The Unit Trust of India (UTI) will continue with the ban on sale and repurchase of US-64 units till December even as it is working out a proposal of a providing an exit option to retail investors, UTI acting chairman K G Vassal said.
"The suspension of sale/ repurchase of US-64 units will continue for the next six months," he said.
Vassal also ruled out any financial bailout from the government.
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The trust will submit a proposal on the exit option to the government in 15 days. "The board of trustees would meet soon to work out the various options which could be given to the retail investors," the UTI chief said.
Sources said the UTI think-tank is exploring the options to arrive at the repurchase price for US-64 units for small investors. These include making the scheme net asset value (NAV)-based, continuing with the administered pricing and offering a premium on the NAV.
On Monday, the UTI had suspended sale and repurchase of units for a period of six months in its most popular and biggest fund, US-64, which accounts for about 25 percent of its assets.
UTI executive director Brij Gopal Daga said: "Liquidity will continue to remain a concern in light of the current market conditions. A decision would be taken taking this factor into consideration. The biggest task before the trust now is to identify small investors."
US-64 has two crore unit holders spread across 40-45 lakh investors.
Earlier this week, finance minister Yashwant Sinha had discussed the liquidity issue with Reserve Bank of India (RBI) governor Bimal Jalan. The RBI is not considering any immediate line of credit to the mutual fund behemoth.
According to Vassal, the ban on sale and repurchase was the best decision taken in light of the current situation on the stock market.
"Had the UTI still continued unrestricted sale and repurchase, this could have resulted in a large-scale outflow from the fund. This, in turn, would have disrupted the built-up asset value of the fund, and adversely affected long term interest of retail investors," he said.
UTI has already announced that it would divest certain holdings of the US-64 scheme to secure better prices.
Non-permissible assets of the schemes including real estate would be transferred out of US-64 portfolio to shift to net asset value pricing, as prescribed by Deepak Parekh Committee. UTI has appointed an independent fund management body to ensure the most advantageous re-balancing of the portfolio.