These banking stocks are impacted the most by the IRDAI draft guidelines

Shares of banks with major exposure to bancassurance income are in focus after the Insurance Regulatory and Development Authority of India (IRDAI) proposed sweeping reforms to insurance distribution.

The draft proposals seek to lower distribution costs, introduce segment and product specific commission limits, improve transparency and curb mis selling. IRDAI has also proposed restrictions on volume linked and reward linked incentives for bank and non banking financial company staff selling insurance.

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According to IIFL Research, IndusInd Bank has the highest exposure among the banks tracked, with FY26 bancassurance income equivalent to 79.3% of profit before tax. It is followed by Bandhan Bank at 30.8%, RBL Bank at 28.5%, Yes Bank at 19.3%, Axis Bank at 12.5%, Federal Bank at 7.9% and HDFC Bank at 7.3%.

Among other banks, Kotak Mahindra Bank has bancassurance income equivalent to 5.8% of FY26 profit before tax, followed by Standard Chartered at 5.6%, State Bank of India at 2.6%, Canara Bank at 2.2%, Union Bank of India at 2%, Punjab National Bank at 1.6%, Bank of Baroda at 1.5%, Indian Bank at 1.2%, ICICI Bank at 0.6% and HSBC at 0.5%, according to IIFL Research.

IRDAI’s proposals include a five-year glide path to lower Expenses of Management limits for insurers. For life insurers, the EoM limit is proposed to move to 15% within two years and 12.5% within five years. For general insurers, the limit is proposed to decline to 25% within two years and 20% within five years.

The regulator has also proposed reintroducing segmental commission limits, with the caps linked to factors such as the insurance segment, product complexity, distribution channel and effort involved in selling and servicing a policy.

Under the proposed framework, open distribution channels such as banks, brokers, corporate agents and web aggregators would have lower commission limits, while relatively higher limits could apply to individual agents.

IRDAI has also proposed greater transparency around commissions, including disclosure of commission rates on policy documents and clearer disclosure of distributor remuneration.

The draft also seeks to prohibit compulsory bundling of insurance with loans and credit products, while proposing restrictions on incentives linked to sales volumes or rewards for bank and NBFC employees selling insurance.

In motor insurance, IRDAI has proposed making insurance available through Market Infrastructure Institutions such as Bima Sugam for a fee of no more than 5% of the premium, along with lower commission structures for certain mandatory and easy to sell products.

The consultation paper is currently open for feedback, with stakeholders allowed to submit comments until October 25, 2026.

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First Published: 

Sept 24, 2026 10:43 AM

IST

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