Several of India’s banks are preparing for a dent in their income as new proposals aim to limit what they can earn from selling insurance products.
Central Bank of India has given the starkest estimate so far. It expects the fees it collects from its bancassurance business, where it sells insurance policies to its customers on behalf of insurers, to fall by roughly a third if the proposed rules take effect as written.
Canara Bank has also put a number on the potential damage. It believes its fee income could shrink by about ₹145 crore as a result of similar changes. For a large public sector lender, that is not a ruinous sum, but it adds to the pressure on income streams outside traditional lending, which banks have leaned on more heavily in recent years.
Axis Bank is taking a more upbeat approach. Rather than accepting a drop in earnings, it plans to offset any shortfall by selling more policies and by finding other sources of revenue. The strategy rests on the idea that higher volumes can make up for thinner payouts on each sale, although that depends on customers continuing to buy.
HDFC Bank, one of the country’s biggest private lenders, has stayed cautious. It says it has not yet worked out how the proposed rules would affect its business, suggesting it is waiting for greater clarity before committing to any forecast.
The differing responses show how unevenly the proposals could land. Banks that depend more on insurance commissions face a bigger adjustment, while those with broader income bases may find it easier to cope.
The proposals are aimed at curbing the cost of insurance distribution, an issue regulators have linked to concerns about aggressive selling and rising expenses for policyholders. Banks, however, now have to weigh the benefits of reform against the hit to their own bottom lines.
Much will hinge on the final shape of the rules, and lenders are likely to keep a close watch on any changes before updating their financial outlooks.