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Government open for business with private banks

With private banks now allowed to participate in government business, the BFSI segment has a lot to gain. This should have a positive impact on your mutual fund investments.

What’s the news?

Centre Lifts Embargo on Granting Businesses to Private Banks

What does that mean?

In a surprise announcement on Wednesday, finance minister Nirmala Sitaraman announced that all private banks would now be allowed to participate in government-related business. Until now, only public sector banks and a few large private sector banks were allowed to conduct government-related business. 

Going forward, all private banks will be allowed to conduct banking transaction related to the government such as taxes and other revenue payment, facilities, pension payments, small savings scheme, etc. 

What is the impact?

Government economic activity can now be a focus area for private banks as well. The domination of public sector banks in this segment can see a change going forward. 

After the announcement by the Finance Minister; banking stocks traded on a massive bullish note. The majority of stocks listed on BSE Bankex are private sector banks and the index ended the day up 3.7%.

How does this affect your wealth?

Scripbox recommended equity funds have 22 -24% exposure to banking sector as per January 2021 portfolio data. Any improvement in this sector and economy will have a positive impact on the funds that you have invested in.

 

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