UTI's Mandate
UTI was formed to increase the propensity of the middle and
lower groups to save and to invest. UTI came into existence
during a period marked by great political and economic
uncertainty in India. With war on the borders and economic
turmoil that depressed the financial market, entrepreneurs were
hesitant to enter capital market. The companies found it
difficult to access the equity markets, as investors did not
respond adequately to new issues. To channelise savings of the
community into equity markets to make them available for the
companies to speed up the process of industrial growth.
UTI was the idea of then Finance Minister, T.T. Krishnamachari,
which would "open to any person or institution to purchase the
units offered by the trust. However, this institution as we see
it, is intended to cater to the needs of individual investors,
and even among them as far as possible, to those Whose means are
small."
UTI was formed as an intermediary that would help fulfil the
twin objectives of mobilizing retail savings and investing those
savings in the capital market and passing on the benefits so
accrued to the small investors. UTI commenced its operations
from July 1964 "with a view to encouraging savings and
investment and participation in the income, profits and gains
accruing to the Corporation from the acquisition, holding,
management and disposal of securities." Different provisions of
the UTI Act laid down the structure of management, scope of
business, powers and functions of the Trust as well as
accounting, disclosures and regulatory requirements for the
Trust.
Structure of the Trust
UTI represents an unique organisational without ownership
capital and an independent Board of Trustees. Under the
provisions of the first UTI scheme, US-64, certain institutions
contributed to the Scheme's initial capital, which was
redeemable at the discretion of the Trust at such value decided
by the Government of India.
The contributors to the initial capital of Rs. 5 crore for US-64
Scheme were Reserve Bank of India (RBI), Other Financial
Institutions, Life Insurance Corporation (LIC), State Bank of
India (SBI) & its subsidiaries and other scheduled banks
including a few foreign banks. In February 1976, RBI's
contribution was taken up by the Industrial Development Bank of
India (IDBI). The institutions were provided representation on
the Board of the Trustees of UTI. Under the provisions of the
Act, Chairman of the Board was appointed by Government of India.
The Board of Trustees oversees the general direction and
management of the affairs and business of UTI. The Board
performs its functions based on commercial principles, keeping
in mind the interest of the unit holders under various schemes.
Since UTI does not have any share capital, it operates on the
principle of "no profit no loss" as all income and gains net of
all costs and development charges ultimately go back to
investors of respective schemes.
Formative Years: 1964-1974
UTI commenced its operations with R.S. Bhatt at the helm. The
first product, Unit Scheme 1964 (US '64), continues to be the
most popular investment avenue to date. In the first year itself
the scheme mobilised Rs.19 crore compared to the incremental
commercial bank deposits of Rs.367 crore in that year. The first
year's dividend was 6.1% compared to the bank deposit rates of
3.75 - 6%. With the increasing popularity of US-64 as a
long-term investment avenue, the Trust introduced a Reinvestment
Plan in 1966-67 (automatic reinvestment of income distributions
to US-64 unit holders). After two successful terms, when R S
Bhatt relinquished charge, he had laid a solid foundation for
the Trust. During his tenure, unit capital had grown to Rs.92
crore, covering an investor base of 3.64 lakh accounts. |
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