New Delhi: In a major reform initiative, the government on August 31 announced a package for Unit Trust of India (UTI), which includes bail-out for meeting liabilities of US-64 and other assured return schemes, an Ordinance to repeal the UTI Act and splitting the mutual fund into two companies.

This was decided at a meeting of the Cabinet Committee on Economic Affairs (CCEA), Finance Minister Jaswant Singh told reporters here.

As per the reform package, the government will honour all redemption guarantee and the liability on this account is estimated at about Rs 6,000 crore for US-64 scheme.

In respect of assured return scheme, the current shortfall is estimated at Rs 8,561 crore.

The government will also consider certain tax concessions on US-64 with a view to providing an incentive to unit holders to remain in the scheme.

Regarding splitting of UTI into two parts, Singh said UTI-I will be the old protected UTI comprising of US-64 for which assured repurchase prices have been announced and assured return schemes.

The UTI-II (the new UTI) will comprise all net asset value based schemes, which will have a professional chairman and board of trustees and will in course of time be privatised.

The government will meet its obligation annually to cover any deficit in UTI-I and it will be managed by a government appointed administrator and a team of advisors nominated by the government, he said.

Singh said UTI Act will be repealed through issue of an Ordinance and both UTI-I and UTI-II will be structured as per the Securities and Exchange Board of India (SEBI) regulations.

The operational aspect including, but not limited to assets and liabilities between UTI-I and UTI-II, would be worked out by the Ministry of Finance.

Singh also announced that the CCEA will work out a reform-cum-bailout package for ailing IFCI next week.

PTI