UTI - Unit Trust of India

UTI- Background

UTI is an abbreviation for Unit Trust of India. Unit Trust of India was first set up on February 1, 1964. It was set up under the act of Unit Trust of India Act in 1963. UTI is a statutory public sector investment institution that has the main objective to encourage as well as to mobilize the savings of the community. It then canalizes them into productive cooperative investments.

Meaning of Unit Trust of India

Unit Trust is an investment plan where the funds are pooled together and then the investment. The fund that has been pooled is later unitized. The investor is known as a unitholder. He or she holds a certain number of units. On the other hand, the second party which is the manager is responsible for the daily running of the trust and for investing the funds.

The trustee, governed by the Trust Companies act in the year 1967, is the third party. The role of the third party is to monitor the manager’s performance against the trust’s deed. The purpose of the deed is to outline the objectives and the vital information about the trust. Also, the assets of the trust are held in the name of the trustee. Then they are held “in trust” for unitholders.

Objectives of Unit Trust of India

Unit Trust of India (UTI) provides the investor with a safe return of the investment whenever there is a requirement of funds. The Unit Trust of India provides a daily price record and also advertises it in the newspapers. Therefore, two prices are always quoted on a daily basis. 

The two prices are the purchase price and the sale price of the units. This price may fluctuate on a daily basis but the fluctuations are very nominal on a monthly basis. The price usually varies between July and June months. In July, the purchase price is the lowest of the various units. The investor who desires to make an investment can purchase his or her units at this time of the year because this will get him the lowest offer price for the units.

The main and the basic objective of the Unit Trust of India are to offer both small as well as large investors. The means of acquiring shares in the properties results from the steady industrial growth of the country.

The Primary Objectives of UTI

  1. The objective of UTI is to promote and pool the small savings from the lower and middle-class income person those who cannot have direct access to the stock exchange.

  2. Also, to provide them with an opportunity to share the benefits of prosperity resulting in rapid industrialization in India.

Organization and Management of Unit Trust of India

The Unit Trust of India (UTI) was established with an initial capital of Rupees 5 crore. This amount was contributed by the RBI (Reserve Bank of India), LIC, SBI (State Bank of India), and its subsidiaries. Also, the scheduled banks and the financial institutions contributed to the capital of Rs. 5 crores. The initial capital was divided into 1000 certificates of each costing Rs. 50,000. The trust is allowed to borrow from the RBI (Reserve Bank of India) to supplement its financial resources. The amount is repayable on demand or within a period of time i.e. of 18 months.

The Unit Trust of India (UTI) is managed by the Board of Trustees. The Board of Trustees consists of a chairman and the four members nominated by the RBI (Reserve Bank of India), one member by LIC, one member nominated by SBI (State Bank of India), and the two members elected by contributing institutions.

The Unit Trust of India Schemes

  1. The unit scheme was introduced in the year 1964.

  2. In the year 1917, Unit Linked Insurance Plan was introduced.

  3. In 1986, Children Gift Growth Fund Unit Scheme was brought.

  4. Rajlakshmi Unit Scheme was introduced in 1992.

  5. Senior Citizen’s Unit Plan was introduced in the year 1993, for the senior citizens of our country. 

  6. Monthly Income Unit Scheme. 

  7. The Master Equity Plan was brought in the year 1995. 

  8. Money Market Mutual Fund Scheme was introduced in the year 1997. 

  9. Unit Trust of India (UTI) Growth Sector Fund was brought in 1999. 

  10. Growth and Income Unit Schemes. 

The Unit Trust of India Act

The Unit Trust of India act was introduced in the year 1963 to provide for the establishment of a co-operation. It was established with a view to encouraging saving and investment and the participation in the income, profits, and the gains accruing to Co-operation from the holding, management, and disposal of the securities.

FAQs (Frequently Asked Questions)

1: What are the Functions of Unit Trust of India (UTI)?

Ans: The functions of UTI are as following:

a) The UTI mobilizes the savings of the relatively small investors.

b) It also channelizes the small savings into productive investments.

c) It allows the distribution of the large-scale economies among the small income groups.

d) Unit Trust of India encourages the savings of the lower and the middle-class people.

e) It sells nits to the investors in different parts of the country.

f) It also converts the small savings into industrial finance.

g) It gives investors an opportunity to share the benefits and the fruits of industrialization in the country.

h) It also provides liquidity to the units.

i) It accepts the discounts, purchases or sells a bill of exchange, warehouse receipt, documents of the title to goods, etc.

j) It also grants loans and advances to the investors.

k) It provides leasing and hire purchase business.

l) It allows buying or selling or making a deal in foreign currency.

2) What are the Advantages of UTI?

Ans: Following are the advantages of UTI:

a) The investments are very safe and also divide the risk over a wide range of securities.

b) Because it distributes 90 percent of its income, the investors will get a regular and good income.

c) Have a high degree of liquidity of investment as one can sell the units back to the trust at a specific price at any time.

d) There are experts who are doing the hard work for you.

e) There are several unit trusts to choose from.

f) The resource of the investors is pooled with other investors, allowing one to make investments impossible as an individual investor.

g) It helps the investors to conveniently diversify the investments.