)
India's state-owned banks are lagging far behind when it comes to selling mutual fund products. In comparison to their peers in the private banking space they have miserably failed.
Not only are the public sector banks (PSBs) losing out in terms of generating extra income by earning commissions but they appear to be non-serious despite the government's several measures to ensure financial inclusion. And it's happening at a time when Prime Minister Office (PMO) itself had to intervene a year ago to put the struggling fund industry in shape on a priority basis.
Consider this : Recently, India's largest lender State Bank of India (SBI) opened its 15,000th branch in Tamil Nadu. The network is almost double than all the branches of country's three largest private banks put together. On the contrary, the commissions earned by SBI via selling mutual funds is a paltry amount at Rs 36.43 crore in 2012-13.
Punjab National Bank (PNB), the second largest PSB with over 5,900 branches across India, could earn a mere sum of Rs 1.9 crore as commissions from mutual funds sales. Rather, the commission earned in FY13 was 11% less than what the bank had in the previous financial year. The third largest Bank of Baroda (BoB), having close to 4,300 branches, earned 76% more but the absolute commission stood at only Rs 3.3 crore.
Compare this with what their peers in the private space achieved, which presents a striking contrast.
HDFC Bank, ICICI Bank and Axis Bank - the three largest private lenders with 8,500 branches put together managed to earn a total sum of Rs 331.6 crore during the year - eight times of what the three largest PSBs earned.
Why are the state-owned banks not utilising their reach and potential?
The government and bank officials have been chanting "financial inclusion" for long but the ground reality suggests that public sector banks (PSBs) have done the least.
What is more alarming is the fact that banks like Allahabad Bank, Andhra Bank, Central Bank of India, Dena Bank, Indian Overseas Bank (IOB), Indian Bank and United Bank of India among many others even failed to be a part of the top distributors' list released by mutual fund industry body Association of Mutual Funds in India (Amfi). Going through the commissions earned in 2011-12, none of these made more than a crore rupees. Some earned as low as Rs 9 lakh.
Not only have they failed against the private banks and other firms but also lost when compared with some of single individuals who earned crores out of commissions.
A senior branch employee in a PSU bank told Business Standard,"We call these third party products. Though we are allowed to sell mutual funds, but we do not. Sometimes, even our own mutual fund products do not find takers then what's the point in selling others' funds."
A chief executive officer (CEO), who heads a fund house which is in partnership with a PSU bank, said, "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."
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."
| Banks | No. of branches | Commission earned in FY13 |
| (Rs Crore) | ||
| SBI | 15,000 | 36.43 |
| PNB | 5,929 | 1.9 |
| BoB | 4,289 | 3.31 |
| Total | 25,218 | 41.64 |
| Axis Bank | 2,021 | 84.13 |
| ICICI Bank | 3,350 | 86.59 |
| HDFC Bank | 3,119 | 160.87 |
| Total | 8,480 | 331.59 |
