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STATES: UTI
Wealth Pipe That Burst:
The leaks in US-64
 GOOD
TIME: With the 1991 reforms causing closure of most tax-exempt savings,
US-64 becomes the preferred scheme for the middle class to park its savings.
Rs 100 of units bought in July bring Rs 114-117 next June, a yield better
than banks.
GLITCH: Crisis appears in June 1996,
with the previous year's net income falling below dividend payout for
the first time in the scheme's history. US-64 eats off its reserves, but
investor confidence is jolted.
COULDN'T CARE LESS: Dividend flattens
out at 20 per cent and reserves shrink but US-64 keeps increasing its
exposure to risky papers.
 COLLAPSE:
By June 1998, the reserves turn negative to the extent of Rs 1,098
crore and there is a run on the scheme in October, calling for new fund
infusion. The Deepak Parekh Committee recommends several changes, including
bringing US-64 under the control of SEBI and swapping equity for debt.
These go unheeded.
GODMOTHER: Jayalalitha forces NDA government
in 1998 to appoint P.S. Subramanyam as UTI chairman. And UTI's equity
investments become arbitrary, if not dubious.
 COMA:
On July 2, 2001, the UTI board meets in Delhi to announce that sale and
repurchase of US-64 will be suspended for six months and a meagre 10 per
cent dividend paid out. Most corporate investors smartly redeemed their
units. The move forces the Government to sack Subramanyam.
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