Banks Say “Minimal Impact” From IRDAI’s Proposed Commission Curbs
Similarly Canara Bank expects a hit of less than Rs 200 crore to its distribution income if the proposed IRDAI norms are implemented in their current form.
Mumbai: The insurance regulator’s proposed caps on insurance commissions will have “no material impact” on the overall earnings of banks, bankers said. In an exclusive interview with Deccan Chronicle, M Paramasivam, executive director, Punjab National Bank said, “The impact of the proposed commission caps on the commissions that we earn from selling insurance products will be hardly Rs 70 crore for the full year. For a bank of our size that is making a net profit of Rs 5500 crore per quarter, the impact is nothing.”
Sandeep Batra, executive director of ICICI Bank during the bank’s Q2FY27 earnings on Saturday said, “We sell only ICICI group products and bancassurance income is less than one percent of our total income and about 5 per cent of the total fees and so it (the norms) will have a minimal impact on the profit and loss book.”
Similarly Canara Bank expects a hit of less than Rs 200 crore to its distribution income if the proposed IRDAI norms are implemented in their current form. “Taken together, across everything that we distribute, the dent will not be more than Rs 200 crore in any case, considering the size of our profits, which was ₹19,000 crore last year,” said Brajesh Kumar Singh, managing director and chief executive of Canara Bank.
Another nationalised bank, Central Bank of India expects bancassurance fees to fall to Rs 49 crore from Rs 76 crore if the commission cuts are put in place.
Meanwhile Axis Bank plans to offset the potential loss in bancassurance income through higher sales volumes, change in product mix and alternative fee income according to its management. HDFC Bank said its too early to assess the impact.
Last month, the Insurance Regulatory and Development Authority of India (IRDAI) in a two part consultation paper titled ‘Recaliberating economics of insurance distribution’ proposed a return to hard commission caps for distributors, lower expense limits for insurers, greater disclosure of distributor remuneration and a clawback mechanism in cases of mis-selling. The consultation paper also proposed sharply lower commissions for credit-linked insurance, while also seeking to curb compulsory bundling of insurance with loans.
