The Unit Trust of India has found a novel way to block large-scale redemptions of US-64 by corporates.
To stem the rush for redemptions in recent weeks, UTI is believed to have told those companies seeking to withdraw from the flagship US-64 that the trust would repurchase their US-64 units by selling their shares held by the mutual fund behemoth.
UTI had used this very same method in 1998 at the height of the US-64 crisis when the fund had to pay dividend out of its reserves.
At that time corporates like Bajaj Auto and companies from the Birla stable had pressed huge redemption requests which were met by selling shares of Bajaj Auto and Birla group companies like Grasim and Indian Rayon.
Over the last few weeks, companies like Bombay Dyeing and Grasim have reportedly pressed huge redemption requests with the Trust. Some of the public sector banks are redeeming US-64 units in a big way.
