The Insurance Regulatory and Development Authority of India (IRDAI) is considering placing a limit on the share of parent banks in insurers' total bancassurance business, potentially capping it at 50 percent.

This is in response to concerns about the concentration of business among private life insurance companies that heavily rely on bancassurance partnerships.

Analysts suggest that if this cap is implemented, it could negatively impact the stocks of private life insurance companies, particularly affecting their Annual Premium Equivalent (APE) growth.

The regulator is closely monitoring the involvement of parent banks in the bancassurance sector and may allow insurers a gradual transition to reduce their reliance on these banks.

Morgan Stanley has highlighted the potential negative consequences of such a cap, while it remains uncertain whether group credit life business will be included in these restrictions.

More information from IRDAI and the affected companies is expected as the situation develops.