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UTI is a statutory corporation established under the Unit Trust of India, Act 1963 with a view to encouraging saving and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities. The Act came into force on 1st February 1964.
The initial capital of UTI was Rs.5 crores which has been contributed as under:
The initial capital forms part of US-64 and the subscribers hold units in that Scheme. In 1975, the UTI Act was amended and by virtue of the amendment, the Industrial Development Bank of India (IDBI) took over the rights and responsibilities of RBI under the Act and the share of the initial capital held by RBI was transferred to and vested in IDBI.
he general superintendence, direction and management of the affairs and business of UTI rests in a Board of Trustees which exercises all powers and does all acts and things which may be exercised or done by UTI. The composition of the Board of Trustees is as under :
The Board meets not less than six times a year and atleast once in two months.
The Act provides that where the whole of the initial capital has been refunded to the contributory institutions, the Central Government may, after consultation with IDBI, by order, provide for reconstitution of the Board. The Act also provides that regulations made by the Board have to be with the prior approval of IDBI.
There is an Executive Committee which, subject to such general or special directions as the Board may, from time to time, give, has the power to deal with any matter within the competence of UTI. The Executive Committee consists of :-
The Executive Committee usually meets once in a month.
The day to day business operations of UTI are looked after by a full time Chairman. He is assisted by a team of Executive Directors and Chief General Managers. Presently posts of eight Executive Directors and twelve Chief General Managers have been created by the Board though all posts have not been filled. The post of Executive Trustee has remained vacant from 1st January 2000.
UTI has a three-tier organisational set up with a Corporate Office, four zonal offices and fifty four branch offices. It has about 4.1 crores unitholding accounts (with more than one account held by a single person) under 73 domestic schemes having investible funds at market value as on 30th June 2001 of Rs.56,057 crores. In addition, it has six off shore funds and four venture capital funds. Its management expenses amount to about 1% of the investible funds.
The Board has powers to constitute such other committees whether consisting wholly of trustees or wholly of other persons or partly of trustees and partly of other persons as it thinks fit and for such purpose as it may decide.
In May 1997, at the instance of SEBI, the Board constituted three Asset Management Committees for UTI's domestic schemes, one each for
Each Asset Management Committee consists of seven members of whom not less than five are independent outside experts. No person is a member of more than one committee. The Committees' scope of activity includes :-
There is also an Audit Committee consisting of five trustees which reviews the systems and controls and interacts with the internal and external auditors. In addition to Board Committees, there are a number of Committees constituted of the executives of which the most important are :-
While the power to take decisions related to investment of the funds has been delegated by the Board of Trustees to the Executive Committee and to a lesser extent to the Chairman, exposure limits have been laid down in UTI General Regulations, 1964 and further restrictive limits have been specified by the Board. The broad investment policy of each scheme is laid down under the provisions of each scheme approved by the Board of Trustees or the Executive Committee. The Board reviews the delegation of powers from time to time.
For investments in the primary market, there is a Primary Market Investment Committee consisting of 4 Senior Executives which vets all proposals and submits the same to the Chairman with their recommendations. The secondary market transactions in equity as well as debt are decentralised to individual fund managers who decide on buy and sell strategy after consultation with research analysts. All stock market transactions are reported to the Executive Committee which gives overall direction in respect of secondary market transactions. Report of secondary market transactions is also placed before the Board.
UTI has promoted a number of associated companies and institutions. The details of its investment in those companies/institutions are as under :-
In addition, it has participated with other institutions in promoting a number of capital market intermediaries like The Stock Holding Corporation of India Ltd., Infrastructure Leasing and Financial Services Co. Ltd., National Securities Depository Ltd. etc.
The investments in associated companies and institutions has been financed out of the Development Reserve Fund. As on June 30, 2001, the Fund amounted to Rs.1,535 crores.
The Act provides that in the discharge of its functions under the Act, UTI shall be guided by such directions in matters of policy involving public interest as IDBI may give to it in writing and if any question arises whether the direction relates to a matter of policy involving public interest, IDBI's decision is final.
Unique Strength & Weakness of UTI
UTI is the largest player in the mutual fund industry with total investible funds of domestic schemes (at Market Value) as at 30th June, 2001 of Rs.56,057 crores constituting about 57% of the total investible funds of the industry. US 64 with a total unit capital as at 30th June 2001 of Rs.12,786 crores had a substantial share of these investible funds. It has certain unique strengths notable amongst them being :-
It also has certain pronounced weaknesses: