L&T Finance (LTNFS.NS) shares fell 10% intraday after the IRDAI released its draft proposal to slash credit‑life commission caps by 90% and motor‑insurance commissions by 70%—a move that rattled the bancassurance market.
The regulator’s draft also bars lenders from conditioning loans on insurance purchases, a policy that could curtail the volume of policies sold across the sector.
According to Jefferies, L&T Finance’s insurance commission income represents 26% of its FY26 pre‑tax profit, dwarfing exposure levels at peers such as IndusInd Bank (18%) and IDFC First Bank (17%).
Among NBFCs, the impact is even steeper: L&T Finance’s share of PBT from insurance hits 26%, followed by Poonawalla (17.8%), Chola (15.5%) and HDB & M&M (13.4% each). These figures underscore the sector’s reliance on credit‑life products.
Senior VP Viral Shah of IIFL Capital estimates that if lenders absorb 50% of the commission loss, L&T Finance could still see a 12% hit to PAT, while most other NBFCs would suffer a 3‑5% dent.
The IRDAI paper remains in consultation; the final rules are expected to be softer than the draft, giving banks and NBFCs time to adjust pricing models and incentive structures before the new commission regime takes effect.