India's insurance regulator has proposed setting commission caps and tightening management expense rules, causing insurance companies, distributors, and banking stocks to fall on Thursday, led by PB Fintech.

PB Fintech plunged 30%, marking its largest single-day decline since listing in November 2021.

Max Financial Services fell as much as 13%, L&T Finance dropped 10%, and HDFC Life Insurance declined up to 8.5%.

Analysts said the proposals published Wednesday evening by the Insurance Regulatory and Development Authority of India could reduce banks' and digital brokers' commission income from high-margin insurance products by up to 90%.

The proposals aim to establish long-term industry constraints and streamline distribution costs.