Public sector banks fail at selling MFs

In stark contrast to private banks, which earn more than 10 times the commission for doing so, on average

"We are already burdened with several recently launched government schemes. How can one expect us to sell mutual funds (MFs) or any other non-banking products?" asks a senior branch executive with a leading state-owned bank.

The story is much the same with other public sector banks (PSBs), almost all of which are struggling to expand beyond their core area of business.

Despite a large network of branches, PSBs have a dismal share in the commission pie generated by selling MF products. While, private sector peers have managed to make their presence felt.

In 2014-15, Indian shares rallied 25 per cent and retail interest in equity MF schemes was at record levels. Yet, state-owned banks failed to cash in. The overall commission payout to distributors jumped 80 per cent to Rs 4,729 crore in FY15 against Rs 2,603 crore the year before. Despite this, the top six PSBs could clinch a mere two per cent or a little less than Rs 100 crore of the total commission corpus. Top private lenders grabbed a fourth.

State Bank of India, the country's largest PSB and also the largest lender, with 16,333 branches, did a relatively better show. Its earning through MF distribution more than doubled to Rs 69 crore against Rs 29 crore a year before. Canara Bank, with the third largest network of 5,682 branches, also witnessed a doubling of commission amount to Rs 10.4 crore. So, too, with Bank of India, which took Rs 6.6 crore. However, given the sheer size of their national network, these figures are a drop in the ocean.

Similarly, the commission payout for Punjab National Bank nearly doubled but in absolute terms, it was a mere Rs 3.6 crore. The bank has 6,560 branches. In the case of Bank of Baroda and Union Bank of India, the commission earned actually reduced.

"PSB channels have not yet cracked MF selling. Some, despite sponsoring a fund house, do not sell their own MF offerings. The work culture is quite different," says the national sales head with a leading fund house. PSB-owned fund houses have been trying to leverage their parent's branch presence but without much success.

On the other hand, private lenders have ridden the rally quite well in recent years. Despite less number of branches, HDFC Bank,

ICICI Bank, Axis Bank, YES Bank and Kotak Mahindra Bank are doing well. Collectively, their contribution to the average of assets under management (AUM) in the fund sector was Rs 87,000 crore in 2014-15; total income generated from MF distribution was Rs 1,150 crore.

By comparison, top PSBs contributed less than Rs 15,000 crore as average AUM.