InvestorQ : Why the government is planning to launch PSU Banks ETF?
Crowny Pinto made post

Why the government is planning to launch PSU Banks ETF?

Answer
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shivangi Arora answered.
1 year ago


In an attempt to reduce its stake in state-owned banks, the Government has taken this step. The government of India has proposed launching an exclusive PSU Banks ETF (Exchange Traded Fund), in the third quarter. So this ETF might come in the market in December 2019. As of now, Government holding in PSU bank is as quite high. For example, the government has 75% stake in Punjab National Bank (PNB) and 65% stake in Bank of Baroda (BoB).

With this PSU ETF launch, the government is aiming at reducing its stake to 52% not only to minimize the risk exposure but also to meet SEBI regulation. Although the ETF portfolio will be diversified, it will be restricted only one sector, which is the only drawback as it will increase the risk for investment.