Mumbai: Banks are assessing the impact of the proposed insurance commission curbs. Central Bank of India is expecting a 33% drop in bancassurance fees while Canara Bank is estimating a ₹145-crore hit to fee income, according to top executives of these lenders.
Axis Bank, meanwhile, is planning to offset the potential loss through higher sales volumes, changes in product mix and alternative fee income, according to its management. HDFC Bank said it is too early to assess the impact.
The changes proposed by the Insurance Regulatory and Development Authority of India (Irdai) to insurance commissions seek to rein in distribution costs and improve transparency in sales. For banks, which earn commissions by selling policies through their branches and other channels, lower payouts could put pressure on a key source of non-interest income.
Central Bank MD and CEO Kalyan Kumar said he expects bancassurance fees to fall to ₹49 crore from ₹76 crore if the proposals take effect in their current form. The business accounts for about 8% of the bank's fee income, according to Kumar.
"Our Banca insurance fees are ₹76 crore or about 8% of fee income. It will come down to ₹49 crore, which means a 33% income impact as things stand," Kumar said.
The bank expects to recover the shortfall once its two new life and general insurance ventures stabilise, and through products such as credit-linked insurance, he said.
Canara Bank's management said during an earnings call that it expects a ₹145-crore impact on fee income. Executives at Axis Bank, which reported a 6% YoY increase in fee income to ₹6,381 crore in the September quarter, said the bank is preparing for the changes but has not quantified its exposure.
"We've done some of the work on our side in terms of what the potential impact could be and how we could mitigate, through a combination of volume, product mix, etc.," Axis Bank's management said during an earnings call.
The lender said it expects six to nine months to prepare for the changes and will seek to generate additional fee income from other businesses to cushion the impact.
Axis Bank is also betting that lower insurance prices could spur demand, which would allow higher volumes to compensate for reduced commissions, as was seen in higher insurance sales following the reduction in GST on premiums.