Unit Trust of India (UTI), History, Role

UTI, established in 1963 by the Reserve Bank of India and Government of India, pioneered India’s mutual fund industry as the first and only investment trust for decades. Initially created to promote small savings and retail participation in capital markets, it introduced the iconic US-64 savings plan. Post-2002 restructuring split UTI into:

1. UTI Mutual Fund (under SEBI): continues as a market-linked mutual fund house
2. Specified Undertaking of UTI (SUUTI): Manages legacy assured-return schemes

With ₹2.5+ lakh crore AUM, UTI remains a key player in India’s asset management ecosystem, blending public trust with modern portfolio services.

History of UTI:

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament – the Unit Trust of India Act, 1963 – under the initiative of the Government of India and the Reserve Bank of India (RBI). It was the first mutual fund institution in India, aimed at encouraging small investors to invest in the capital market through a diversified portfolio.

UTI launched its first scheme, Unit Scheme 1964 (US-64), which became extremely popular and remained a flagship product for decades. The trust enjoyed a monopoly in the mutual fund industry until 1987, after which public sector banks and insurance companies were allowed to set up mutual funds. In the 1990s, with the liberalization of the Indian economy, the mutual fund industry opened to the private sector, intensifying competition.

In the late 1990s and early 2000s, UTI faced a major crisis due to mismanagement and poor investment practices in the US-64 scheme, leading to massive losses and investor panic. In response, the government restructured UTI in 2002 by bifurcating it into UTI Mutual Fund (regulated by SEBI) and the Specified Undertaking of UTI (SUUTI) to manage legacy assets.

Today, UTI AMC Ltd. is a leading asset management company in India, continuing UTI’s legacy in a regulated and competitive environment.

Role of UTI:

• Democratizing Investments

UTI revolutionized retail participation in capital markets by offering affordable mutual fund units. Its US-64 scheme introduced millions of Indians to systematic investing, breaking barriers for small investors. By enabling investments as low as ₹500, UTI fostered a culture of savings and wealth creation beyond traditional bank deposits, particularly among middle-class households.

• Mobilizing Household Savings

As India’s first mutual fund, UTI channeled household savings into productive economic sectors. It aggregated small savings to invest in equities, bonds, and government securities, providing investors steady returns while fueling industrial growth. This role strengthened India’s financialization journey, reducing reliance on physical assets like gold.

• Developing Capital Markets

UTI enhanced market liquidity by investing in IPOs and corporate bonds. Its large-scale participation stabilized stock markets during volatile phases. By acting as an institutional investor, UTI improved price discovery and corporate governance standards, laying foundations for India’s modern securities ecosystem.

• Financial Inclusion

Through extensive post-office networks and vernacular outreach, UTI brought rural and semi-urban populations into formal finance. Schemes like Children’s Gift Fund and retirement plans catered to underserved segments, promoting inclusive wealth-building decades before fintech emerged.

• Supporting Government Projects

UTI financed infrastructure and social sector projects by subscribing to government bonds and PSU equities. Its investments in NHAI, REC, and other institutions backed nation-building while offering investors stable, sovereign-backed returns.

• Crisis Management & Restructuring

Post-2001 US-64 crisis, UTI’s bifurcation into UTI MF (SEBI-regulated) and SUUTI (legacy scheme manager) safeguarded investor interests. This restructuring preserved trust while transitioning to transparent, NAV-based products, setting benchmarks for crisis resolution in financial institutions.

• Innovation in Fund Products

UTI introduced India’s first equity, debt, and hybrid funds, later expanding to ETFs, REITs, and international funds. Its Index Fund (1999) and Auto-SWP facilities pioneered passive investing and systematic withdrawals, shaping industry practices.

• Investor Education

UTI’s financial literacy campaigns educated generations on compounding, diversification, and risk management. Through workshops, vernacular content, and CSR initiatives, it demystified market-linked investments, empowering first-time investors with knowledge.

Legacy Note: From monopoly to competition, UTI’s evolution mirrors India’s financial market maturation while retaining its core mission – “Many investors. One trust.”