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Govt mulls new financial services ETF; may appoint adviser soon

Friday, May 24

 

–Govt source: Planning a new ETF for PSU financial services cos

–May include PSU insurers in financial services ETF

–May invite bids to appoint advisers for fincl svcs ETF

 

By Sagar Sen and Tushar Chakrabarty

 

NEW DELHI – After the huge success of Central Public Sector Enterprises ETF and Bharat 22 ETF, the government is mulling to launch a new exchange-traded fund with stocks of financial institutions, including state-owned banks and insurance companies, a senior finance ministry official said.

 

"Earlier we had thought of launching the exchange-traded fund with only PSU bank stocks, however, later we also considered including stocks of companies in sectors like insurance," the official told Cogencis.

 

The government is likely to invite bids from merchant banks to advise on the proposal.

 

"We need to discuss this with advisors and consider their opinion before going ahead," the official said.

 

The plan to launch a new ETF comes on the back of government receiving substantial funds through the Bharat 22 ETF. The government has so far raised 711 bln rupees from the ETFs, including 451 bln rupees in 2018-19 (Apr-Mar).

 

The success of the two ETFs has prompted the Department of Investment and Public Asset Management to look at the option of launching new sectoral ETFs including financial services sector, the official said.

 

The idea of a new bank-specific ETF arose as government's shareholding in public sector banks has increased in the last two years following infusion of about 1.85 trln rupees.

 

"Going forward we expect PSU banks' financial position to be strengthened which is likely to generate investor demand. We think ETF is an attractive option for investors to hold shares of multiple banks through a single financial instrument," the official said.

 

Currently, there are two state-owned insurance companies — General Insurance Corp of India and The New India Assurance Co Ltd — and 19 public sector banks that are listed on exchanges.

 

The government aims to raise 900 bln rupees through divestment in 2019-20, compared with 853 bln rupees raised last year.  End

 

Edited by Vandana Hingorani

 

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