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"We are already burdened with several recently launched government schemes. How can one expect us to sell mutual funds or any other non-banking products," says a senior branch executive with a leading state-owned bank.
The story is pretty much the same with other public sector banks, almost all of whom are struggling to expand beyond their core area of business.
Despite a large network of branches, public sector banks have a dismal share in the commission pie generated by selling mutual fund products. In comparison their private sector peers have managed to make their presence felt.
In 2014-15, Indian shares rallied 25% and retail interest in equity MF schemes was at record levels, but state-owned banks has failed to cash in.
The overall commission payout to distributors jumped over 80% to Rs 4,729 crore against Rs 2,603 crore last year in FY15. Despite this, top six PSU banks could clinch a mere 2% or less than Rs 100 crore of the total commission corpus. On the other hand, top private lenders grabbed a fourth of the commission pie.
State Bank of India (SBI), the country's largest lender with 16,333 branches, put on a relatively better show as its earning through mutual fund distribution more than doubled to Rs 69.38 crore against Rs 29 crore last year.
Canara Bank, with the third largest network of 5,682 branches, also witnessed a doubling of commission amount to Rs 10.36 crore. Same was the case with Bank of India (BoI), which managed to raise up its commission payment to Rs 6.57 crore. However, the figure is miniscule given the sheer size of their nation-wide network.
Similarly, commission payout for Punjab National Bank nearly doubled but in absolute terms it was a mere Rs 3.6 crore. The bank has 6,560 branches. In case of Bank of Baroda and Union Bank of India, quantum of commission earned reduced.
"PSU channels have not yet cracked mutual fund selling. Some players, despite sponsoring a fund house, do not sell their own MF offerings. The work culture is quite different," said national sales head with a leading fund house.
PSU bank-owned fund houses have been trying to leverage their parent’s branch presence without much success.
On the other hand, private lenders have ridden the rally quite well in the last few years. Despite having less number of branches, banks like HDFC Bank, ICICI Bank, Axis Bank, YES Bank and Kotak Mahindra Bank are doing well. Collectively, their contribution to the average AUM of fund sector stood at about Rs 87,000 crore in 2014-15 and total income generated from mutual fund distribution was over Rs 1,150 crore.
On the contrary, top PSU banks contributed less than Rs 15,000 crore as average AUM.
| Commission earned from MFs, average AUM contribution and branches of top PSU and private banks in 2014-15 | |||
| AUM(in Rs cr) | Commission earned | No. of branches | |
| SBI | 10,230.70 | 69.38 | 16,333 |
| PNB | 500.02 | 3.60 | 6,560 |
| Canara Bank | 1,006.80 | 10.36 | 5,682 |
| Bank of Baroda | 931.75 | 3.93 | 5,190.00 |
| Bank of India | 598.98 | 6.57 | 4,892 |
| Union Bank | 1,528.08 | 4.95 | 4,081 |
| TOTAL | 98.79 | 42,738 | |
| AUM (in Rs cr) | Commission earned | No. of branches | |
| HDFC Bank | 29,967.77 | 328.98 | 4,014 |
| Axis Bank | 14,533.71 | 304.08 | 2,589 |
| ICICI Bank | 18,421.52 | 247.98 | 4,050 |
| Kotak Mahindra | 23,819.69 | 255.04 | 684 |
| Yes Bank | 678.16 | 19.77 | 631 |
| TOTAL | 1,155.85 | 11,968.00 | |
| * As on 31st March | |||
| Source : Amfi & Banks' Annual Reports | |||
