We will be soon appointing an advisor to suggest on launching an ETF: Finance Ministry

The Finance Ministry is planning to launch an exchange-traded fund (ETF) consisting of stocks of PSU banks and financial institutions this fiscal and will soon appoint an advisor to explore its feasibility, according to an official. After the resounding success of CPSE ETF and Bharat-22 ETF, the government is looking at diversifying the ETF basket by including stocks public sector banks and financial institutions.

"We will be soon appointing an advisor to suggest on launching an ETF with PSU bank scrips. The advisor will also look into the feasibility of including stocks of financial institutions and insurance companies into the basket," the official told.

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The plan to launch a bank ETF comes on the back of the government seeing 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.

"We expect balance sheet of PSU banks to strengthen going forward and an ETF would provide risk-averse investors with an option 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 New India Assurance Co Ltd -- and 19 public sector banks that are listed on exchanges. Besides, financial institution IFCI is also listed on the exchanges.

The Finance Ministry has also started consultations with global investors for launching CPSE-scrip based ETF in the overseas market. The official further said that the government does not intend to launch in the domestic market any new ETFs comprising stocks of public sector companies since in most of these companies, government holding is nearing 51 per cent.

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