Zerodha founder and CEO Nithin Kamath has highlighted regulatory risk as a major concern for businesses operating in heavily regulated financial sectors, following the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed overhaul of insurance distribution economics. The consultation paper proposes changes to commission structures, Expenses of Management, distribution practices and safeguards against mis-selling, potentially altering the economics of businesses dependent on insurance distribution. Kamath said the IRDAI proposal was a reminder that a regulatory change can materially alter the economics of a regulated business.
Kamath drew a parallel with the broking industry, pointing to regulations governing retail futures and options trading, earnings on client funds and margin trading facility requirements as areas where changes could affect brokerage revenues and profitability. He argued that investors assessing regulated businesses should not simply extrapolate current revenue and profit into the future because regulatory changes can alter underlying business models. His comments come as insurance and distribution-related stocks experienced sharp declines following the IRDAI proposals, with PB Fintech falling as much as 36% during Thursday’s trading session.
The IRDAI proposals remain at the consultation stage, with stakeholders invited to submit comments by October 25, 2026. The episode highlights regulatory risk as an important consideration for financial institutions and fintech companies whose revenues depend on regulated products, distribution arrangements or customer-facing financial services.
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