MUMBAI, January 22: The flagship scheme of the Unit Trust of India (UTI), is likely to face an unscheduled redemption spree from banks following the Reserve Bank of India's tight money policy announced last week.The RBI on last Friday jacked up the bank rate to 11 per cent and CRR to 10.5 per cent sucking out liquidity from the system and paving the ground for hike in domestic interest rates.
Banking sources said redemptions worth Rs 500 crore are likely to be effected. Bank of Baroda has taken the lead in redeeming units worth Rs 160 crore.
Top UTI officials said that the institution was prepared for such eventualities. In fact, sources said that UTI was almost anticipating such an outflow. "We have such cycles of institutional and corporate outflows as liquidity tightens," said a source. US-64 by virtue of its size is in a position to take this kind of redemption, they added. Especially this year, as the scheme has seen Rs 3300 crore worth of funds making a beeline for its coffers. On the assumptionof a 20 per cent dividend, the scheme is expected to give a yield of around 14 per cent. At present, the sale price of US-64 is Rs 14.90 and repurchase price is Rs 14.60.
However, even as monies were making their way into the fund, US'64 has also already seen a huge outflow of nearly Rs 720 crore from the scheme during the six month period of July-December 1997.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
