PSU banks with their deep reach across the country help AMCs access relatively untapped markets that are seen as holding huge potential for the MF industry
Fund houses are increasingly joining hands with public sector banks to increase their footprints. In the recent past, six AMCs have announced tie-ups with PSU banks to distribute their funds.
Recently, Reliance AMC tied up with Indian Overseas Bank which has around 2689 branches.
“PSU Banks have the reach and client base which not all private banks have. PSU banks are only recently joining the race to distribute mutual fund products. The potential is huge,” said Srinivas Jain, chief marketing officer, SBI Mutual Fund. SBI AMC has recently partnered with Ratnakar Bank, a co-operative bank
Peerless AMC which has good presence in tier II, III and IV cities recently tied up with Allahabad Bank which has over 2500 branches with over 40 % in rural and almost 20% in the semi-urban India. Peerless aims to further increase in presence in these towns.
The PSU advantage
Compared to private banks that are more active in MF distribution in metros, PSU banks bring the reach in semi-urban and rural areas for AMCs. Most fund officials feel that PSU banks provide a huge potential in the times to come. Additionally, customers have a good connect with the branch officials of PSU banks.
“PSU banks provide a huge potential to the mutual fund industry. These banks have not woken up to the benefits of mutual funds because they think some MF schemes compete with bank fixed deposits. Now, they want to increase their fee based income. If banks don’t actively get into MF distribution, their customers could invest through some other channels and banks don’t want that. Branch managers of PSU banks connect very well and share a good rapport with their customers. Their customers trust them,” said a sales head of a large fund house which recently partnered with a PSU bank.
Handholding
AMCs have to provide a lot of handholding and support to PSU banks initially as they are not fully equipped to market MF schemes. AMCs provide trainings to relationship managers of all banks they have tied-up with.
The list of MF schemes which banks sell is usually researched by banks internally and in consultation with AMCs. Most banks have a separate division called third party products division which handles mutual fund sales.
Largest PSU bank distributors
Public sector behemoth— SBI Bank is the largest MF distributor in the PSU banks space which earned a commission of Rs 31 crore in FY12. On the other hand, foreign bank — HSBC Bank is the largest MF distributor having earned Rs 154 crore in the same period, almost five times higher revenue than SBI Bank. IDBI Bank is the second largest MF distributor which earned Rs 9 crore through mutual fund distribution.
While the recent AMC-PSU bank tie-ups are not a result of the recent SEBI nudge to reach smaller towns, these partnerships are likely to yield results in the long-run. The SEBI announcement is likely to be an encouragement for AMCs to tie up with PSU banks. The banks that AMCs have recently tied-up with do not have their own AMCs.
Tie-ups with PSU Banks
