IRDAI Commission Proposals Could Dent Bandhan Bank’s Income by Rs 200 Crore

NEW DELHI – IRDAI Commission Proposals: Bandhan Bank says it will broaden its fee income sources to absorb the hit from the insurance regulator’s proposed commission rules. The lender expects the new structure to reduce its third-party product income by about Rs 200 crore a year. It plans to offset that through wholesale banking, mutual fund distribution and a reworked insurance strategy.

Managing Director and CEO Partha Pratim Sengupta outlined the plan on the media call after the September quarter results. He said the bank is changing its product mix and distribution approach to cushion the impact.

IRDAI Commission Proposals: Wholesale banking steps up

A large part of the plan rests on wholesale banking, which Sengupta said has already turned profitable. The bank wants to earn more from trade finance and foreign exchange services, rather than relying mainly on plain interest income from corporate lending. New wholesale products are being introduced, and the CEO expects the segment’s contribution to rise in the coming quarters.

The need for a cushion is clear from the numbers. Bandhan’s third-party product income was about Rs 156 crore in the September quarter, up 26 per cent from a year earlier. A Rs 200 crore annual reduction would therefore take a meaningful share of a growing line.

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The bank’s newer credit card business is also expected to help. It launched earlier this year, and about 34,000 cards have been issued so far. Management expects at least one lakh cards to be in customers’ hands by the end of the fiscal year.

IRDAI Commission Proposals: Why the commission rules matter

The pressure comes from a consultation paper, “Recalibrating Economics of Insurance Distribution”, which the Insurance Regulatory and Development Authority of India (IRDAI) published on September 23, 2026. The draft proposes product- and channel-specific caps on what distributors can earn. The proposed ceiling for credit-life policies sold on a single premium is as low as 2 per cent. The paper also proposes banning volume-linked or reward-linked incentives for employees of banks and NBFCs who sell insurance.

The regulator’s concern is rising distribution costs. In its sample of life insurance sold through corporate agents, including banks, new-business premiums grew 28 per cent, while total payments to sellers grew 125 per cent. Banks and NBFCs that depend on insurance income saw their share prices fall after the draft was released. Comments were invited until October 25, 2026, and the regulator has said the final rules could come into effect as early as January 2027, with April 1 also under consideration.

Bandhan said it has shared its initial observations on the proposed norms directly with IRDAI. Several other banks and insurers have also made representations, according to the lender.

IRDAI Commission Proposals: Tier-3 and tier-4 cities, and mutual funds

On the insurance side, Bandhan plans to push distribution harder in tier-3 and tier-4 towns, where commission rates are higher and the bank has a larger branch presence. It is also talking to insurers about designing products at both group and individual levels, so that its offerings fit the new commission structure.

Mutual fund distribution is the other lever. Sengupta said it would give the bank a steadier stream of fee income than commissions that depend on regulatory settings.

For investors, the plan arrives with the bank on a recovering footing. Bandhan reported a net profit of Rs 502 crore for the June quarter, up 35 per cent from Rs 372 crore a year earlier, helped by lower provisions. Its gross advances grew 16 per cent to Rs 1.56 lakh crore. The September quarter commentary shows management is preparing for a lower-commission environment before the rules are even final.

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