The Hindu Business Line : Banks bag larger share of MF distribution

GOT a call from your banker, urging you to shift your idle savings into an equity mutual fund? Not a surprise, as banks are playing a bigger role in marketing mutual funds to individual investors.

Fund industry estimates indicate that banks, specifically private and foreign ones, now bring in about 35 per cent of retail mutual fund investments, up from 20 per cent a couple of years ago.

Apart from banks, brokers, agents and independent financial advisers are the other channels that fund houses use to distribute their products.

PruICICI Mutual Fund estimates that banks bring in about 35 per cent of the fund's retail sales today. A year ago, this was 28 per cent. "Five years ago, a majority of non-institutional sales came from brokers; today banks constitute a lion's share of the same," says Mr Raj Raman who heads sales and marketing at PruICICI Mutual Fund. He says banks are seizing a larger share of distribution for equity funds because they are able to leverage on their relationships with a captive investor base.

Mr Sanjay Santhanam, his counterpart at Sundaram Mutual Fund, says private and foreign banks have benefited from their access to customers who have an appetite for equity investing. "There has been a shift in the asset allocation of high net-worth investors to equity. These banks are ideally placed to capitalise on this," he says.

Mr Rajan Krishnan, Vice-President, Sales and Marketing at Principal Mutual Fund, estimates that about 40 per cent of the fund's sales to individuals are now raked in through banks, against 25 per cent a year ago. He says bank distributors have benefited from a first-mover advantage. "Some of them have been in the distribution business for about seven to eight years now; the top management is committed to this business and the sales team is prepped up to distribute funds," he says.

However, some funds feel that while the private and foreign banks have helped bring in big-ticket investments from affluent investors, it is the public sector banks that are best placed to reach out to small investors who live outside the metros.

Funds such as UTI Mutual Fund and Sundaram Mutual Fund have inked distribution pacts with PSU banks that have a large national footprint, to leverage on their vast branch network.

"We believe that the banking channel, especially public sector banks, will play a key role in spreading mutual funds into smaller centres. But this will be a gradual process as the banking staff need to be trained and the required infrastructure needs to be put in place," says Mr Ravi Mehrotra, President-India, Franklin Templeton Mutual Fund.

About a fourth of Templeton's assets have come in through the bank channel.

Data from CAMS, the largest registrar for the fund industry, shows that HSBC, ICICI Bank, Standard Chartered Bank and Citibank are the leading distributors of mutual funds to individual investors. HDFC Bank, Standard Chartered, ICICI Bank and ABN Amro are the front-runners in the distribution of equity funds. Total assets brought in by the top 10 banks stood at about Rs 14,000 crore in January 2005 for the funds served by CAMS.

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