Finance Minister Yashwant Sinha today sought to allay fears of investors over mutual fund major UTI's decision to freeze sale and repurchase of its flagship scheme US-64, saying the Government will scrutinise the issue.
"We normally like financial institutions to function on their own without interference in day to day working. But the results announced yesterday are distressing," he said adding "the entire issue will be closely scrutinised.""We will go into all aspects regarding the issue of freeze of sale of US-64 for six months and the issue of sale of strategic holdings by UTI," Sinha said.
Concerned over the fact that UTI announcements had sent shockwaves particularly among small investors, Sinha said "I assure investors that there is no reason to panic.""We assure the investors, particularly small investors, that their interests will be safeguarded," he added.
Asked if the Government had any timeframe to withdraw the suspension of sale and repurchase of US-64, Sinha said "Let us not jump the gun. First we will scrutinise the situation."
The suspension of sale and repurchase of US 64 for six months was unprecedented in UTI's 37-year history and this meant that 20 million odd US-64 investors cannot offload their shares in case of emergency except through National Stock Exchange's debt market.
The impact of this unpopular decision was almost immediate as UTI chairman P.S..Subramanyan said it was being taken as there were fears that US-64 reserves might turn negative.
Along with the suspension, UTI had announced a dividend of 10 per cent for 2000-01 which is higher than expected, but less than the 13.75 per cent announced last year.
Subramanyam is already under attack for the disappointing performance of UTI this year. His announcement that the mutual fund might even sell strategic holdings in larger corporations as part of broader strategy has led to severe criticism of his functioning.
Asked if there was any rethinking on his decision to freeze sale of US-64 in the face of mounting criticism, Subramanyam said if the situation improved in the near future he would not hesitate to revoke the suspension ahead of December.