Uti Money Market Mutual Cleared

A letter to this effect was sent to the UTI yesterday. Confirming the development, UTI chairman Jagdeesh Capoor said the central bank had cleared to proposal informally on Tuesday. "However we have received no written communication so far. Our officers went and made a special proposal to the central bank and they have cleared our proposal," Capoor told Business Standard.

Central banks officials said that the UTI had been given the permission on Tuesday and a letter giving "in-principle clearance" has been sent to them. This makes UTI the first entity to set up an MMMF in the country. The setting up of the MMMF will add depth to the money market and also act as a transmission mechanism through which individual investors can park funds in government securities.

 

ABN Amro and Bank of Madura are also planning to set up MMMFs. However, the clearance from the Reserve Bank of India on their proposal is still awaited. Officials in ABN Amro could not be contacted for their comments.

The details of the MMMF being floated by UTI are still not available. Senior officials in UTI said the details would be worked out shortly once the formal clearance comes from the central bank. UTI is also likely to have a tieup with UTI Bank under which the bank will manage the fund. Sources in the bank said that after the accounting principles for the funds are worked out with UTI the final decision will be made.

The RBI had in November 1995 permitted private sector mutual funds to set up MMMFs. Earlier, the scheme was restricted only to banks and financial institutions. However, private sector MMMFs have to seek prior permission from the RBI as well as the Securities and Exchange Board of India (Sebi). In the slack season credit policy announced in April 1996, the RBI had allowed corporates and others which include individuals (both resident and NRIs) to invest in MMMFs. This was done with a view to making scheme more flexible. Earlier, only individuals could invest in MMMFs.