Government planning to launch Financial Sector ETF

The government is planning to launch an exchange traded fund (ETF) comprising stocks of public sector banks,insurers and financial institutions this fiscal year,and has invited bids from advisors to explore its feasibility.

After the resounding success of CPSE ETF and Bharat-22 ETF,the government is looking at diversifying the ETF basket by including stocks of public sector banks (PSBs),public sector insurance companies (PSCIs) and public sector financial institution(PSFIs).

“Keeping in view the encouraging response and demand for such product,the government proposes to create and launcha new ETF in additional to the existing two ETFs,comprising stocks of listed PSBs,PSICs and PSFIs,“the Department of Investment and Public Asset Management (DIPAM) said while inviting bids from advisors by July 26.

The DIPAM will appoint one advisor with experience and expertise in advising on creation and launch of ETFs/ Mutual funds/ Index linked fund.

The plan to launch a bank ETF comes on the back of the government seeing a huge investor demand for two existing ETFs.It has raised Rs. 32,900 crore through two tranches and an additional fund offer of Bharat-22 ETF and Rs.38,000 crore in five tranches of CPSE ETF in the domestic market.

Currently,there are two state-owned insurance companies -General Insurance Corp of India and New India Assurance Co- and 19 public sector banks that are listed on exchanges.Besides,financial institution IFCI is also listed on the exchanges.

“The proposed new ETF will serve as an additional mechanism for the government to monetize its shareholdings in listed PSBs, PSICs and PSFIs that will eventually form part of the new ETF basket.”the DIPAM said.

The government will also appoint an asset management  company (AMC) to act as the ETF provider and a legal advisor for the proposal ETF.


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