Investors paid an estimated Rs 27,335 crore in mutual fund distribution commissions in FY25. But most of this money went to a very small group of distributors.
An analysis by 1 Finance Magazine of data published by the Association of Mutual Funds in India (AMFI) found that 77.2% of the total commission went to just 3,158 distributors. That is about 1.5% of the roughly 2.06 lakh distributors registered with AMFI.
For investors, this matters because distribution commissions are built into the cost of regular mutual fund plans. They are not usually charged as a separate bill to the investor.
The data also shows how strongly the mutual fund distribution business favours players with a large customer base and a lot of assets.
BANKS HAVE A BIG ADVANTAGE
Of the Rs 27,335 crore paid as commissions, Rs 21,106 crore went to the 3,158 distributors whose commissions were disclosed by AMFI.
The remaining estimated Rs 6,229 crore was spread across about 2.03 lakh distributors below the disclosure threshold.
The biggest beneficiaries among the disclosed distributors were banks and bank-linked broking channels.
Just 50 such channels received Rs 6,330 crore in commissions in FY25. That means each received an average of about Rs 126.6 crore.
Individual distributors were much smaller by comparison.
The 1,474 individual distributors whose commissions were disclosed received a total of Rs 2,689 crore, or about Rs 1.82 crore each on average.
In other words, the average commission earned by a bank or bank-linked channel was about 70 times that of an individual distributor.
The main reason is scale.
Banks already have large customer bases, branches and established distribution networks. That makes it easier for them to attract and manage large amounts of mutual fund money.
Individual distributors usually depend more on personal relationships and may work with investors who have smaller amounts to invest.
Other large distributors also earned significant commissions.
Wealth managers and corporate distributors received Rs 11,629 crore across 1,591 entities. That works out to an average of Rs 7.31 crore each.
Fintech platforms received Rs 458 crore across 43 entities, averaging Rs 10.65 crore each.
WHAT DOES THIS MEAN FOR INVESTORS?
The numbers do not mean that distributors are doing something wrong or that commissions are necessarily bad. Distributors provide a service and are paid for bringing investors and their money into mutual funds.
The important point for investors is to understand how that payment works.
A distributor earns commission on the mutual fund assets linked to their AMFI Registration Number. The more money invested through them, the more commission they can potentially earn.
This is where regular and direct mutual fund plans differ.
In a regular plan, the fund’s expenses include the cost of distribution. This affects the expense ratio and, ultimately, the returns received by investors.
A direct plan of the same mutual fund does not pay distribution commission and therefore has a lower expense ratio.
That does not mean every investor should automatically choose a direct plan.
Someone investing through a distributor may value help in selecting funds, completing paperwork, managing investments and dealing with the AMC.
The point is simple. Investors should know that they are paying for that service through the cost of a regular plan.
HOW BIG IS THE COMMISSION POOL?
The Rs 27,335 crore commission pool was generated against mutual fund assets of Rs 65.74 lakh crore in FY25.
But there is an important qualification to the numbers.
AMFI directly disclosed commissions for the 3,158 distributors that received Rs 21,106 crore.
The remaining Rs 6,229 crore is an estimate. It is calculated by subtracting the disclosed amount from the total commission pool and attributing the difference to the roughly 2.03 lakh distributors below the disclosure threshold.
So the estimated Rs 3.07 lakh average for these distributors should not be treated as the actual income of each distributor.
The AMFI register also includes dormant registrations.
The figures cover mutual fund distribution commissions. They do not include money distributors may earn from products such as insurance or the National Pension System.
WHAT SHOULD INVESTORS CHECK?
Investors do not have to guess how their mutual fund is being distributed. They can check whether they are investing through a regular or direct plan and compare the expense ratios.
They can also find out how the person advising them is being paid.
A mutual fund distributor earns commissions, while a SEBI-registered investment adviser follows a different compensation and regulatory model.
The broader picture from the data is clear. India’s mutual fund distribution business is heavily concentrated among large banks, wealth managers, fintech platforms and other distributors with the ability to attract large amounts of money.
If you use a regular mutual fund plan, distribution is part of the cost. Whether that cost is worth paying depends on the service you receive.
Investors can compare the expense ratio of a regular plan with the direct version of the same fund and decide whether the additional cost makes sense for them.
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