IRDAI proposal triggered a sharp fall in financial stocks, erasing nearly ₹1.12 lakh crore in investor wealth. Bajaj Finance, PB Fintech, HDFC Bank, Axis Bank and HDFC Life were the biggest losers as commission caps on insurance distribution raised concerns over fee income. The selloff spread across banks and insurers, hitting valuations hard.
Bajaj Finance lost ₹29,000 crore, PB Fintech ₹20,000 crore, HDFC Bank ₹15,000 crore, Axis Bank ₹14,000 crore and HDFC Life ₹7,000 crore. Other firms like Max Financial, L&T Finance, ICICI Prudential Life, IndusInd Bank, IDFC First Bank and AU Small Finance Bank also saw declines between ₹3,000 and ₹6,800 crore. PB Fintech even hit a 10% lower circuit.
The regulator proposed capping commissions at 15–20% in the first year and 5–10% on renewals for health insurance. Life insurance commissions may range from 5–20% depending on premium terms, while motor insurance personal accident add-ons could be capped at 5–10%. IRDAI also suggested banning compulsory insurance with loans to improve transparency and reduce costs.
Analysts warn that banks relying heavily on insurance distribution could face pressure on non-interest income. However, lenders with captive insurance arms may absorb some impact. The final outcome will depend on the regulator’s transition timeline and product mix adjustments.