In FY15-16, mutual fund distributors earned as much as Rs3,648 crore in the form of commission and expenses. Of this, the 28 banks on the list earned a commission of Rs1,286 crore or nearly 35% of the total commissions paid out. As we have often pointed out in the past, for banks, a high concentration of in-house mutual fund sales is of their sponsored asset management companies (AMCs). Based on the distributor commissions of FY14-15, more than 1/3rd of the commission pay-outs to banks are sourced from its in-house AMC. Not much has changed in FY15-16.
Bank-sponsored mutual funds are hugely dependent on their sponsor for inflows. Bankers command enormous reach and trust among their customers compared to other distributors. For Axis MF nearly 21% of the gross inflows were from Axis Bank. Axis MF paid out Rs92 crore to Axis Bank, nearly 56% of the total commissions paid to distributors. NJ IndiaInvest, a national distributor, earned a commission of Rs20 crore or about 14% of the total commissions paid by Axis MF.
For ICICI Prudential MF, nearly 40% of the gross inflows were through ICICI Bank. Therefore, not surprisingly, the banks earn the highest commissions compared to other distributors on the list. For ICICI Prudential MF, nearly 21% of the total commissions were paid to ICICI Bank. Citibank was the next highest commission earner of ICICI Prudential MF earning 5.80% of the total commissions. ICICI Securities earned nearly 4% of the total commissions paid.
Similarly, in the case of HDFC MF, as much as 16% of the total commissions were paid to HDFC Bank. Second on the list was NJ IndiaInvest earning about 9% of the total commissions paid by HDFC MF. SBI had a share of 28% in the total commissions paid by SBI MF, while Kotak Mahindra MF paid nearly 33% of the total commissions to Kotak Mahindra Bank and Kotak Mahindra UK. While HSBC MF has not disclosed the distributor’s commissions for FY15-16, in FY14-15, as much as 46% of the total commissions were paid to HSBC Bank, Standard Chartered Bank followed behind earning a commission of 11%.
The top three banks on the list—HDFC Bank, ICICI Bank and Kotak Mahindra Bank earned total commissions of Rs261 crore, Rs170 crore and Rs166 crore in FY15-16. HDFC Bank, earned Rs91 crore (or 31% of the total commissions) from HDFC MK. Nearly, 61% of the total commissions of ICICI Bank were from ICICI Prudential MF. For Kotak Mahindra Bank, about 29% of the commissions were sourced through Kotak Mahindra MF. Canara Bank, State Bank of India and Union Bank of India earn over 90% of their commissions from their in-house AMCs.
Clearly, for each bank, the best mutual schemes are none other than the schemes belonging to their own group or the ones that offers the maximum commission. The data showing that banks push hard schemes belonging to the group which may or may not be in customer interest proves our point once again. Unfortunately, savers don’t know this and tend to trust their bankers blindly. After all, that is the place where they keep their savings.
I have found HSBC fairly sensible since more than fifteen years. But, Richu Singh,from Dehra Dun, then of HSBC, Bangalore, did rook me out of some 4.6 Lakhs (2010) by selling Canara Bank - HSBC life insurance to me. An insurance that I certainly did not need, and was a foray into Life Insurance and portfolio management by unqualified, incompetent and greedy bankers.
HDFC offers a good "entirely at your risk" on-line option. I have been rooked very badly by SBI, UTI and LIC.