In selling mutual funds, PSBs sit back while private peers hustle

Distributors pocket 8% more commissions, while state-owned lenders see a decline

State-owned banks have continued to do poorly when it comes to selling of mutual fund (MF) products. Despite their large branch network, they’re behind their private peers.

The total commission earned by distributors was Rs 2,583 crore in FY14 against Rs 2,389 crore in FY13. In the past four years (since date became available), MFs’ commission payout has risen 45 per cent from Rs 1,770 crore in FY11.

In this period, the earnings by state-owned banks remained poor. Rather, in many instances they have seen a decline in commissions from selling MF products.

State Bank of India (SBI), the largest lender, with close to 16,000 branches, could manage to get a commission payment of Rs 28.9 crore in 2013-14 against Rs 36.4 crore the year before, a decline of 20 per cent. For Punjab National Bank (PNB), with nearly 6,100 branches, fund houses paid a minuscule Rs 1.84 crore as commission for selling MFs.

On the other hand, private peers HDFC Bank, ICICI Bank and Axis Bank (less than 10,000 branches put together) are among the top 10 largest earners of commissions from the fund houses. HDFC Bank earned Rs 158 crore as MF commission, ICICI got Rs 118 crore and Axis Bank got Rs 94 crore.

“Public sector banks (PSBs) have traditionally been not selling mutual funds and they started pretty late. However, this is set to change in the years ahead, given the kind of reach and infrastructure they have,” says Sundeep Sikka, chairman of the Association of Mutual Funds in India.

Hemant Rustagi, chief executive officer (CEO) of Wiseinvest Advisors, agrees. He says the real need is to change of mindset of distributors. “PSBs have a huge potential to increase the penetration of MFs, as they have strong presence in the rural and semi-urban regions,” he adds.

Interestingly, several PSBs have MF businesses in a joint venture. However, there is little of push for such products at their branches. According to the CEO of a state-owned bank’s MF, “Somehow, we have not been able to leverage on the wider presence of our branch network. It is a serious issue and I hope things improve.”

SBI and PNB apart, Bank of Baroda, IDBI Bank, Canara Bank and Bank of India have their own MF businesses.