Recast Unit Trust Money Market Mf Gets Nod

Unit Trust of Indias (UTI) money market mutual fund has finally been given the go-ahead by the Reserve Bank of India, after it made fundamental changes in the proposed structure of the fund.

UTI plans to launch the fund in March after it obtains a formal nod from the Securities and Exchange Board of India (Sebi).

It has now decided to float the fund as one among a family of funds, instead of the earlier deposit account format with UTI Bank. The Reserve Bank, as a policy, has always been keen on maintaining an arms length between banks and mutual funds.

The fund had been awaiting RBI clearance for the past few months, but was held up owing to certain clarifications on the proposed structure. Jagdish Capoor, deputy governor, RBI said, The money market mutual fund that UTI has been planning involves UTI Bank. In that connection there were some clarifications that the RBI was seeking because of which the clearance was put on hold. However, these have now been sorted out by the mutual fund. A formal approval would soon be issued, Capoor added.

The issue, according to sources at the mutual fund, was essentially whether the operations of the UTI money market fund would reflect on the assets and liabilities of the UTI bank.

The RBI was concerned about the role of UTI Bank in the operations of the UTI money market fund, in their earlier structure. The trusts original plan involved setting up the MMMF as a deposit account within the bank.

However, according to sources, the central bank was concerned about the scheme providing competition to the bank deposits. Clearing the scheme in this form would have set a precedent for other funds, they felt.