Managing director of the mutual fund S K Bandopadhyay told PTI that the promoter bank Indian Bank had written to the government for funds to make good the shortfall in its redemption price.

Earlier this month, IBMF sent a circular to investors offering repayment at its net asset value (NAV), which is currently around Rs 10.45, that is a return of 4.5 per cent on an initial investment of Rs 10 and much below what had been indicated in the offer document.

According to what was `indicated' in the offer document investors would have had a return of 16.75 per cent on their investments.

IBMF has also asked Securities and Exchange Board of India to reconsider its earlier decision, where it asked the asset management company to pay upaccording to the returns indicated in its initial offer, taking the view that an `indicative' return was as good as an assured return.

Bandopadhyay, however, made it clear that without support from the government the fund had insufficient surplus to meet its perceived liabilities. The prospect of support from Indian Bank is remote as the bank itself is a certified weak bank and in need of funds.

According to Bandopadhyay, the scheme's returns were only indicative and as such not assured. Bolstering his stand with examples, the chief of IBMF said in 1993-94 against an indicative return of 15.2 per cent it had paid out dividend at 18 per cent, while in the following year against 15.5 per cent indicative it had paid out 19 per cent.