Top PSU banks earn a 10th of what private ones do on MF sales

Despite having more branches state-owned banks don't fully utilise their large networks

India's state-owned banks are lagging considerably their private peers when it comes to selling mutual fund products.

Not only are public sector banks (PSBs) losing in terms of generating extra income through commissions on selling mutual funds, they appear non-serious despite the government's measures to ensure financial inclusion. And it's happening at a time when the Prime Minister’s Office (PMO) itself had to intervene a year ago to put the struggling sector in shape on a priority basis.

Recently, India's largest lender, State Bank of India (SBI), opened its 15,000th branch in Tamil Nadu. This network is double than all branches of the country's three largest private banks. On the contrary, the commissions earned by SBI through selling mutual funds were Rs 36.43 crore in 2012-13. However, in the public banking space, SBI is doing the best job in distribution of mutual funds.

Punjab National Bank (PNB), the second largest PSB, with 5,900 branches, could earn Rs 1.9 crore as commissions. Rather, the commission earned in FY13 was 11 per cent less than what the bank had the previous year. The third largest lender, Bank of Baroda (BoB), with 4,300 branches, earned Rs 3.3 crore.

HDFC Bank, ICICI Bank and Axis Bank, the three largest private lenders with 8,500 branches, managed to earn Rs 331.6 crore last financial year, eight times of what the three largest PSBs earned.

Allahabad Bank, Andhra Bank, Central Bank of India, Dena Bank, Indian Overseas Bank, Indian Bank and United Bank of India even failed to be a part of the top distributors' list of  the Association of Mutual Funds in India (Amfi). Going through the commissions earned in 2011-12, none made more than Rs 1 crore. Some earned as low as Rs 9 lakh.

They have also lost when compared with some of single individuals who earned crores out of commissions.

An employee at a PSB told Business Standard: "Though we are allowed to sell third-party products like mutual funds, we do not. Sometimes, even our own mutual fund products do not find takers. Then, what's the point in selling others' funds?"

Added a chief executive at a fund house, in partnership with a PSB: "It's pathetic to see nationalised banks not taking aggressive steps. They need to be made experts on selling third party products — be it mutual fund or insurance. At least, they should sell their own products."

Agrees Dhruva Chatterji, senior investment consultant at Morningstar (India): "At state-owned banks, employees do not have expertise to sell mutual funds."  

According to senior official at Amfi: "If top state-owned banks can bring just one investor a month (which is not a big deal) from a branch, in totality it will be a huge number every year. But it's not happening for whatever reason."