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Vivek Law & Parul Monga
Mumbai, Dec 28: The Unit Trust of India has revamped its broker empanelment system and decided to slash brokerages across the board in a bid to crack down on the nexus between brokers and its dealing room staff. The move, which will see the Trust spread its business across a larger number of brokers, is likely to help it save on brokerage fees owing to increased competition.
According to sources in UTI, the Trust has more than 100 active brokers empanelled with it. However, a select few managed to corner a bigger share of the business from the Trust, thus depriving others of a good business opportunity. This may have prompted the Trust to revamp its empanelment system as it was felt that competition would lead to lower brokerage charges. Considering that UTI paid brokerage of around Rs 28 crore last year, the move has major significance.
Sources also pointed out that the Trust has decided not to give any fixed brokerage charge but instead negotiate the brokerage payable. When contacted, UTI chairman PSSubramanyam confirmed that the Trust has decided to spread its business across a larger number of brokers. He, however, denied that this was a fallout of the fact that major business was concentrated in the hands of a few brokers.
"We realised that several other brokers who are empanelled with us too have the requisite capital adequacy apart from others and fit our criteria for giving business. Therefore, we have decided to spread our business across more brokers", said Subramanyam.
As regards the issue of negotiating brokerages, Subramanyam said that the brokerage which the Trust pays would automatically come down further once there was greater competition among the brokers. "We have always been striving to give as low a brokerage as possible," said Subramanyam.
However, one broker who was among those who received a large amount of business from UTI said that the Trust had decided to broadbase its business and this had led to his business from UTI coming down. He also said that UTI had decided to nolonger give the fixed 0.5 per cent brokerage and instead negotiate a brokerage fee.
It is felt that in a dematerialised environment where absolute safety of settlement is guaranteed there is no reason for any investor, least of all a giant like UTI, to restrict itself to a few "trusted" brokers. On the other hand, with brokerages falling in the demat environment owing to a greater comfort level acquired by a broker, it was felt that it was high time investors became more market savvy by giving lower brokerages.
Subramanyam had earlier said that he was keen to revamp the dealing room operations by making it more focussed. This was sought to be brought about by creating specialist dealers in each scrip or each sector, and extend the capability of these to all schemes of the Trust.
All these decisions had been prompted by the infamous UTI crisis, which led to the reserves of several of the Trust's schemes, including the flagship US-64 scheme, recording negative reserves.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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