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As per IRDAI’s consultation paper, bancassurance economics could see a material reset

ICICIdirect Research 25 Sep 2026 DISCLAIMER

News: As per IRDAI's consultation paper, bancassurance economics could see a material reset, particularly for lenders distributing credit-linked insurance. Life insurance bundled with loans is proposed to be capped at 2% commission for single-premium policies and 2.5% in the first year for multi-year policies, versus materially higher prevailing payouts. Compulsory bundling of insurance with loans would also be prohibited, while volume- or reward-linked incentives to bank/NBFC staff would no longer be permitted. Insurance distribution forms a meaningful fee pool for select lenders, contributing ~16.3% of PPOP for Yes Bank, ~12.4% for IDFC First Bank, ~10.5% for IndusInd Bank, ~9.0% for RBL Bank and ~8.6% for Axis Bank, while exposure is lower for larger diversified banks. Among NBFCs, dependence is also meaningful for select players, at ~16.8% for L&T Finance, ~18.5% for Piramal Finance and ~10.3% for Chola.

View: The proposed norms could materially compress non-interest income for lenders with high dependence on bancassurance and credit-protection commissions, with NBFCs relatively more exposed given higher payouts and greater use of bundled credit-life products. Banks with diversified fee pools should be better able to absorb the impact, while lenders such as Yes Bank, IDFC First, IndusInd, RBL and Axis could see a more visible drag given the higher contribution of insurance distribution to PPOP. A large part of the near-term concern was already reflected in yesterday’s sharp stock-price reaction, while the proposals remain at the consultation stage.

Impact: Neutral

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