How much are your banks dependent on insurance commissions?

Insurance distribution has emerged as a significant source of non-interest income for several banks, with commission earnings accounting for a sizeable share of pre-tax profits at some lenders. Data compiled by CA Kanan Bahl, founder of Fingrowth Media, shows a wide variation in the contribution of insurance commissions to banks’ profit before tax (PBT) in FY26.

IndusInd Bank recorded the highest ratio at 75.6%, followed by Bandhan Bank at 30.8%, DCB Bank at 21%, Yes Bank at 19.3% and Axis Bank at 12.5%. Among other private lenders, City Union Bank stood at 8.3%, HDFC Bank and Federal Bank at 7.3% each, while Kotak Mahindra Bank was at 5.8%. The average for private banks was 6.8%.

Among public sector banks, SBI’s ratio stood at 2.6%, compared with an average of 2.3% for PSUs. Canara Bank, Punjab National Bank and Bank of Baroda reported ratios of 2.2%, 1.6% and 1.4%, respectively. ICICI Bank’s ratio was 0.6%.

The figures, however, need to be viewed in context. Bahl noted that the unusually high ratios for IndusInd Bank and Bandhan Bank were partly because of exceptional losses that affected their FY26 profits. Even in FY25, the ratios were around 35.1% for IndusInd Bank and 10.3% for Bandhan Bank.

Bandhan Bank’s insurance commission

According to data shared by Bahl, Bandhan Bank’s FY26 disclosures provide an illustration of the scale of insurance distribution income. The bank generated ₹987.71 crore from retail life insurance business through its retail network, earning ₹406.12 crore in fee income.

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This translates into an average fee income of approximately 41.12% of the insurance business generated through the network. The bank also generated ₹158.68 crore from general insurance business through its retail network, earning ₹23.50 crore in fee income.

Bahl has highlighted the gap between first-year and renewal commissions in insurance distribution, noting that renewal commissions on traditional products are generally much lower, at around 2%-10% from the second year onwards.

Insurance commission as a percentage of PBT — FY26

IRDAI proposes commission overhaul

The figures come as the Insurance Regulatory and Development Authority of India (IRDAI) proposes a major overhaul of insurance distribution economics.

In its consultation paper, “Recalibrating Economics of Insurance Distribution”, IRDAI proposed product- and channel-specific commission caps based on factors including the type of insurance, distribution channel, product complexity and servicing requirements.

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For life insurance policies with terms of 10 years or more, first-year commissions are proposed to be capped at 25% for agents and 20% for distribution entities, with renewal commissions initially capped at 5%.

IRDAI also flagged wide variations in existing payouts. For individual life insurance, average first-year commissions ranged from 14% to 51%, while maximum commissions ranged from 33% to 81%.

The regulator has proposed tighter Expense of Management limits as well, saying the measures are aimed at reducing insurance costs, widening risk pools and improving policyholder returns. Stakeholders can submit comments on the consultation paper until October 25, 2026.

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