Mumbai, Sept. 24 -- Banks and non-banking financial companies (NBFCs) could see a sharp reduction in insurance distribution income under proposed commission caps by the Insurance Regulatory and Development Authority of India (Irdai), with credit-life products facing particular pressure as the regulator proposes to prohibit compulsory bundling of insurance with loans.

Insurance stocks tumbled on Thursday after the proposals. Turtlemint hit its 20% lower circuit at Rs.109.10, while PB Fintech hit its 10% lower circuit at Rs.1,701. ICICI Prudential Life fell 7.6% to Rs.448, HDFC Life declined 5.6% to Rs.530.15 and LIC was down 2% at Rs.399 during morning trade, according to BSE.

The consultation paper proposes different commission limits b...