Commissions paid to mutual fund distributors (MFDs) increased by over 20 per cent for most large fund houses in 2023-24 (FY24), driven by a sharp market rally and strong inflows.
The largest fund house, SBI Mutual Fund (MF), which now manages nearly Rs 10 trillion in assets, paid Rs 2,025 crore to its major distributors — 21 per cent higher than the Rs 1,675 crore payout in 2022-23 (FY23).
Its sponsor, State Bank of India (SBI), accounted for nearly 50 per cent of the total payout, pocketing Rs 1,001 crore.
In FY23, the state-owned lender’s share of total commissions was 52 per cent.
MFs pay commissions to distributors to help them mobilise assets via regular plans.
In response to a query about SBI primarily selling its own MF products, Securities and Exchange Board of India Chairperson Madhabi Puri Buch stated that SBI MF is entitled to leverage its distribution muscle, provided there is no mis-selling.
“There are two factors to consider.
"Many funds, particularly those in the same category, are neck-and-neck in terms of performance.
"Therefore, if an entity decides to sell its group company’s product among these schemes, I don’t see any issue with it,” she said at an SBI MF event on Friday.
“Different organisations have different strengths.
Some may have a strong brand.
"If SBI has the power of its distribution, why shouldn’t it use it? Is there something wrong with that?
"However, if a fund is underperforming and you are still selling it, that constitutes mis-selling.
"This is something the system must address.
"I am confident that SBI Group’s ecosystem manages this effectively,” she added.
SBI chairman Dinesh Kumar Khara also defended the bank’s approach, stating that it draws comfort from the fact that SBI Group has oversight over SBI MF.
For the second-largest fund house, ICICI Prudential MF, the commission payout to ICICI Bank remained nearly unchanged at Rs 269 crore.
However, the overall payout rose to Rs 1,676 crore in FY24, a 21 per cent increase from FY23.
Consequently, the bank’s share of the total commission disbursed by the fund house decreased from 20 per cent in FY23 to 16 per cent in FY24.
The latest commission data for HDFC MF could not be sourced.
The next three largest fund houses shared a common top distributor, NJ IndiaInvest, which distributes MFs through its network of empanelled MFDs across the country.
