Govt may launch exchange traded fund of PSU bank stocks next fiscal

  • The bank exchange traded fund (ETF) would be in addition to the two ETFs -- CPSE ETF and Bharat-22 ETF

  • The government has raised Rs 32,900 crore through Bharat-22 ETF since 2017, and Rs 28,500 crore from CPSE ETF since 2014

  • The govt official said the ETF route would bring back investor confidence in the banking stocks

New Delhi: The finance ministry is mulling launching an exchange-traded fund consisting of PSU bank stocks in the next financial year, an official said.

"We are open to the idea of floating an ETF consisting of stocks of PSU banks. We are studying the price movement of the probable stocks which could form part of the index," the official said.

The bank exchange traded fund (ETF) would be in addition to the two ETFs -- CPSE ETF and Bharat-22 ETF -- launched by the government which have seen huge investor demand.

The government has raised Rs 32,900 crore through Bharat-22 ETF since 2017, and Rs 28,500 crore from CPSE ETF since 2014.

 Govt may launch exchange traded fund of PSU bank stocks next fiscal

Representational image. Reuters.

The official further said the ETF route would bring back investor confidence in the banking stocks.

"Individual bank scrips may not be attractive for investors at the moment but bunching of banking stocks through ETFs might see investor demand pick up," he said.

Among the 20 public sector banks, the government holds 58.53 percent stake in SBI, 70.22 percent in Punjab National Bank, 70.62 percent in Canara Bank, 77.23 percent in Oriental Bank of Commerce and 83.09 percent in Bank of India.

Besides, it holds 63.74 percent in Bank of Baroda, 87.01 percent in Bank of Maharashtra and 67.43 percent in Union Bank of India.

The government has set a disinvestment target of Rs 90,000 crore for 2019-20, up from Rs 80,000 crore in 2018-19. So far this fiscal, the government has raised Rs 53,558 crore from CPSE stake sale and share buyback.

In an interview to PTI, Secretary in Department of Investment and Public Asset Management (DIPAM) Atanu Chakraborty had earlier said DIPAM would conduct a study to provide risk-free investment option to retail investors in the form of sector-specific ETFs.

"You should not see ETF as an individual share. In an ETF, we bring all the shares together to reduce the systemic risk," he said, adding that DIPAM is looking at the possibility of forming a basket of shares from the same sector and design a theme-based ETF index.

Updated Date: Feb 19, 2019 17:03:07 IST