Bank-owned mutual funds have an edge over others

Mutual fund and insurance subsidiaries enable banks to tap the potential by providing specialised, value-added financial services to investors and thereby expand the customer base.

Published: 10th April 2022 09:45 AM  |   Last Updated: 10th April 2022 09:45 AM   |  A+A-

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Image used for representational purpose only. (File Photo)

Express News Service

BENGALURU: With an aim to serve more customers and also to address all their financial requirements, banks are either launching or partnering/ acquiring Asset Management Companies (AMCs) and insurance subsidiaries.

Recently, Bandhan Financial Holdings Limited (BFHL),investment firms GIC and ChrysCapital signed an agreement with IDFC Limited to acquire its AMC and also IDFC AMC Trustee Company for a consideration of R4,500 crore.

Anil Singhvi, chairman of IDFC Limited said the Bandhan consortium with its strong brand and resources will further strengthen distribution of products and improve overall experience for IDFC AMC’s investors and distributors.

Analysts who are tracking banks’ acquisitions said one of the main advantages of this is value building. “If you are a pure play banker and you also have financial services offering, the banks’ valuation typically increases. Also, bank customers are more in numbers compared to AMC customers, and you can sell AMC products to them and also earn commission,” an analyst said.

Bank of Baroda is a majority shareholder of IndiaFirst Life Insurance Co. In the asset management space, the bank recently entered into a strategic partnership with BNP Paribas Asset Management, combining the strengths of their respective asset management businesses in India, to form Baroda BNP Paribas Mutual Fund.

Vikramaditya Singh Khichi, Executive Director, Bank of Baroda, said banks offer a comprehensive range of financial products and services to customers with an objective of addressing their financial goals.

“Increasingly, customer preference trends indicate inclination towards opting for a financial institution that can address a customer’s composite financial requirements. Banks, being trusted and reputed organisations in the finance sector have the ability to cater to these varied requirements by offering financial products ranging from deposits, credit, investments to protection,” he said.

Mutual fund and insurance subsidiaries enable banks to tap the potential by providing specialised, value-added financial services to investors and thereby expand the customer base.

Banks can tie up with a MF arm or have their own subsidiaries.

Mostly, a large bank prefers to have its own subsidiary, as it is said to be a win-win situation for its customers as well as shareholders. From Kotak, HDFC, ICICI to SBI, all major banks have their own AMCs. Recently, Bank of India acquired a balance stake in BOI AXA Investment Managers. 

As many as 11 of the 43 AMCs are owned by a bank or a banking joint venture. These 11 (excluding IDFC which also goes to a bank) AMCs together account for 41% of the R 38.83 lakh crore of the industry AUM average at the end of March 2022.

Incremental value

Having MF and insurance subsidiaries allow the bank to add incremental value to its customers.The Indian market offers significant opportunity.



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