Even for a government that is seen as bumbling on too many occasions, what’s happening at UTI has to take the cake. After getting stuck in UPA politics for more than 18 months, largely a result of the finance ministry insisting that the then FM’s advisor’s brother be appointed to the job, the search for the new head of UTI got a fresh lease of life when Pranab Mukherjee moved to become the country’s President. Under a new dispensation in the finance ministry, the four government-owned financial institutions who own 18.5% each of UTI’s equity were a lot more amenable to the suggestions made by US firm T Rowe Price (which owns 26% of UTI), that a professional headhunting firm be employed and a more transparent interview process be followed.
This process chose McKinsey India’s senior advisor Leo Puri. Though UTI’s board, which comprises the nominees of UTI’s shareholders, had ruled in Puri’s favour, LIC suddenly turned around and said Puri was neither an MBA nor a ICAI/ICWA professional, something that the advertisement for the job said was a basic qualification. Puri, a masters in law from Cambridge and in politics, philosophy and economics from Oxford may have been good enough to advise McKinsey’s blue-chip clients, but he wasn’t good enough for UTI! Later, SBI took up the matter.
While the finance ministry has kept a hands-off approach so far, at some point it needs to ask its financial institutions what game they’re playing. After all, let’s not forget, each one of them has a conflict of interest since they run their own mutual funds which are in direct competition with UTI. Whether or not a new selection process is started all over again—it will delay matters and there’s no certainty the better candidates will want to even stay in the fray since the episode clearly shows the government still calls the shots at UTI—the finance ministry needs to do some other things. It needs to announce a time-frame by which all government-owned financial institutions exit UTI—under Sebi rules no sponsor firm can run more than one mutual fund. Indeed, this was the understanding when T Rowe Price first bought into UTI.