The decision to rebrand the bank is result of UTI Mutual Fund’s (UTIMF) objections to UTI Bank trying to register its name as a trademark (something that its chairman claims is essential in order to initiating legal proceedings in case of ‘phishing’ attacks originating overseas) and its plan to set up a Asset Management Company (AMC) for private equity.
UTI Bank was encouraged to provide four options of dealing with the consequent impasse, and the government picked the last one, which was to rebrand UTI Bank. A quick rebranding exercise is to follow after the end of this financial year, since UTI Bank can use the brand name without any royalty payment only until January 2008.
The saga of UTI Bank’s birth and the circumstances under which it is giving up its name makes for a study in capricious decision-making in the public sector. The bank was promoted by the erstwhile Unit Trust of India (UTI), an investment company which crumbled in 1999-2000. When it comes to bizarre policy-making, the RBI does not lag behind. So UTI Bank, IDBI Bank and ICICI Bank (the original ones) were all set up under its ‘new private bank’ policy, although they were all floated by public sector entities. The latter two eventually merged with the parent development financial institutions.
The saga of UTI Bank’s birth and the circumstances under which it is giving up its name makes for a study in capricious decision-making in the public sector |
What does the future hold for UTI Bank? Its performance in the last five years and its image as a stable and responsible bank makes the security of a quasi-government image unnecessary; so the rebranding exercise may allow it to emerge as a board-managed private bank.
Interestingly, the future of UTIMF, which manages over Rs 34,000 crore is not so clear. As part of the bailout package, its AMC is held equally by four sponsors— Life Insurance Corporation (LIC), SBI, Bank of Baroda (BoB) and Punjab National Bank (PNB). This has inherent conflicts of interest, since each of the sponsors has its own mutual fund. While the government had promised to resolve the conflict by bringing in a strategic partner, it has made no effort to do so. Instead, UTIMF has turned into yet another fiefdom of the bureaucracy and is now venturing into pension schemes, which is technically beyond the regulatory mandate of the capital market regulator.
The government has rejected UTI Bank’s offer to acquire UTIMF. Of its four sponsors, BoB and PNB are apparently uninterested in increasing their stake; and SBI was once keen on acquiring it but that may no longer be the case. Although LIC was interested in merging UTIMF with its own mutual fund division, the insurance regulator does not favour the move. As things stand, UTIMF will continue to function with the present ownership structure, at least as long as its mutual fund schemes do well; but UTIMF’s schemes are not.
The question it, what happens if and when the government is forced to look for a strategic investor again? That investor will find no value in the UTI brand name—making the present tussle, which has forced the bank to find another name, rather pointless.
The UTI brand name, which is already just a derivative of the original name, will then die a quiet death.
http://www.financialexpress.com/columnists/full_column.php?content_id=158228