In a move to allow the government tap into the huge resources of insurance companies and ensure long term investments through the ETF mode, the insurance sector regulator will soon notify the proposed central public sector enterprises-exchange traded fund as an investment product for insurance firm.
The finance ministry and the Insurance Development and Regulatory Authority has been pondering over this matter for quite sometime.
A finance ministry officials said, “A similar model is being worked out with market regulator Securities and Exchange Board of India that will pave the way for mutual funds to participate in the ETF structure.”
The proposed ETF, which will comprise shares of listed public sector enterprises, will be another tool the government can use to meet its disinvestment goal, which for the current fiscal is Rs 40,000 crore.
In this fiscal, the government has so far raised only Rs 828 crore through stake sale in MMTC and Hindustan Copper. According to Life Insurance Council data, the total assets under management of life insurers stood at Rs 16.18 lakh crore as on March 31, 2012, up 9% from the previous year.
Disinvestment secretary Ravi Mathur recently said that the government was planning to launch the proposed ETF by October-November. The companies shortlisted for the proposed ETF and the pricing of the scrips will have to be approved by a ministerial panel.
“Mutual funds will ensure that participation remains active and there are significant transactions,” the official said
India Index Services & Products, a subsidiary of the National Stock Exchange, has been appointed as the index provider.
