIndian Bank has promised to pay up the unpaid liability.

The decision follows a directive issued by the SEBI last week that all indicative returns in the offer document have to be paid by the sponsor. The SEBI had asked the sponsor of the scheme Indian Bank to pay the indicative return as mentioned in the offer document. SEBI sources said the directive was issued to the sponsor last week.

On the other hand, Canbank Mutual Fund which is facing a similar situation under its Cantriple scheme is going back on its promise. Canbank Mutual Fund is facing the investors wrath once again for reneging on the promise made under its Cantriple scheme. The mutual fund floated by Canara Bank has now developed cold feet over fulfilling the assurance given at the time of launching the scheme in 1991.

Much to the chagrin of investors, the mutual fund has now offered to redeem the scheme at the net asset value NAV.