Banks, because of their huge network of branches, are one of the biggest mutual fund (MF) distributors
in the country. While most banks
that distribute MFs are free to sell any schemes offered by the country’s more than 40 fund houses, they have shown a preference towards their own MF subsidiary. Canara Bank, for instance, earned nearly Rs 17 crore in MF commissions in 2016-17; the entire amount came from their arm, Canara MF. Similarly, State Bank of India (SBI) earned Rs 175.46 crore in MF commission, 98 per cent of that by selling SBI
MF schemes. The share of commission from their MF arms was high for other banks
such as Bank of Baroda, ICICI Bank, IDBI Bank
and Axis Bank.
Industry experts have raised concerns about the dominance of large distributors
in pushing their own products. They say the products of the other fund houses, too, should be advised to investors to create better asset diversification.
But, there has not been much impact on distributors.
With Sebi’s recent consultation paper on segregation of distributors
and advisors, it will be interesting to see how the situation pans out, going forward.