Solution to Canstar issue soon

BANGALORE, June 8: The Canstar scheme imbroglio is likely to be solved within the next one to one-and-a-half months. A deadline is believed...

BANGALORE, June 8: The Canstar scheme imbroglio is likely to be solved within the next one to one-and-a-half months. A deadline is believed to have been set to resolve the redemption issue of the ill-fated Canstar Mutual Fund Scheme.

According to sources, the issue has assumed urgency since the liability on the part of Canbank Mutual Fund CMF would have grown manifold since repurchase has been suspended from August 1996.

New chairman of Canara Bank T R Sridharan Canara Bank is the principal trustee is understood to have set an internal deadline of three months from the date he took charge to solve this issue. The bank cannot go to the public for raising any funds without resolving the Canstar issue, sources said. Canara Bank8217;s public issue has been hanging fire for quite sometime and details of the public offering can be decided only after the annual results are out which will be in the next few weeks.

According to the sources, since CMF and its principal trustee Canara Bank had refused to consider the suggestion of the unit holders at a meeting last year to redeem the units at the pledged price of Rs 23, since the NAV had come down to below Rs 15, efforts are on to reconcile unit holders to a figure 8220;close8221; to Rs 23 which would be acceptable. If CMF was to reedem the units at Rs 23, the outgo would amount to between Rs 600 and Rs 800 crore.

Another proposal to raise an interest-free loan from the central government was shot down at a meeting of the CMF trustees sometime ago, it is learnt. The question raised by those who attended the meeting was: 8220;How can the loan be repaid since the Canstar scheme will no longer be operative. The scheme is also not transferable to any other CMF scheme.8221;

The Securities and Exchanges Board of India SEBI which intervened on the basis of complaints from unitholders, had conducted a postal ballot at the end of last year. The results of that ballot are yet to be announced.