SEBI Directs LIC, BoB And SBI To Reduce Stake In UTI AMC

The Securities and Exchange Board of India (SEBI) has directed Life Insurance Corporation of India (LIC), State Bank of India (SBI) and Bank of Baroda (BoB) to bring down their stakes below 10 percent in UTI Asset Management Company (AMC).

At present, SBI, LIC, Punjab National Bank and BoB hold 18.5 percent stake in UTI AMC, each. The rest is held by American company T Rowe Price.

SEBI rules introduced in March 2018 put a cross-holding limit which does not allow a shareholder who has at least 10 percent stake in a mutual fund to hold a similar-sized stake in another fund house. Board positions would also have to be given up. This was introduced to eliminate conflicts of interest.

All the Indian stakeholders, except PNB, have their own AMC businesses.

In compliance with the cross-holding rules, the regulator also wants their nominees to be removed from boards of UTI AMC and UTI Trustee Co before 31 December 2020.

On failure to comply, the shareholding and voting rights of the three stakeholders in excess of 9.99 percent would be frozen, it said.

"It is noted that despite the expiry of over 20 months from the date of amendment of the regulations, the noticees (LIC, SBI, BoB) are yet to achieve compliance with these requirements," SEBI order on Friday said.

"This conflict of interest could affect the functioning and performance of the mutual fund industry as a whole," it added.

"Thus, implementation of Regulation 7B is critical to the removal of such potential conflict of interest for improving the overall functioning of the mutual fund industry and to foster the interest of investors."

This Wednesday, SBI on Wednesday said that it has decided to sell 8.25 percent of its stake in UTI AMC through an initial public offering (IPO).