{"id":9388,"date":"2025-09-13T12:38:05","date_gmt":"2025-09-13T12:38:05","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=9388"},"modified":"2025-12-26T12:03:18","modified_gmt":"2025-12-26T12:03:18","slug":"commissions-to-own-subsidiaries-makes-mis-selling-by-banks","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/","title":{"rendered":"Commissions to own subsidiaries makes mis-selling by banks"},"content":{"rendered":"<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-9389\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/1757574363824.jpg\" alt=\"Commissions to own subsidiaries makes mis-selling by banks\" width=\"1101\" height=\"1651\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/1757574363824.jpg 480w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/1757574363824-200x300.jpg 200w\" sizes=\"(max-width: 1101px) 100vw, 1101px\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69dd25ef2710b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69dd25ef2710b\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Commissions_to_own_subsidiaries_which_makes_mis-selling_by_banks\" title=\"Commissions to own subsidiaries, which makes mis-selling by banks\">Commissions to own subsidiaries, which makes mis-selling by banks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Compliance_summary_for_Section_194H_%E2%80%93_TDS_on_CommissionBrokerage\" title=\"Compliance summary for Section 194H \u2013 TDS on Commission\/Brokerage:\">Compliance summary for Section 194H \u2013 TDS on Commission\/Brokerage:<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Who_Must_Deduct\" title=\"Who Must Deduct?\">Who Must Deduct?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Threshold\" title=\"Threshold\">Threshold<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Rate\" title=\"Rate\">Rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Timing\" title=\"Timing\">Timing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Deposit_Reporting\" title=\"Deposit &amp; Reporting\">Deposit &amp; Reporting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Non-Compliance_Risks\" title=\"Non-Compliance Risks\">Non-Compliance Risks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/commissions-to-own-subsidiaries-makes-mis-selling-by-banks\/#Practical_Points\" title=\"Practical Points\">Practical Points<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Commissions_to_own_subsidiaries_which_makes_mis-selling_by_banks\"><\/span><span style=\"color: #000080;\">Commissions to own subsidiaries, which makes mis-selling by banks<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The numbers from FY24 commissions show a massive reliance by banks on distribution income especially from their own subsidiaries, which makes the \u201cmis-selling\u201d concern very real. Let\u2019s break it down:<\/p>\n<p>1.\u00a0\u00a0\u00a0\u00a0HDFC Bank alone earned nearly 30% of the total commissions (INR 6,467 cr out of INR 21,773 cr).<br \/>\n2.\u00a0\u00a0\u00a0\u00a0SBI + Axis Bank + HDFC Bank together account for ~63% of the pie.<br \/>\n3.\u00a0\u00a0\u00a0\u00a0Subsidiary-dependence is glaring:<br \/>\no\u00a0\u00a0Kotak Mahindra Bank: 100% from Kotak Life Insurance.<br \/>\no\u00a0\u00a0Canara Bank: 99.1% from Canara Robeco MF. This raises direct conflict of interest concerns.<br \/>\n4.\u00a0\u00a0\u00a0\u00a0Public sector banks (PNB, BOB, Canara, Union, Indian Bank) earn less compared to private giants, but still show patterns of in-house bias.<br \/>\n5.\u00a0\u00a0\u00a0\u00a0Smaller private banks (Yes, Federal, IDFC First) are aggressively building this stream, despite weaker balance sheets.<\/p>\n<p>The Core Issue<br \/>\nBanks are supposed to advise and protect customers\u2019 financial interests.<br \/>\nBut if employees are incentivized to push in-house products with high commissions, then:<br \/>\nCustomer needs may be ignored.<br \/>\nProducts with poor suitability (e.g., expensive ULIPs, long lock-in insurance) may be pushed.<br \/>\nTrust in the banking system could erode.<\/p>\n<p>Possible regulatory responses could include:<br \/>\n1.\u00a0\u00a0\u00a0\u00a0Disclosure mandates \u2013 Banks must declare % of commissions from group entities.<br \/>\n2.\u00a0\u00a0\u00a0\u00a0Cap on related-party distribution \u2013 Limit how much a bank can sell of its subsidiary\u2019s products.<br \/>\n3.\u00a0\u00a0\u00a0\u00a0Suitability norms \u2013 RBI\/IRDAI\/SEBI could enforce stronger \u201ccustomer-first\u201d checks (like fiduciary responsibility).<br \/>\n4.\u00a0\u00a0\u00a0\u00a0Commission transparency \u2013 Customers should know exactly what commission the bank earns from the product they\u2019re sold.<br \/>\n5.\u00a0\u00a0\u00a0\u00a0Incentive reform \u2013 Shift from commission-based to advisory fee-based distribution.