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Investors find trust lacking


Yashwant Sinha

Trust is a scarce commodity these days when it comes to Indian financial institutions. The Unit Trust of India, the country's biggest mutual fund, could be in trouble once again. Last July the government bailed out UTI's biggest fund, US 64, the second rescue in three years.

UTI's new chairman, M Damodaran, says it could face a shortfall this year when it must pay investors guaranteed returns. An expert panel warned last year that in 16 out of 25 guaranteed-return funds managed by UTI the market value of assets was lower than the liability of the fund.

By one estimate UTI will have to pay investors up to Rs58 billion, or 11% of its Rs511 billion ($10.8 billion) assets, this year. Not much money is coming in from investors. UTI has suffered net outflows. Assets managed by UTI shrank by a fifth last year, partly because of a battered equity market.

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