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Some lenders are charging as much as 6% for offering investment advice on MFs Private banks such as ICICI Bank and HDFC Bank and international lenders like Citigroup have seen a sharp jump in their fee income, helped by a surge in sale of unit-linked insurance products (Ulips) and record mobilisation of funds by mutual funds. All this at a time when lending continues to remain flat.
In fact, some lenders, through their private wealth management, are charging as much as 6% for offering investment advice on mutual funds. Sale of Ulips has risen to a 4-year high, and so have the inflows under the new fund options of mutual funds. The premium collected by selling Ulips grew 33% to Rs. 1,625 crore during the April-June quarter, according to preliminary industry data. ICICI Bank saw an overall fee growth of 8% on a y-o-y basis for Q1 of 2015 and a healthy growth in retail fees, according to the bank’s investor presentation.Similarly, HDFC Bank saw a 9.5% jump in fee income for the quarter.
“The rise in the equity markets has definitely led to an increased customer demand for Ulips, given that the current version of Ulips has lower allocation charges and is an attractive customer value proposition,“ said Amitabh Chaudhry, MD and CEO of HDFC Life. Income earned from sale of mutual funds and insurance is reported under the non-interest income head by banks. “Third party sales have improved this quarter,“ said Kajal Gandhi, analyst at ICICI Securities.“Trading gains were lower last year this quarter because of MTM losses which will be slightly better this quarter.“
According to data provided by the Association of Mutual Funds of India, in August, equity new fund options (NFOs) have attracted inflows worth Rs. 1,229 crore, the highest since January 2010. “Fees will be robust for the second quarter because of a diversity of products and fees coming from retail insurance and MFs and corporate transactions,“ said a private bank executive on the condition of anonymity. The benchmark BSE Sensex index has climbed 25% in 2014 as investors believed that the Narendra Modi-led government will provide a stable government and expedite economic reforms.
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