News reports disclose that for the first time The Unit Trust if India (UTI) has approached the Securities Board of India (SEBI) for inspection of its schemes.

UTI, with assets in excess of Rs 605 bn as on August 1999, is India's largest mutual fund (MF). It accounts for more than 75% of India's MF segment. UTI commenced operations in 1964, with the launch of Unit Scheme 1964 (US-64), its flagship scheme. Unlike other MFs, it is governed by the Unit Trust of India Act, 1964, and does not come under the purview of SEBI regulations.

Currently, SEBI regulations require a MF to have a sponsor and an asset management company (AMC). As UTI was never governed by SEBI regulations, it never had a sponsor. MF analysts are of the opinion that the government should take over the sponsorship of UTI, so that it is at par with other MFs.

UTI's move to make its schemes SEBI-compliant is in response to the Deepak Parekh committee recommendations to enhance transparency and give it a more investor-friendly appearance.

Now that UTI has approached SEBI for inspection of its schemes, it will serve to reassure investors of its seriousness regarding reforms. For quite some time now, UTI's image has suffered due to investor discontent and this is more than reflected in lower inflows in its schemes. But after becoming SEBI-compliant, investor perception about UTI will improve considerably. While this may not increase inflows into UTI's schemes, nevertheless, it is a step in the right direction.

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