Life Insurance Corporation (LIC) was forced to pay Rs 200 crore by way of shortfall in assured returns to the investors of LIC Mutual Fund's three Dhanvarsha schemes and Dhanshree. LIC had to chip in Rs 136.92 crore towards meeting the shortfall in Dhanvarsha (4) scheme alone.

State Bank of India had to pay Rs 12.29 crore for the Magnum Bond Fund and Rs 34.25 crore for the MMIS 91 scheme of SBI Mutual Fund. Indian Bank was made to pay Rs 23.18 crore to the investors of Ind Jyothi floated by Indian Bank Mutual Fund. Similarly, Punjab National Bank and Bank of India also forked out Rs 2.8 crore and Rs 1.38 crore respectively to bail out the schemes floated by their mutual fund subsidiaries.

Many mutual funds had assured minimum returns whilefloating new schemes. ``Several mutual funds found it difficult to meet this commitment and almost reneged on their promises. This may be due to the fall in stock market prices and mismanagement of funds,'' said a mutual fund source.

``Even the assured return schemes of mutual funds launched prior to the Sebi regulations have been asked to meet their commitments,'' said Ashok Kakkar, executive director, Sebi. The assured schemes are guaranteed by the sponsors of the mutual funds as per the Sebi regulations. ``If the mutual fund subsidiary is unable to shell out money for the assured returns, then sponsors of the fund will have to meet the shortfall. We have imposed strict regulations and compliance for both public and private sector mutual funds,'' said a Sebi official.

The mutual funds industry, which is currently going through a rough patch, is expected to grow phenomenally as it is the safer route for the investors to enter the secondary market. Of the Rs 75,000 crore raised by the mutual funds as onMarch 31, 1998, the share of Unit Trust of India (UTI) alone is Rs 60,000 crore. The share of public sector mutual fund was Rs 11,000 crore. Of this, amount invested in equity was 51 per cent of corpus.