But this cannot be a long-term solution. Efforts to brazen things out--by unconcernedly hiking the sale and repurchase prices--are also not the answer. True, there is no question of allowing a run on UTI--if that is allowed to happen, the financial system will be at risk. But it must be realised the only way out is for UTI to adjust its sale and repurchase prices downwards to reflect the scheme's true NAV--and quickly.

This may shock investors, but they will probably accept the reality sooner or later. Most investors think of the scheme as something that brings them income, not capital appreciation. Bringing the price down will result in aone-time capital depreciation for all--but that is why those already holding on to units won't sell. On the plus side, many new investors will come rushing in at the lower price. At a sale price of Rs 10 or Rs 11, the pressure on UTI to declare a high 20 per cent dividend will also be less. Any payment slightly above the comparable fixed-deposit rate must be enough to attract fresh investors.

UTI could also think of offering a rights issue at a slight discount to the NAV, which will not only stave off redemptions, but also bring in the much-needed funds. In the long-term, the solution lies in bifurcating the US 64 scheme into two different funds---one an income scheme for the risk-averse investor, and the second a pure equity or balanced scheme.