MF Commission payouts surge 40% YoY to Rs 21,000 crore in FY25; NJ India, Prudent gain most: Kotak Institutional Equities

According to AMFI’s study of a large sample of mutual fund distributors, the FY2025 commission pool was around Rs 21,000 crore which was up by 40% on yearly basis. Among large banks, HDFC Bank has the lowest contribution from captive AMC, while SBI is almost fully captive.

Large independent distributors (NJ/Prudent) have been major beneficiaries, with commissions growing at 30-35% CAGR in the past decade, according to a report on Capital Markets by Kotak Institutional Equities.

The mutual fund distribution continues its shift toward independent/open architecture players compared to banks. The share of national distributors and small agents (AUM below Rs 500 crore) increased marginally on a yearly basis to nearly 75% in FY2025 (63% in FY2019). Banks continue to lose market share steadily, led by private and foreign banks, the report said.

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The elevated levels of new fund offerings (NFOs) in FY2025 have helped distributors generate strong commissions. While the first-year commission rate was similar to the past cohorts, the absolute amount raised through NFOs was very high in FY2025.

The total money raised through NFOs in fiscal year 2025 was the highest of around Rs 89,800 crore up from Rs 54,400 crore in fiscal year 2024. In fiscal year 2026 till date is Rs 15,600 crore.

“We have also seen selective commission cuts (including the backbook) by some of the large AMCs. A comparison of revenue growth between AMCs and distributors reveals a still unbalanced sharing of the industry revenue pool. The benefits of higher revenue concentration among AMCs (share of the top-5/10) compared to a more fragmented distribution is offset by competition for fund performance (i.e., churn). Distributors, on the other hand, can potentially consolidate and diversify across other products," the report highlighted.

According to Kotak Institutional Equities, India will remain a commission-oriented market for mutual funds, even as the share of direct equity has been rising steadily.

While India already has one of the most investor-friendly regulatory regimes for mutual funds, there are four ways in which the industry can potentially evolve in the long term, based on observations from other markets which includes first focus on costs driving a shift to advisory-driven models (US). Secondly, continue to operate as commission-driven, with higher disclosures (Europe);

Thirdly, caps on fund fees and curbing distributor power through commission-sharing caps (China); and lastly, regulatory ban on inducements/commission to curb mis-selling and align incentives (UK, Netherlands).

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The regulatory initiatives such as the proposed revamped RIA framework and market forces such as the growth of new passive focused players and investment platforms will likely increase competition, driving higher penetration with lower fees.

The share of direct channels has increased in the overall distribution of actively managed equity-oriented funds from 28.5% in 2025 to 29.1% in Q1FY26. Within the banking universe, the share of top four banks has increased in commission payout which is especially led by SBI.

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