Dubai based NRIs in the United Arab Emirates have urged India to fix the redemption price of the state-run mutual fund manager Unit Trust of India's (UTI) flagship US-64 at the May price, the Indian Express has reported.
In a memorandum to Indian Finance Minister Yashwant Sinha, the Overseas Indians Economic Forum (OIEF) has said the UTI can withhold redemptions of units for the next six to nine months or even a year, but the fund should pay back investors at the rate of Rs.14.25 per unit after the time frame expires.
The UTI is offering investors Rs. 10 per unit as a special redemption price after it lifted a partial freeze on sale and repurchase of the popular scheme on August 1, 2001.
It also said that if the UTI requires time to improve the performance of US-64 and restructure the investments, a dividend of minimum 12 percent may be declared for the next two years and, after that period, a minimum redemption rate of Rs.14 may be given to the investor.
The Gulf region, it said, has one million NRIs and US-64 has been a good avenue for investment by small investors. The total NRI investment in UTI to date is close to Rs.12.5 billion.
The investors have purchased the units at prices ranging from Rs.14-18 and there will be heavy capital loss at redemption price of Rs.10 in August 2001, not bearing in mind the loss due to currency fluctuation, the letter pointed out.
The memorandum, signed by Ismail Hukkawala, chairman of OIEF, and Bharatbhai Shah, convener, investors' liaison committee, said it is really shocking that many smart corporate operators exited from the scheme in May. It said to ensure justice and equity for the small investors, the OIEF proposes that the May 2001 redemption price at which many smart players exited the scheme may be paid to all the exiting investors.
They add that the ministry of finance needs to inject sufficient funds immediately till such time that the scheme stands on its own feet once again. The investors will be more than happy to wait as they will be receiving more than what has been promised by UI now. This will also restore confidence of investors in financial markets in India, which have been plagued by stock market scandals and banking scams, they added.
The memorandum said if remedial measures are not taken, that added that this will will create a negative impact on the various deposit schemes, such as FCNR, NRI and other schemes of the UTI. They also emphasized that if an immediate solution is not found then, there might be outflow of funds of NRIs, who have invested billions of dollars in India.
They pointed out that UTI has marketed US-64 all along citing three factors - safety, liquidity and high returns, and they find all the three traits have disappeared.
- nriol.com report
more snippets...
We appreciate your feedback, please write to us at: feedback@nriol.com
