UTI privatisation decree violates Sebi rules : action committee

AIUTSJAC president Gajanan C Kirtikar says as per Sebi regulations, if there is any material change in UTI (like shifting of assets or schemes of UTI), the government has to obtain minimum 75 per cent of investors’ consent before doing so. “But on UTI privatisation, the government didn’t even bother to obtain the consent of at least seven investors.”

Similarly, as per the Sebi guidelines, one sponsor can promote only one asset management company (AMC). But State Bank of India, Bank of Baroda, Punjab National Bank and Life Insurance Corporation, the new sponsors of UTI-II, are already sponsoring their own AMCs. Sebi also instructed that the sponsors must have a minimum 40-per cent stake in the AMC. However, the new sponsors have only 25-per cent stake in UTI-II, says Kirtikar.

According to him, the government claims that after bifurcation, UTI-II will be professionally managed. At present, the board of trustees of UTI consists of the executive director of the Reserve Bank of India, the department of economic affairs joint secretary, four chartered accountants and the former chairman of Syndicate Bank. “Are these board members not professional enough,” he asks.

“People invest in UTI because it is a government brand. If this is removed, it could lead to a huge repurchase, which ultimately will lead to a capital market collapse,” he fears. Currently, UTI alone has around 45-per cent share in the Indian capital market.

“In case UTI is privatised, the resultant fall in the markets could wide the gap of the net asset value and assured returns; it will also force the government to declare another huge bailout package for UTI,” warns Kirtikar.