The top-10 mutual funds paid out Rs 7,724 crore in distribution commissions in financial year 2021-2022, which was 54 percent higher than what the top-10 fund houses paid in commissions last financial year.
An analysis of the disclosures by mutual funds showed that bank-sponsored fund houses relied heavily on their parent bank’s branch network to sell their mutual fund schemes.
About 8-50 percent of commissions paid by the bank-sponsored mutual funds went to their parent banks.
This was the highest in the case of SBI Mutual Fund, where 52 percent of the commission payout, went to the State Bank of India. The fund house paid a total of Rs 1,371 crore in commission payouts in financial year 2021-2022, according to the fund house’s disclosures.
According to DP Singh, Deputy MD, SBI MF, "The fund house has used SBI's large branch network towards B-30 penetration. This is evident from the from the leadership position that SBI MF has in B30 too." The B-30 cities are those that are beyond the top-30 cities.
"The fund house has also strong partnerships with national distributors such as NJ India and Prudent Corporate which together accounted for more than 10 percent of the commissions paid out by the fund house," Singh added.
"Additionally, the fund house used bank's network for its bumper NFOs that it floated last financial year, which helped in expanding the size of the mutual fund industry," he said.
In the case of Axis Mutual Fund, this proportion was as much as 30 percent <see: table>, with Axis Bank getting a lion’s share of the commissions paid by the fund house.
ICICI Mutual Fund and HDFC Mutual Fund paid 19 percent and 15 percent of distribution commissions to ICICI Bank and HDFC Bank, respectively. ICICI Securities was third-largest distributor for ICICI MF, receiving 5 percent of the commission payouts.
Compared to other banks with MF subsidiaries, Kotak Mahindra Bank received the lowest share of commissions from its subsidiary mutual fund. It accounted for 8 percent of distribution commissions paid by Kotak MF.
National Distributors playing their part
National Distributors NJ India and Prudent Corporate Advisory were among the top-three distributors for most fund houses. NJ India was in the top-three for seven of the top-10 fund houses, while Prudent was in top-three for five of the top-10 fund houses.
Fund houses not sponsored by banks depended on a mix of national distributors, banks and brokers.
Aditya Birla Sun Life MF paid 16 percent of its commissions to NJ India and seven percent each to Prudent and HDFC Bank.
Nippon India Mutual Fund paid as much as 26 percent of its commission payouts to NJ India.NJ India again garnered largest part of commissions from Mirae MF at 8 percent, ICICI Securities (6 percent) and Kotak Bank (5 percent).