Khan was also associated with the Unit Trust of India since the institution's inception in 1964. As the promoter, IDBI has had supervisory powers on India's largest capital market players, though it did not interfered in its day to day functions. In the last seven years, Khan has been the director on the board of UTI and has taken several initiatives to steer the organisation into correct direction. Khan, who is now chairman National Stock Exchange, spoke to DEV CHATTERJEE on the recent controversy over UTI's best selling scheme -- Unit-64, the non performing assets (NPAs) of the financial institutions and the industrial recession. Excerpts.

There have been many questions over the US-64 and its performance in the last few weeks. What is your opinion considering that you were adirector in those crucial years when the scheme's corpus depreciated?

I do not think there has been anything wrong with the UTI's US-64 scheme. An impression is being created that the scheme is not performing well and there could be a run on the scheme. The US-64 has been a good scheme and will continue to remain so in the future. For years, the scheme has provided the liquidity, returns and safety to its investors. It will provide the same advantages in future too.

The scheme's value had depreciated due to the fall in stock markets in the May-July period which was was a notional loss. They have now managed to recover a lot of gap in the last three months. The UTI has weathered many storms in the past and I am confident that it will be able to get out of the current situation in the next few days.

There was a criticism that UTI lacks transparency as it is not declaring its net asset value of US-64. Do you agree?

Historically, US-64 had provided safe returns to its investors withoutdeclaring its NAV. If the scheme was not transparent, more than 2 crore unit-holders would not been invested their life's savings with the Trust. The scheme has never defaulted on its promises. Whenever the sale and repurchase announcements have been made, it was based on the last year's performance only.

Of the UTI's total corpus of Rs 60,000 crore, US-64 accounts for Rs 20,000 crore. Seventy per cent of UTI's schemes are announcing its NAVs. We should not condemn the entire organisation for one scheme alone. I wonder how anyone can question about transparency in UTI.

What do you think is the future of UTI and US-64?

The Trust has a great future considering that it is India's biggest capital market player. The fall in stock market last week was due to the crash in the global markets. As foreign institutional investors (FIIs) wanted to get out of all global markets on that particular Monday, stock exchanges in India followed. The market would have collapsed irrespective of the woes of US-64. Weshould not forget that India's withstood the global meltdown only due to its strong fundamentals.

Due to the recession, many steel companies have not been able to pay back its loans and there is a talk of loan rescheduling by the FIs. What is your opinion?

The rescheduling of loans for the steel industry has made news in the recent days with many cynics predicting that these companies will turn NPAs. There is no doubt that the steel companies are in trouble as global steel prices have crashed while other countries are dumping steel in India.

If we do not reschedule the loans, these companies will turn sick and will be referred to the BIFR. Any BIFR case takes at least 10 years to get resolved as there is no exit option for the NPA cases. This leads to FIs funds being blocked for many years.

Therefore, instead of blocking funds, if we can help them to revive the project, it will help everyone. For example, SPIC was a dead company in the early 70s when IDBI helped it to finance a revival package.Today the company has transformed itself into a blue chip.

Unless we change all the relevant laws like bankruptcy law, the SICA and the Companies Act, the FIs will not be able to get back their funds immediately as in the US where promoters can be changed with the help of bankruptcy laws. Till then, we have to find other ways to get back our funds.