Mutual fund distributors' commission rises by 9% in FY'14

NEW DELHI: Income earned by distributors from selling mutual fund schemes surged 9 per cent to a staggering Rs 2,572 crore in 2013-14, driven by improved market conditions, even as their number fell during the year.

According to latest data available with Association of Mutual Funds in India (AMFI), the total income earned by 329 distributors stood at Rs 2,572 crore. Citibank topped the chart with highest commissions.

This was 9 per cent higher than the total commission of Rs 2,367 crore given by the fund houses to their 332 distributors during the fiscal year 2012-13.

Public sector banks, meanwhile, are far behind their private peers when it comes to selling MF products.

Interestingly, the top 10 distributors contributed about 47 per cent of the overall commissioned earned in the past financial year. There were seven banks among the top-ten mutual fund distributors.

Market participants attributed the spike in commission to better capital market conditions in the past fiscal coupled with measures taken by Sebi for the benefit of the sector.

However, the year ahead is going to be tricky for the MF industry as the recent budget proposals may dealt a big blow to the sector, mainly on debt and gold oriented funds.

The Union Budget 2014-15 increased long-term capital gains tax on debt funds to 20 percent from 10 per cent, and changed the definition of long-term for debt funds to 36 months from 12 months.

As per the latest disclosure of commission and expenses paid by various fund houses to their distributors, Citibank led the list earning a commission of Rs 181.16 crore followed by HDFC Bank (Rs 158.51 crore), NJ IndiaInvest (Rs 149 crore) IIFL Wealth Management (Rs 130 crore) and SPA Capital Services (Rs 121 crore).

Besides, other among the top-ten commission earners - ICICI Bank (Rs 118 crore), Kotak Mahindra Bank (Rs 99 crore), Axis Bank (Rs 94 crore), Standard Chartered Bank (Rs 89 crore)and HSBC Bank (Rs 83 crore).

As per AMFI data, State Bank of India (SBI), the largest lender, could manage to get a commission payment of Rs 29 crore, followed by IDBI Bank (Rs 9 crore), Union Bank of India (Rs 6 crore), Canara Bank (Rs 5 crore) and Bank of Baroda (Rs 4 crore.)

AMFI discloses commissions of those MF distributors who meet any of the four criteria -- presence in at least 20 locations or manage assets of at least Rs 100 crore, or should have received commissions worth a minimum of Rs 1 crore from all MFs collectively, or received above Rs 50 lakh from one fund house.