The assets under advisory (AUA) of public sector undertaking (PSU) banks are growing steadily. The combined MF AUA of seven PSU banks, who are the sponsors of their respective fund houses, has increased from Rs. 16,827 crore in FY 2014-15 to Rs. 20,363 crore in FY 2015-16, shows AMFI data.
While India’s largest lender State Bank of India has witnessed a growth of 27% in its MF AUA, Canara Bank has recorded a massive growth of 70% in MF AUA.
Experts attribute this growth to increasing number of SIPs being channelized by them. Typically, PSU banks sell retail products like equity and gold funds through SIP route. Also, a few PSU banks have formed wealth management teams who advise on sophisticated products like capital protection funds, asset allocation funds and debt funds.
Assets under advisory of PSU Banks
|
PSU banks |
Assets under advisory in FY 2015-16 |
Assets under advisory in FY 2014-15 |
Change |
|
State Bank of India |
12992 |
10231 |
27% |
|
Canara Bank |
1709 |
1006 |
70% |
|
Union Bank of India |
1061 |
1528 |
-31% |
|
IDBI Bank Ltd |
2313 |
2031 |
14% |
|
Bank of India |
808 |
599 |
35% |
|
Bank Of Baroda |
869 |
931 |
-7% |
|
Punjab National Bank |
614 |
500 |
23% |
|
Total |
20366 |
16826 |
21% |
Source: AMFI. Rs. cr.
While their MF assets have increased, the commissions earned by a majority of PSU banks through mutual funds has dropped. AMFI data shows that seven public sector banks earned Rs.102 crore from mutual fund distribution in 2015-16 compared to Rs.111 crore in FY 2014-15, a decline of 8%.
Experts attribute this decline in commissions to the 1% upfront commission cap introduced by AMFI from April 2015.
Public sector behemoth— SBI Bank which is the largest MF distributor in the PSU banks space saw its revenues from mutual fund distribution drop by Rs.7 crore to Rs. 62 crore in FY15-16. IDBI Bank too saw its commission earnings drop by Rs. 2 crore to from Rs. 12 crore in FY14-15 to Rs. 10 crore in FY15-16.
However, a few PSU banks like Canara bank and Union Bank of India have witnessed a marginal growth in their commission income due to increased volumes.
Commission earned by PSU banks
|
PSU banks |
Commission earned in FY 2015-16 |
Commission earned in FY 2014-15 |
Change |
|
State Bank of India |
62 |
69 |
-10% |
|
Canara Bank |
11 |
10 |
8% |
|
Union Bank of India |
6 |
5 |
24% |
|
IDBI Bank Ltd |
10 |
12 |
-14% |
|
Bank of India |
5 |
7 |
-29% |
|
Bank Of Baroda |
4 |
4 |
-2% |
|
Punjab National Bank |
3 |
4 |
-14% |
|
Total |
102 |
111 |
-8% |
Source:AMFI
Compared to private banks that are more active in MF distribution in metros, PSU banks bring an extensive reach in semi-urban and rural areas to AMCs. Most fund officials feel that PSU banks have huge potential and can deliver huge numbers in times to come. Additionally, customers trust PSU banks.
AMCs have to provide a lot of handholding and support to PSU banks initially as these banks often are not fully equipped to market MF schemes. AMCs provide training to the relationship managers of the banks they have tied-up with.
Earlier, in its long term policy for mutual funds, SEBI had asked fund houses to leverage the huge network of public sector banks to reach out to hinterland.
