Unit Trust of India chairman M Damodaran is likely to head the new market value-based UTI Mutual Fund, promoted by LIC and three leading banks, after the new fund becomes operational from February 1.

Damodaran, who was government appointed administrator for Unit Trust of India, is slated to head both UTI-I comprising of US-64 and assured return schemes as well as UTI-II, a top official in one of the sponsors said on Friday.

The government signed an MoU with the new sponsors – Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda -- on January 15 to transfer 43 net asset value based schemes under UTI-II to the new UTI Mutual Fund on February 1.

The four leading financial players formed a separate asset management company with an initial capital of Rs 10 crore (Rs 100 million) and in the lines of Securities and Exchange Board of India's 3-tier structure.

Even after the split, UTI Mutual Fund will continue to be leading player with over Rs 15,000 crore (Rs 150 billion) worth of assets under management.

The government will continue to run the Rs 31,000 crore (Rs 310 billion) worth UTI-I, comprising US-64 and assured return schemes and gradually wind it up after all the schemes matures.

Damodaran will continue to be the administrator for the beleaguered UTI-I for one year.

The government appointed four advisors: additional secretary (budget) D Swarup, joint secretary (capital markets) U K Sinha, taxation expert A N Shanbhag and N C Bhide, to assist Damodaran.

It is learnt that Damodaran's name has already been shortlisted for heading UTI-II as well. An official announcement would be made only on February 1, sources said.

The government issued four notifications on Friday for transfer of NAV-based assets to a new asset management company, operationalisation of UTI-II from February 1, appointment of administrator and board of four advisor for UTI-I.

Earlier, Finance Secretary S Narayan there was no bar for Damodaran to head both UTI-I and UTI-II. However, it was up to the new sponsors to choose the new CEO.

The four sponsors had invested Rs 2.5 crore (Rs 25 million) each in the asset management company.

A chartered accountant has been appointed to carry out due diligence of UTI-II.