Stories
Bank Nifty, Fin Nifty Crash 2% as IRDAI Proposals Threaten Earnings; Axis Bank, Max Financial Hit Hard
- •Shares of non-banking financial services and banks plummeted due to proposed IRDAI measures capping insurance distribution commissions, impacting revenue.
- •Max Financial Services and L&T Finance experienced significant drops, with Max Financial Services down over 10% to a one-year low.
- •Nifty Private Bank and Nifty Financial Services indices fell around 2% each, with major constituents like Bajaj Finance, Bajaj Finserv, and HDFC Bank seeing declines.
- •Jefferies noted that the proposed tightening of insurance commission caps from FY28 would negatively affect banks' bancassurance fees, especially for credit-protect premiums.
- •The IRDAI proposals, which reintroduce commission caps scrapped in 2023, aim to lower policy costs and curb mis-selling but could disrupt existing distribution models.
Key Questions Answered
Bank Nifty and Fin Nifty fell by up to 2% because the Insurance Regulatory and Development Authority of India proposed capping insurance distribution commissions, which brokerages warn could hit the cross-selling and insurance distribution revenues of banks and non-banking financial services companies.
The IRDAI consultation paper proposes reintroducing hard commission caps across life, health, and motor insurance, barring banks and lenders from compulsorily bundling insurance with loans, and staggering life insurance commissions over the policy's life rather than paying them upfront.
According to IIFL Research, IndusInd Bank has the highest exposure with FY26 bancassurance income equivalent to 79.3% of its profit before tax, followed by Bandhan Bank at 30.8% and RBL Bank at 28.5%.
