Government may launch 1st fixed income ETF of PSUs in December

Government may launch 1st fixed income ETF of PSUs in December

The government is expected to launch India’s first fixed income Exchange Traded Fund (ETF). The ETF is expected to be sized around Rs 15,000-20,000 crore and will contain debt securities of a dozen state-run companies.

The fund will include only AAA-rated papers of the public sector units (PSUs). It could offer a return of over seven percent for investors, higher than the 5.5 percent post-tax return offered by most fixed bank deposits.

The proceeds will go to the PSUs involved in the ETF, unless it also includes government securities and bond papers.

“We already held some road shows and hope that the debt ETF will be launched by December,” a government official source told the newspaper.

Large central public sector enterprises (CPSEs) will most probably participate in the ETF, the report said.

There are a few gold and equity traded ETFs in India, but no debt funds, except for two securities based ETF which have not seen much interest from investors.

The tax rules applicable for debt mutual funds will apply to the debt ETF as well, the report stated.

In FY19, the government had sold several tranches of ETFs, generating Rs 45,730 crore.