Major banks earn over ₹20,000 crore from insurance sales in FY26
Insurance News India: Banks are increasingly leaning on insurance distribution to power their fee income
Banks earned record insurance commission income in FY26 as the bancassurance channel continued to gain momentum across India.
Insurance: India’s banking sector’s quiet second business — selling insurance alongside loans and deposits — has grown into a serious revenue stream. An analysis by Financial Express of annual report for FY26 show most public sector banks posting healthy growth in commission income from insurance distribution, and industry estimates suggest the combined bancassurance commission pool across banks has, for the first time, moved past the ₹20,000 crore mark.
Sales Insurance: SBI Extends Its Lead
State Bank of India, the country’s largest lender, earned ₹2,795.01 crore in insurance commission during FY26, up 19.26% from ₹2,345.36 crore a year earlier, according to an analysis of bank annual reports. Of this, ₹2,384.63 crore — about 85% — came from distributing policies of its own life insurance arm, SBI Life, underlining how tightly SBI’s bancassurance business is woven into its broader financial ecosystem. The bank’s mutual fund distribution commission also grew 7.05% to ₹1,617.52 crore, with SBI Mutual Fund contributing nearly three-fourths of that figure.
Sales Insurance: A Mixed Bag Among Public Sector Peers
The picture across other public sector banks was one of broad-based, if uneven, growth:
Canara Bank posted one of the strongest performances among PSU lenders, with insurance commission rising 15.67% to ₹566.36 crore, while its mutual fund commission grew 8.41% to ₹72.84 crore. Bank of Baroda’s insurance commission rose a more modest 3.76% to ₹368.93 crore, even as mutual fund distribution income slipped marginally.
Indian Bank’s insurance commission climbed 8.21% to ₹190.65 crore, and UCO Bank posted a 6.53% rise to ₹66.08 crore, with its mutual fund commission jumping a sharp 42.04% (albeit off a small base of ₹2.23 crore). Central Bank of India’s insurance commission grew 13.57% to ₹160.90 crore, and Punjab & Sind Bank, one of the smaller public sector lenders, saw a strong 17.92% rise to ₹31.98 crore.
Not every bank shared in the upswing. Punjab National Bank’s insurance commission fell 8.61% to ₹438.67 crore, while its mutual fund commission dropped 13.14% to ₹163.41 crore. Union Bank of India also reported a 10.77% decline in insurance commission to ₹475.45 crore, even as its mutual fund commission rose 7.93%.
Sales Insurance: Why Banks Are Betting Bigger on Insurance
Bancassurance — the practice of banks selling insurance products through their branch networks — has become an attractive, low-capital way for lenders to diversify fee income beyond traditional net interest income. Selling policies for both PSU-backed insurers (like SBI Life) and private insurers has let large banks convert their branch footprint and customer relationships into a steady annuity-like commission stream, without deploying fresh capital the way lending does.
An earlier analysis by IIFL Securities had pegged the banking sector’s overall bancassurance income pool at roughly $1.7 billion (around ₹14,500 crore) in FY24, growing at a compounded annual rate of about 25% over the preceding three years, with private banks capturing a disproportionately higher share of that revenue relative to their balance sheet size. Extrapolated at a similar pace, industry estimates for FY26 put the combined bancassurance commission pool across public and private banks at over ₹20,000 crore — though this figure includes both PSU and private lenders and hasn’t yet been confirmed through a consolidated FY26 industry-wide disclosure.
Sales Insurance: Regulatory Scrutiny Looms
The growth hasn’t gone unnoticed by regulators. The finance ministry has repeatedly urged banks to avoid mis-selling insurance and to stay focused on their core business of deposits and credit. Separately, the Insurance Regulatory and Development Authority of India (IRDAI) has been examining whether to cap how much of an insurer’s total business can come through a single bancassurance partner, amid concerns that some insurers — particularly bank-promoted ones — have grown overly dependent on their parent or partner bank for distribution.
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The same IIFL analysis had noted that if such bancassurance caps were introduced, banks’ fee income from the channel could decline by 15–30%, with a modest 1–2% hit to profit after tax — an impact that could be softened with a phased rollout rather than an abrupt cap.
Sales Insurance: The Insurer Side of the Ledger
The rise in bank commissions mirrors a broader trend across the life insurance industry. Insurers collectively paid out close to ₹66,100 crore in commissions in FY26 against premium collections of nearly ₹9.97 lakh crore — a payout ratio of about 6.6%. HDFC Life was the largest private-sector commission payer at ₹9,127 crore against premium collections of ₹79,387 crore (an 11.5% commission ratio), while LIC, the country’s largest insurer, paid out ₹24,447 crore against its much larger ₹5.37 lakh crore premium base, translating to a comparatively lean 4.6% ratio.
What This Means Going Forward
For banks, insurance distribution is likely to remain a growing, high-margin fee business — but one operating under closer regulatory watch. With finance ministry officials continuing to flag mis-selling risks and IRDAI weighing structural caps on bancassurance concentration, the sector’s next leg of growth may hinge less on volume and more on how banks balance distribution incentives with customer protection.
