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Did You Know | India’s first ‘MF’ UTI was never an MF

Did You Know | India’s first ‘MF’ UTI was never an MF
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First Published: Wed, Apr 14 2010. 08 48 PM IST
Updated: Wed, Apr 14 2010. 08 48 PM IST
Unit Trust of India (UTI) was an investment scheme that was set up under the UTI Act, 1963. Launched in 1964, UTI’s inaugural scheme, US-64, was the first scheme to mobilize the common man to invest in a cluster of equity and debt securities. The Securities and Exchange Board of India (Sebi), which governs mutual funds (MFs) now, wasn’t even born then.
Initial mismanagement: When Sebi was formed, UTI was governed by an Act of Parliament. Lack of active regulation led to mismanagement of funds and over-reporting of net asset values (NAV). UTI dipped into its reserves to promise returns when none were due.
The disaster: With depleting reserves, UTI suspended sales and redemption for six months in June 2001. The resulting uproar saw its then chairman P.S. Subramanyam being arrested. In July 2001, M. Damodaran was brought in to stem the rot and resurrect the age-old institution. In January 2002, UTI declared its NAV for the first time. At Rs5.81, it was much lower than the last repurchase price of Rs14.25.
The resurrection: Eventually, in February 2003, UTI was split. While the government of India took over the assured return schemes and started winding them up, non-assured schemes were hived off and UTI Asset Management Co. Ltd was formed. It was brought under Sebi’s control and is now India’s fourth largest MF.
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First Published: Wed, Apr 14 2010. 08 48 PM IST
More Topics: UTI | Mutual Funds | Investment | Sebi | Money Matters |