How Much Do Banks Love Their Mutual Fund Subsidiaries?

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Data Monster

Have you wondered if banks would only suggest their own mutual fund companies? If you go to an Axis Bank branch, would they only suggest an Axis Mutual fund scheme for you? We now have this data – how much did banks earn as commission from their mutual fund companies? Typically most mutual funds are subsidiaries of the banks themselves. (HDFC is special: HDFC Mutual Fund is owned by HDFC, which is the parent of HDFC Bank and a different entity).

Related Post: Banks See 30% Lower Mutual Fund Commissions: The Annual MF Report on Commissions

50.38% of the commissions earned by 13 banks were paid by their sister firms with Canara Bank earning over Rs. 10 crore or 97.5% of its commission earning from Canara Robeco Mutual Fund. At the other extreme, Kotak Mahindra Bank was paid only Rs. 45.23 crore by its subsidiary Kotak Mutual Fund which constituted just 27% of the overall commission earnings for the Bank.

Mutual Funds Commission Paid To Distributors Banks 2016

As you can see, banks tend to push only the mutual funds with their own names – they get most of their commissions from their own fund houses. 

Banks, as entities that people trust, should not try to sell their own funds while pushing products, because a better performer or a lower cost product may be from a different fund house. But this seems to be an incestuous world – as most banks seem to push their own mutual funds only! Kotak seems to be the only really diversified distributor, which earns only 27% from its own fund house.

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3 COMMENTS

  1. For HDFC & ICICI the low % from their sister concerns may be due to that they had products like “Investment Services Account” from where you can purchase any MF through an online a/c (just like FUNDSINDIA but long before it). So it seems ppl who have these accounts use to buy all type of MF’s (& HDFC/ICICI getting commission on it).

  2. Very interesting Post. I totally agree with the view that the Banks should not sell MFs from their own stable, which perhaps could be termed vested interest, irrespective of the fact that their respective MF is independent of the Bank.

  3. Does the commission earned by AXIS/HDFC/ICICI/KOTAK include brokerage commission earned through their Stock Brokerage coes? (they have a decent exposure in client online trading) If not then its commendable, if it does then there % share will be quite similar to those of PSU banks highlighted by you.

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