News reports in leading business dailies indicate that some bank-sponsored mutual funds are looking to exit from the mutual fund business.

The writings on the wall for bank sponsored mutual funds. A sharp slump in performance coupled with declining investor interest are the main reasons for these funds heading for the exit door. Apart from some exceptions like Canbank MF and SBI MF, others like PNB MF and Bank of India MF failed to incite investor interest with innovative products like open-ended monthly income plans, liquid/money market funds, gilt funds. Given their extensive bank network these mutual funds had an enviable distribution channel. In fact, private funds have begun to realise the importance of banks in the distribution of mutual funds and are tying up with them with this objective. The Kothari Pioneer  IndusInd Bank tie-up is a case in point.

Falling industry share and market realities have woken up bank funds to the fact that fund management is just not their forte. News reports reveal that PNB MF and BoI MF are looking to exit from the business. Other bank funds are looking to divest some stake in favour of a foreign partner.

Regardless of the condition of most bank-sponsored funds, news reports indicate that there are some banks are waiting to get into the mutual fund business viz. Jammu & Kashmir Bank, ABN Amro Bank. It remains to be seen how these banks plan to woo investors and succeed where others before them have failed.

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