It is learnt that almost 22 crore units under the scheme have already been dematerialised. The value is close to Rs 300 crore. However, although the figures appear high they pale in comparison with the total corpus of the scheme which is over Rs 20,000 crore. However, a large part of this holding is with corporates who would not be keen to dematerialise the units unless there is a liquidity created in the secondary market for these instruments.

Although it not clear whether UTI would legally be able to undertake a limited depository participant operation, sources said that if there isany hurdle to this, UTI could adopt a differential margin system where it would by pegging a higher charge for other scrips, dissuade investors from dematerialising these scrips with UTI.

"Our aim is clear. We want to provide such service which enables higher levels of dematerialisation of our units. We are the issuer as well as the registrar for our units and hence we can dematerialise the units much faster. Today an investor goes to a depository participant who sends the units to us. This is time consuming. We can do this for investors. We will also make the charges far more attractive. To top it all we will be able to service investors through all our 51 branches," said a UTI source. "However, we would not want to dematerialise shares as we want to restrict ourselves only to our own units. We will discuss whether such a limited business is possible, with Sebi and NSDL," said the official.

In fact, apart from service, there is also huge amount of business potential for UTI in dematerialising units forinvestors. Even after offering low rates the Trust could end up making significant amount of money through custody charges and dematerialisation charges and subsequently as liquidity rises, also through transaction charges.

Currently, all these fees are going to other depository participants and the Trust feels it might well be worth it to cash in on its strength of being the issuer and registrar as well coupled with the distribution network. UTI's plan to issue units in demat form will prevent further creation of units in paper form. It will be remembered that Sebi has already decided to make issuance of shares manadatorily in demat form from an undisclosed date and it is felt that it only makes sense for the Trust to follow a similar path in case of its units.

UTI recently started extending the dematerialisation facility to more of its schemes and feels that dematerialised units would lead to far lesser complaints of theft and transfer.