UTI terminates RUS, investors angry

MUMBAI, SEP 11: Economic compulsions seem to have got preference over a noble intention of enriching the girl child''. Unit Trust of Ind...

MUMBAI, SEP 11: Economic compulsions seem to have got preference over a “noble intention of enriching the girl child”. Unit Trust of India, the largest mutual fund, has taken a unilateral decision to terminate the Rajlakshmi Unit Scheme taking refuge under the argument of “liberalisation and fall in interest rates.”

Upsetting the calculations of thousands of unitholders, the UTI decided to close the scheme before maturity as it is no longer viable for the trust to continue the scheme in the new environment. When the UTI launched the scheme in 1992, it went to the town giving several rosy promises. “UTI pays its tribute to her by announcing Rajlakshmi Unit Scheme (RUS). It is meant for all those who care for her future, when she would enter the most critical phase of her life, around the age of 21 and encounters challenges of marriage, entry and adjustment in a new household, motherhood and economic independence. Let not, what should be the most joyous years of life turn the darkest in her life. The critical financial needs of this period can be met if you plan and save now for her years of dream…," said the offer letter of RUS issued by the UTI in 1992.

When contacted, UTI chairman PS Subramanyam said the scheme was not viable in the changed economic scenario in the country. “We gave around 16.75 per cent return under the scheme in the last eight years. With the interest rate coming down across the board (to around 13 per cent), it is not possible to continue the scheme. We decided to terminate the scheme in the overall interest of the UTI and its unitholders,” the UTI chief said.

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Said an angry investor, “UTI’s statement that the servicing of these investments will be difficult is out of context and probably with an ulterior motive to deprive the girl child from getting the assured and promised return. The scheme in all probability will mature in 2012-2013 and UTI unilaterally is attempting to take a decision that is harmful to the interests of the Investors, namely the beneficiary girl child. As UTI is not required to hand-out maturity value in the near future why this hurry now?”

Investors complain that the UTI has taken a unilateral decision without consulting unitholders. “How can the UTI suddenly defend its decision on the falling interest rates. UTI officials should have foreseen the changing economic scenario. It cannot go back on its promise. If it was to be scrapped, there was no need to launch a scheme like this,” said another investor.

The Securities and Exchange Board India (SEBI), the regulator of mutual funds, is yet to make its stand clear on the issue. However, several investors said the SEBI should ask the UTI to continue with the scheme. “It’s not fair on the part of the UTI to ask RUS unitholders to switch over to another scheme,” investors said, adding, “UTI had left investors in the lurch by terminating the scheme.” While terminating the RUS, UTI had said unitholders can change over to the Children’ College and Career Fund.

Like any other IPOs (initial public offerings), the UTI also made a sweet talk to attract investors. Consider this sample. “This is an exclusive scheme for the benefit of women, for her who brings so much love and sunshine in our life, for her who deserves all reverence, respect and love from every one of us. In the midst of all our formative and critical periods of life, she, as mother, sister, wife, daughter or any other relation, forgets herself to see us free of worry and pain, to see that smile on our face. What are we doing to her and for her? Now?"

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UTI chairman says the trust would have made huge losses had it continued with the scheme. But investors are not convinced. As one analyst put it, “it cannot stop the scheme half-way through the maturity period. SEBI and UTI will have to stop this sort of short-changing practices.”