Bank Nifty, Fin Nifty crash up to 2% as brokerages see earnings hit from IRDAI proposals; Axis Bank, Max…

According to fresh market updates, Shares of non-banking financial services and banks declined on September 24 as they might see a decline in insurance distribution revenues due to a cap on commissions after the Insurance Regulatory Authority of India proposed a bevy of measures.

Banks and financial services firms earn commissions on cross-selling and distributing insurance products. A cap on commission for distributors is noted to impact the topline of banks and non-banking financial services firms. Shares of L&T Finance declined 10% to a three-month-low of Rs 279 apiece.

Shares of Max Financial Services slumped to over 10% and hit an over one-year low of Rs 1,360.10. The firm is stated to be impacted more by the proposed changes. Max Financial Services sells most of its elevated-cost channel products through banks.

Nifty Private Bank and Nifty Financial Services declined around 2% each, with the majority of constituents trading softer.

Financial services majors like Bajaj Finance, Bajaj Finserv were among top laggards on the Nifty 50, down 1-5%. A decline in HDFC Bank put the most pressure on the headline index. It was down nearly 1% and its peer, Axis Bank, was down over 4.5%. The Nifty Bank index was down nearly 2% and was among the major sectoral laggards. The sectoral index was trading below 55,600-mark.

"Insurance regulator proposes to tighten caps on insurance commissions from FY28. It has sought public opinion on draft norms over next month, and rules apply prospectively. This will be tad negative for banks' bancassurance fees, especially credit-protect premiums, as it's mostly single premium with high commissions. Based on FY26 banca commission/ FY27 earnings (normalised), IndusInd Bank and IDFC First Bank have elevated exposure, and ICICI Bank and PSU Banks have softer risk," stated Jefferies.

The proposals, in a consultation paper released late on Wednesday, would reintroduce commission caps across life, health and motor insurance, which the Insurance Regulatory and Development Authority of India (IRDAI) had scrapped in 2023.

Under the proposed rules, banks and non-bank lenders would be barred from compulsorily bundling insurance with loans, and life insurance commissions would be staggered over the life of a policy rather than paid largely upfront.

While the reforms are aimed at lowering policy costs and curbing mis-selling, market watchers stated they could disrupt existing distribution models, weighing on expansion in an industry that relies heavily on agent and bancassurance channels for business.

Immediate backing (for Bank Nifty) is placed at 56,000-55,700 marks being the almost identical low of the last 2 weeks lows. A decisive breach below this level could extend the corrective move towards 55,200, followed by 54,800, stated Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking