New Delhi: The government on September 3 asserted that it would not allow "asset bleeding" of UTI-l to meet redemption pressure on US-64 scheme and proposed to pass on the dividend earned from corporates on its assets to unit holders.

Unveiling the roadmap for UTI-l, which would be the sick box of UTI after split of the mutual fund into two, Finance Secretary S Narayan announced that government would also come out with tax-free certificates, mainly for large institutional investors in US-64 as an alternative to cash redemption of units.

"In view of the commitment of the government of India to meet all shortfalls in UTI- l, UTI-l will not indulge in asset bleeding to meet redemption pressure and all sale and purchase of stocks will take place in UTI-ll based upon the market perception of its fund managers or the management," Narayan told reporters setting at rest speculation that UTI would sell its bluechip stocks to meet its commitment to unit holders.

The government on August 31 announced the decision to split UTI into two wherein all assets of US-64 and assured return schemes would be transferred to UTI-l valued at over Rs 24,000 and remaining Rs 17,800 crore in net asset value based schemes to UTI-ll, which would be the healthy UTI.

Giving details of the tax concessions to be provided to unit holders of US-64, Narayan said any dividend received by UTI-l from the corporates in which the assets have been parked, would be passed on to the investors barring small administrative expenses.

The dividend would no longer be retained by the mutual fund to improve its net asset value as was being done at present.

Also this dividend would not be taxable in the hands of the investors of unit holders, he said.

PTI