Earlier, two audit reports prepared by management consultants - Chandabhoy Jassubhoy and Rajendra Chitale - suggesting overhaul of the UTI's working were ignored by the regulatory body and the UTI. The reports by Chandabhoy Jassubhoy and Chitale were prepared when S A Dave was the chairman and he had opposed any regulation saying that the Trust has been created by a separate Act of Parliament, hence, it is independent of Sebi. Price Waterhouse has conducted an independent audit in 60 mutual fund schemes and predicted major shortfalls when the schemes come up for redemption. The report has criticised the accounting policies of the US-64 and warns thatthe development reserve fund of the Trust is inadequate to cover the shortfall.

In fact, despite warning bells sounded by two audit reports, the UTI itself has not done anything over the last few years to set its house in order. When contacted, SEBI officials say that as they do not have powers to regulate UTI as of now, and they would not like to comment on the Price Waterhouse or earlier reports.

UTI officials, on the other hand, say that they have already set up three asset management committees and at present a lot of restructuring is taking place in the organisation in order to bring down their non-performing assets (NPA) level in US-64 and other schemes. ``Besides, we are also looking at the option of hiring a foreign consultant to restructure the organisation,'' say officials.

Officials say that they are identifying sticky exposures in several companies -- especially in the steel sector and it will make efforts to get out of these exposures over the next two years.

The levels of NPAs in theportfolio of US-64, is whopping Rs 1,056 crore which is almost 4.8 per cent of the total corpus of the scheme. The current corpus of the scheme is at Rs 22,000 crore with over two crore investors.