In line with raging concerns of market regulator SEBI, the commission paid by mutual funds to distributors have grown at a faster pace last fiscal compared to average asset under management growth of distributors.
The commission paid by the mutual fund industry has increased by 16 per cent to ₹12,100 crore against ₹10,400 crore logged in the previous fiscal, while the AAUM held by them was up nine per cent at ₹14.74-lakh crore (₹13.58-lakh crore), according to the Association of Mutual Funds in India data.
With the highest average AUM of ₹1.44-lakh crore (₹1.24-lakh crore), commission earned by SBI was up 25 per cent at ₹910 crore (₹730 crore), while that of HDFC Bank was up 16 per cent at ₹670 crore (₹580 crore) on AAUM of ₹96,700 crore (₹84,500 crore).
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In fact, the top four banks – SBI, HDFC Bank, ICICI Bank and Axis Bank – accounted for 70 per cent of the commission earned by all banks.
Of the overall commission earned by SBI, about 96 per cent was from SBI MF while that of ICICI Bank and Axis Bank was at 69 per cent and 54 per cent from their captive source of ICICI Pru MF and Axis MF. HDFC Bank had the lowest captive sourcing of commission at 24 per cent from HDFC MF.
Among national distributors, financial services company NJ promoted by first generation entrepreneurs Niraj Choksi and Jignesh Desai by earning a commission of ₹1,540 crore (₹1,300 crore) on an AAUM of ₹1.24-lakh crore (₹1.09-lakh crore), while Prudent and ICICI Securities received ₹580 crore (₹440 crore) and ₹450 crore (₹400 crore) as commission last fiscal.
Abhijeet Sakhare, Research Analyst, Kotak Institutional Equities, said mutual fund distribution continues to have a strong presence of national distributors and smaller agents (with less than ₹500 crore AUM), contributing 65-70 per cent of commissions and AUM.
Private banks and foreign banks have seen a decline in share in the past few years even while PSU banks, led by SBI, have seen their commission and AUM share grow by 10 per cent and 12 per cent, he added.
New entrants focused on digital distribution can potentially accelerate MF ownership, even as there are limited global evidence of a fully digital approach toward long-term investing, he said.