Unit 64 was started in 1964, Monthly Income Schemes were also started assuring percentage of interest and return of capital, for number of years. There was a conflict between Unit Trust of India and SEBI on the ground that provisions of SEBI did not apply to Unit-64, as they are governed under the Unit Trust of India Act. Unit Trust of India has not to follow Rules and Regulations of SEBI.

Unit Trust used to invest the monies received from the Unit Trust - holders in equity and debt instruments. No company dealing in Units and Mutual Funds had given assurance regarding assured interest per month or per year and also assured return of capital. Unfortunately, the management of the Unit Trust of India assured interest and capital knowing it fully well that such a guarantee is contrary to the market forces of the share market. The share market does not create any wealth. It is only exchanging the wealth among the investors. Unit Trust should not have given such assurance of principal and interest, which is against the market forces.

The share market had crashed in 1999 and Parekh Committee was appointed, which had made recommendations with regard to the working of Unit Trust. The Central Government had given 3300 crores rupees to the Unit Trust of India. The Parekh Committee had submitted its report and had suggested two main recommendations, which were not carried out for the period of 3 years.

• To change ratio of investment : 70% equity : 30% debt, to 70% debt and 30% equity.

• Price of Unit, which was at Rs.13.50 in the month of July should be reduced to NAV price of the Unit. Authorities did not carry out both the recommendations and another debacle of Unit-64 happened in 2001. Unit Trust did not declare any dividend and closed the business of purchase and re-purchase of Units. The Central Government had to intervene and formulate a scheme for two crore investors. The Central Government has decided to give Rs.15,000 crore to Unit Trust of India in order to fulfil the obligation of giving principal amount and interest to the Unit-holders.

By not implementing Parekh Committee Report within three years, has resulted in loss of Tax-Payers money to the extent of Rs.15,000 crore.

The writer had sent a letter to the Times of India, which is reproduced as under :

Two crore US-64 holders should have asked a simple question to themselves as to how Unit Trust of India had distributed dividend of 20% to 26%, when a public Company is able to give 15% interest on the amounts received as fixed deposits.

Unit-64 Scheme had collected Rs.13.50 to Rs.19.00 for one unit of Rs.10/-. The said scheme did not take entire Rs.13.50 to Rs.19.00 in the share capital. The excess of Rs.10/- provided with profit in share market was distributed to Unit-holders in the month of July. The Central Government at the cost of honest tax payers gave Rs.3300 crore in the year 1999 to Unit Trust of India and appointed Parekh Committee in 1999 to salvage U.T.I.

Two main suggestions were made by Parekh Committee namely to change the ratio of investment 70 equity : 30 debt to 70 debt : 30 equity. No attempt was made to change the ratio and the ratio of the investment is 67 equity : 33 debt has remained today even after three years.

The Parekh Committee gave three years time to bring down selling price to NAV of one Unit, but U.T.I. has offered the same price of Unit at Rs.13.50 only and continued the same three years even though NAV was less than Rs.13.50. U.T.I. had wiped out reserve fund in distributing dividends in July, 2001. Rs.3,000 crore were borrowed for meeting large-scale in repurchase of units by corporate investors in May, 2001.

Indian investor is greedy with regard to high rate of interest and be should take solace that he had also received 26% dividend when the rate of interest in the market was 15%. Indian investor has learnt a lesson that any scheme which is not based on NAV is bound to fail as such scheme is like any other chit fund."