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BUSINESS: UTI
Recreating The Trust
With his experience as a regulator, the first bureaucrat
chief of UTI is expected to discipline a large fund that has gone berserk
By Sumit Mitra
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A TIGHT REIN: The new broom of UTI
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The headquarters
of the Unit Trust of India (UTI) at Marine Lines in Mumbai saw a lot more
than a change of guard last week. With the appointment of Melovithi Damodaran,
a 1972 batch IAS officer, as its ninth chairman, the beleaguered mega-fund
of the Government seemed poised for a cultural about-turn. It spelt the
end of the "old order" as manifest in the colourful personalities
of some of its former chiefs (see box), some of whom allowed themselves
to be driven by the passion of the gaming table in dealing with public
funds. With no boss to report to in a trust insulated from the government
by an Act of Parliament, the UTI top shots, drawn from the executive ranks
of financial institutions, had acquired the image of the head of J.P.
Morgan in the pre-crash weeks of 1929-appearing on the front page of the
Wall Street Journal with a V-sign and a cigar in the mouth on the day
the mayhem began. The 37-year-old UTI had, at best, no leader accountable
to its owner, the Government.
Damodaran, the burly new broom, lacks-and unregrettably
so-the making of a market player. "I don't see it (not having a taste
for gambling on the stock market) as a handicap," he says. In the
service, however, he has a string of achievements to his credit. An officer
of the Manipur-Tripura cadre, he became the chief secretary of Tripura
in 1992 at the age of 45, the youngest IAS officer till then to head the
bureaucracy of a state. In the 1980s, as a young deputy secretary in the
Textiles Ministry, he had hands-on experience in restructuring the ailing
textile mills of Maharashtra in the stormy years of trade union leader
Datta Samant's factory-gate battles.
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SHIFT
OF INTEREST
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FIREWALL: UTI chief to stay off investment
decisions and to blow the whistle only if these go out of sync with
the small investor-orientation.
EXPERTS ONLY: The Asset management
committee of professionals to decide on investment, collectively
and transparently.
LOW RISK: Equity ratio of all schemes,
including US-64, to be brought down increasing shares of secure
debt instruments.
TRANSPARENCY: In sale and purchase
of equity, all deals will be through the stock exchanges, eliminating
closed-door negotiations.
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However, when Finance Minister Yashwant Sinha
chose Damodaran for the UTI chairmanship, what weighed uppermost was his
recent record in the Department of Banking as the chief of vigilance in
the years marked by the banks' altogether new adherence to prudential
norms-owning up bad loans, grading these sub-standard assets by the length
of their defaults and identifying the guilty officer. "My job,"
the affable ex-sheriff of the banking sector says, "was not so much
of policing but to help create a system by which you could distinguish
a mala fide error of judgement from one which is bona fide." In his
short stint at the Reserve Bank of India (RBI) after that, he switched
from being a whistle-blower to that of supervising the nursing back to
health of three burnt-out cases-Indian Bank, United Bank of India and
United Commercial Bank. Still, he kept in touch with RBI's Department
of Banking Supervision, with its growing capability to supervise credit
decisions both from scrutiny at the banks or through online checks at
the central bank.
Damodaran's skills are thus double-edged. He
is known for restructuring crumbling organisations but is also adept at
catching a crook, or at least setting up a system of alarms to make would-be
violators think twice. It is a combination of these two qualities which
brought the high-profile job to Damodaran, over the heads of at least
a half a dozen financial wizards, including P.J. Nayek of UTI Bank and
Basudev Sen of IDBI.
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