India to launch first debt exchange-traded fund

India will launch its first debt exchange-traded fund (EFT) comprising debt of state-run companies, Finance Minister Nirmala Sitharaman said yesterday, in a bid to allow retail investors to buy government debt.

“It will be the first corporate ETF, which will provide additional money for PSUs (public sector undertakings) as well as other government organisations,” Sitharaman told reporters, after the proposal was approved by the cabinet chaired by Prime Minister Narendra Modi.

The ETF, called Bharat Bond ETF, will have a fixed maturity of three and ten years and will trade on the local stock exchange. It will invest in a portfolio of bonds of state-run companies and other government entities, a government statement said. Retail investors will be able to invest in the bonds with as little as 1,000 rupees ($14), it said.

India has so far allowed only equity ETFs, and the government raised nearly 144 billion rupees ($2 billion) through ETFs in the 2019/20 fiscal year beginning April.