Indian Bank MF challenges SEBI order on assured returns

Indian Bank Mutual Fund is in no mood to pay up the assured returns of around Rs 700000000 to investors of its `Ind Prakash’ scheme. The Indian Bank subsidiary has challenged the order of the Securities and Exchange Board of India (SEBI) on repayment of assured returns in the Appellate Authority in the Finance Ministry. SEBI had asked Indian Bank Mutual Fund, vide its order dated November 29, 1999, to pay Rs 30 per unit to over one00000 investors before December 30, 1999. However, the mutual fund has now approached the Appellate Authority against the SEBI order. It is understood that the RBI also supported the SEBI stand and asked Indian Bank to fulfil the commitment made to the investors. The crisis has deepened with the government refusing loss-making Indian Bank to bail out its mutual subsidiary. On the other hand, Indian Bank Mutual Fund is strapped for cash and is not in a position to shell out Rs 700000000 to pay up investors. SEBI rejected the argument of Indian Bank and is stillinsisting that investors of Ind Prakash should be made full promised return of Rs 30 per unit. What has upset investors was the fact that Indian Bank MF had earlier agreed to make the payment but retracted later. The mutual fund made a commitment on June 15, 1999 that “in the interest of investors, Indian Bank, the sponsor bank of the mutual fund, has proposed to meet the unpaid dividend liability even though the scheme has given only indicated returns.” The mutual fund earlier which agreed to pay up the shortfall earlier has now gone back on its word and says it will pay Rs 17 instead of Rs 30 per unit. The scheme has a corpus of Rs 1020000000 under Plan A and Rs 1000000000 under Plan B. The huge losses made by its parent Indian Bank which is now waiting for a bailout — later changed the situation. “The mutual fund should immediately pay up the promised returns to investors. Otherwise it will dampen the confidence of investors in the mutual fund sector which is now showing a good performance,” saidKirit Somaiya, president of Investors Grievances Forum, adding that the Finance Minister had asked Indian Bank to honour the commitment. Several mutual funds including BoI Mutual Fund, GIC Mutual Fund, PNB Mutual and LIC Mutual Fund had paid up shortfall in assured returns to investors. These mutual funds had paid up Rs 1,6580000000 to investors. Even Indian Bank Mutual Fund had paid Rs 230000000 to Rs 420000000 in respect of its Ind Jyothi and Suvarnapushpa schemes. Chennai-based Indian Bank, the parent of Indian Bank Mutual Fund, announced a net loss of Rs 788.500000000 for fiscal 1999. The massive net loss, its fourth in a row, pushed its accumulated losses as on March 31, 1999, to Rs 3,181,880000000, wiping out its net worth of Rs 2,898.630000000. In effect, Indian Bank’s negative net worth now stands at Rs. 2830000000.