<\/p>\n<p>The numbers highlight that commissions are not small \u201cside income\u201d they are a structural revenue stream. But if left unchecked, this model risks mis-selling, loss of customer trust, and systemic reputational damage for Indian banks.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Compliance_summary_for_Section_194H_%E2%80%93_TDS_on_CommissionBrokerage\"><\/span><span style=\"color: #000080;\">Compliance summary for <\/span><strong style=\"color: #000080;\">Section 194H \u2013 TDS on Commission\/Brokerage<\/strong><span style=\"color: #000080;\">:<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-9807\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H.jpeg\" alt=\"summary for Section 194H \u2013 TDS on Commission\/Brokerage:\" width=\"1211\" height=\"1212\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H.jpeg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H-300x300.jpeg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H-150x150.jpeg 150w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H-768x769.jpeg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/194H-800x801.jpeg 800w\" sizes=\"(max-width: 1211px) 100vw, 1211px\" \/><\/p>\n<div><span style=\"color: #000080;\"><strong>Scope of section 194H<\/strong><\/span><\/p>\n<ul>\n<li>Applies to payments for:\n<ul>\n<li>Services rendered (other than professional services)<\/li>\n<li>Acting on behalf of another for buying\/selling goods<\/li>\n<li>Transactions relating to assets, valuable articles, or securities<br \/>\n<em>(Insurance commission excluded \u2013 covered under Sec 194D)<\/em><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Who_Must_Deduct\"><\/span><span style=\"color: #000080;\"><strong>Who Must Deduct?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000080;\">Any person paying commission\/brokerage.<\/span><\/li>\n<li><span style=\"color: #000080;\">Individuals\/HUFs only if liable to tax audit u\/s 44AB in preceding FY.<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Threshold\"><\/span><span style=\"color: #000080;\"><strong>Threshold<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000080;\">No TDS if total commission\/brokerage \u2264 \u20b920,000 in a financial year, <em>(Applicable from 1 April 2025)<\/em><\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Rate\"><\/span><span style=\"color: #000080;\"><strong>Rate<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>2% \u2013 if PAN furnished <em>(effective 1 Oct 2024)<\/em><\/li>\n<li>20% \u2013 if PAN not furnished (Sec 206AA)<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Timing\"><\/span><span style=\"color: #000080;\"><strong>Timing<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Deduct at earlier of credit or payment, including year-end provisions.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Deposit_Reporting\"><\/span><span style=\"color: #000080;\"><strong>Deposit &amp; Reporting<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Deposit: By 7th of next month<\/li>\n<li>Return: Form 26Q<\/li>\n<li>Certificate: Form 16A<\/li>\n<li>Credit reflected in Form 26AS \/ AIS of payee.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Non-Compliance_Risks\"><\/span><span style=\"color: #000080;\"><strong>Non-Compliance Risks<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Interest u\/s 201(1A)<\/li>\n<li>Late fee &amp; penalties<\/li>\n<li>Disallowance of expenditure u\/s 40(a)(ia)<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Practical_Points\"><\/span><span style=\"color: #000080;\"><strong>Practical Points<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Trade discounts upfront: not commission.<\/li>\n<li>Incentives\/performance-linked payouts: May attract 194H depending on arrangement.<\/li>\n<li>Commission credited to suspense\/payable account: TDS still applicable.<\/li>\n<\/ul>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Commissions to own subsidiaries, which makes mis-selling by banks The numbers from FY24 commissions show a massive reliance by banks on distribution income especially from their own subsidiaries, which makes the \u201cmis-selling\u201d concern very real. Let\u2019s break it down: 1.\u00a0\u00a0\u00a0\u00a0HDFC Bank alone earned nearly 30% of the total commissions (INR 6,467 cr out of INR &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[642],"tags":[1216],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9388"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=9388"}],"version-history":[{"count":3,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9388\/revisions"}],"predecessor-version":[{"id":9808,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9388\/revisions\/9808"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=9388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=9388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=9388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}