Mumbai, July 25: The Unit Trust of India (UTI) is further reducing the rate of return on its Monthly Income Plan to 12.5 per cent. For MIP(IV) which UTI proposes to launch in August, this is half a per cent less than the 13 per cent rate of return that the on-going MIP (III) is offering. With this, the rate of return has been decreasing steadily from the 15 per cent rate that MIP (I) had given early this year. The rate of return continues to be assured for all the five years of the scheme.

UTI officials attributed the further decrease in return to the on-going fall in interest rates in the economy.

However, MIP (III) has not been able to get as good a response as the earlier ones. The scheme closes on August 3, but the collections so far are not very promising.

In fact, UTI officials do not expect the tally to go beyond Rs 600 crore, when the issue closes. This is inclusive of the rollover expected from the maturing GMIS scheme, of which Rs 200 odd crore is expected.

MIP(I) and MIP(II), it may be recalled had received fabulous responses with record collections of Rs 1200 crore and Rs 1300 crore respectively.

For MIP(I) this was attributed to fact that UTI was giving a 15 per cent assured return for all the five years.

Later even though there was a fall of one per cent for MIP (II), the collections were undeterred, part of which was attributed by market observers to the CRB Caps deposit fiasco of which say that UTI was the biggest beneficiary.

However, UTI officials cite another possible reason for the lower collection by MIP (III), that of competition from US-64.

The annual drive for collections under this flagship scheme with special sales and repurchase prices that are traditionally said to be more attractive than at other times during the year, have been on for the whole of July.

And officials say that the response to US'64 is unprecedently high.

On a July sale price of Rs 14, if a Rs 2 dividend is retained next year as well, as the market expects UTI to, the yield will work out to 14.3 per cent which is considered to be quite good in a falling interest rate scenario.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.