Finance Ministry planning to introduce bank ETF in FY 2019-20

Public sector Banks ETF would be in addition to the CPSE ETF and Bharat-22 ETF, which have received huge investor demand after it was announced by the governmentNew Delhi: The finance ministry is giving consideration to the introduction of an exchange traded fund (ETF) comprising stocks from state-owned banks in the coming financial year, an official said, adding that the ETF route will possibly bring back investor confidence in the banking stocks. The bank ETF would be in addition to the CPSE ETF and Bharat-22 ETF, which have received huge investor demand after it was announced by the government.

"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.

"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,"

Since 2017, Rs 32,900 crore has been raised by the government through Bharat-22 ETF, while Rs 28,500 crore was generated from CPSE ETF since 2014.

Bank stocks via ETF attractive for investors

"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.

Of the 20 state-owned banks, the government holds 83.09 percent in Bank of India, 77.23 percent in Oriental Bank of Commerce, 70.62 percent in Canara Bank, 70.22 percent in Punjab National Bank and 58.53 percent stake in State Bank of India (SBI). The government also holds 87.01 percent in Bank of Maharashtra, 67.43 percent in Union Bank of India and 63.74 percent in Bank of Baroda.

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