MUMBAI, Oct. 31 -- Banks are preparing for a sharp hit to fee income from proposed caps on insurance distribution commissions, with smaller and mid-sized lenders facing a disproportionately higher impact than their larger peers.

The proposed curbs could erode more than half the bancassurance income at some small and mid-sized lenders, with losses reaching as much as 70% in certain product categories. Several lenders, including small finance banks (SFBs), flagged the potential hit while reporting their second-quarter earnings, as they assessed the impact of the Insurance Regulatory and Development Authority of India's (Irdai) proposals.







Irdai's 23 September consultation paper proposed product-wise limits on commissions paid by insu...