MUMBAI, November 7: In what is expected to be a great relief to risk-averse investors, the Unit Trust of India (UTI) has decided to continue assuring returns for its forthcoming monthly income plan.

However, in keeping with the general fall in interest rates, UTI has decided to reduce the interest rate for MIP (V) 1997 by 75 basis points at 11.75 per cent. The recently concluded MIP (IV) offered 12.5 per cent monthly. MIP (V) will be offering an assured return of 11.75 per cent payable monthly, with the rate of return being guaranteed for all the five years of the plan. However, as an additional feature, MIP (V) will also offer an option to pay the interest on an annual basis, in which case it will be 12.4 per cent. The MIP series offered earlier provided investors only with the monthly and cumulative option. The annual interest for MIP (V) is an additional feature.

The scheme will be open from November 17. The fund will be open to all categories of investors. UTI also hopes to target investors of GMIS 92, which is coming up for redemption at the same time, to rollover their investment into this scheme.

The current year has been a fruitful one for UTI as far as collections under the MIP series are concerned. MIP (I), (II), (III) and (IV) collected Rs 1,200 crore, Rs 1,300 crore, Rs 800 crore and Rs 900 crore respectively.The success of these schemes stemmed from the fact that UTI was offering assured returns for the entire life of the scheme, the guarantee being backed by a special fund - a Rs 400-crore development reserve fund.It may be recalled that just a couple of months ago, UTI chairman GP Gupta had indicated that the Trust might consider phasing out assured returns schemes, considering that the interest rates were constantly moving southwards.

However, sources said that the Trust has, for the present, decided to continue giving assured returns in order to be able to live up to its image of offering products for investors of all grades of risk.

In fact, UTI is not offering an assured return product only for the small investors. On November 24, it will also be launching another of its special fund for institutional investors called the Institutional Investors Special Unit Scheme (IISUS), offering a return of 12.75 per cent. The interest payable here is higher because the minimum investment amount is higher at Rs 10 lakh, and the cost of managing the funds cheaper.

This will be the second IISUS scheme this year. The IISUS (I) launched in April this year had offered an assured return of 15 per cent and collected around Rs 600 crore. UTI also proposes to launch its Monthly Equity Plan (MEP) in November as part of the equity-linked savings schemes series, targeting tax payers. The offer document for this plan is still undergoing its cooling period at SEBI. If all goes well, UTI proposes to launch this scheme on November 24.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.