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Aabhas Pandya
New Delhi, Sept 3: Unit Trust of India has decided to suspend fresh sale of units in Rajlakshmi Unit Plan (II) from October 1 this year. According to officials at UTI, the suspension comes in the wake of continuing low interest rates and the mutual fund behemoth cannot generate returns to meet the promised amount on redemption.
``It is like an assured return scheme where an investment of Rs 1500 or more grows at a rate of around 14-14.5 per cent per annum in a 16-20 years timeframe. In the current interest rate scenario, it is difficult to find instruments that give returns in the range of 15-16 per cent,'' said an official at UTI. However, he pointed out that sales were merely being suspended and the scheme could be relaunched with reduced interest rate. Rajlakshmi Unit Plan was launched in 1994 with an aim to benefit the girl child and has a current corpus of over Rs 300 crore.
According to analysts, such a move from UTI was expected since interest rates have failed to sustain at the higher levels.``Interest rates at the longer end have moved in a band of 13.5 to 14.5 per cent which gives little maneuverability to UTI as far as spreads go. Besides, there is no clear signal yet as to where the interest rates are headed,'' said an analyst.
``It makes no sense for UTI to continue with schemes that promise to generate returns of over 14 per cent when the three monthly income plans since the beginning of the current calendar year have assured an annualised return of a little over 13 per cent,'' added another industry observer.
With the suspension of sales in Rajlakshmi, the family of assured return schemes under UTI has shrunk further. Besides monthly income plans, the mutual fund currently offers assured returns in Unit-Link Insurance Plan and deferred income plans.
Only last year, UTI had suspended sales of units in its 11-year old plan - The Children's Gift Growth Fund (CGGF). The suspension came into effect from November 1, 1997 since the fund could not sustain assured returns of 14 per centamidst falling interest rates. The scheme is yet to be resumed although trust officials had indicated that they would relaunch the scheme with a lower assured return.
UTI faced considerable flak from depositors in CGGF for its arbitrary decision since the scheme also offered recurring investment plan. ``However, UTI may not come in for criticism this time since Rajlakshmi offers only one time investment. On the other hand, the scheme could see some large inflows till September 30 since suspension of fresh sale comes into effect from October 1,'' said an analyst. The scheme has a minimum investment of Rs 1,500 which grows to Rs 21,000 in 20 years (maximum period for lock-in) if the entry age is upto one year. There is no upper limit on investment and the girl child should not be more than 5 year old. If the child is in the 4-5 year age group, Rs 1,500 will become Rs 11,000 in 16 years.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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