India’s leading private and public sector banks earned more than ₹20,000 crore in brokerage and commission from selling insurance policies in FY26. An analysis by FE of the country’s top 8 banks’ annual reports shows that nearly 80%, or close to ₹16,000 crore, of this income was generated by the four largest private sector lenders.

Insurance distribution has emerged as one of the biggest sources of fee income for large private banks, contributing nearly a fifth of non-interest income for some of them.

The top 10 banks had earned over ₹18,000 crore from insurance distribution in FY25. The steady rise in such earnings highlights the growing importance of fee-based businesses even as the Reserve Bank of India (RBI) and the Finance Ministry have repeatedly urged banks to focus on their core lending and deposit-taking activities instead of aggressively cross-selling third-party financial products.

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HDFC Bank, the country’s largest private lender, earned ₹5,688 crore in commission and fee income from life insurance distribution and another ₹1,239 crore from health and general insurance products during FY26. The bank is the promoter of HDFC Life Insurance and HDFC ERGO General Insurance.

The dependence on bank distribution is equally significant for insurers. HDFC Life sourced 58% of its ₹14,635 crore individual annualised premium equivalent (APE) through the bancassurance channel in FY26.

ICICI Bank, which also owns life and general insurance subsidiaries, earned ₹2,882 crore from life insurance distribution and ₹1,186 crore from health and general insurance distribution. For ICICI Prudential Life Insurance, bancassurance remained the largest distribution channel, accounting for around 30% of new business.

Axis Bank and Kotak Mahindra Bank reported ₹3,700 crore and ₹1,075 crore, respectively, in insurance distribution commission during the year.

Bancassurance continues to dominate the distribution landscape for private life insurers, accounting for around half of new business. Banks provide insurers access to extensive branch networks, deep customer relationships, digital infrastructure and lower acquisition costs than agency and other distribution channels.

However, regulators are seeking to curb mis-selling and reduce the industry’s dependence on bank-led distribution.

In its March 2026 report on the life insurance sector, ICRA said bancassurance remained the dominant distribution channel, with bank-sponsored insurers particularly reliant on it. “High reliance on banca channels creates concentration risk for the sector, necessitating broader partner and channel diversification,” the rating agency said.

The RBI has since tightened the regulatory framework. Under new directions effective January 1, 2027, banks and non-banking financial companies will have to fully compensate customers if they are found to have mis-sold third-party financial products such as insurance policies and mutual funds. ICRA believes the proposed Responsible Business Conduct guidelines could moderate banca-led sales and pose near-term growth challenges for bank-promoted insurers.

Separately, the Insurance Regulatory and Development Authority of India (IRDAI) is expected to overhaul the commission framework for insurance distributors. The proposed changes aim to curb mis-selling by staggering commission payouts over the policy term, reducing policy churn and aligning distributor incentives more closely with long-term customer interests.

Public sector banks remain less dependent on insurance distribution than their private sector peers. State Bank of India, the country’s largest lender, earned ₹2,795 crore in insurance commission during FY26, largely from distributing products of its subsidiaries, SBI Life Insurance and SBI General Insurance.