Shares of PB Fintech Ltd. tumbled as much as 23% on Thursday, recording their steepest single-day drop since their market debut in November 2021, after India's insurance regulator unveiled a proposal to cap commissions and tighten expense management, triggering a broad selloff across the country's insurers, distributors, and lenders.

Max Financial Services Ltd. fell as much as 12%, L&T Finance Ltd. declined 10%, and HDFC Life Insurance dropped up to 8.5% in the session, as the regulatory draft rattled investor sentiment across the sector.

According to analysts, the measures introduced late Wednesday by the Insurance Regulatory and Development Authority of India (IRDAI) could slash commission income for banks and digital brokers in high-margin product categories by as much as 90%. The proposal is designed to instill greater long-term discipline within the industry and rationalize distribution costs.

Avinash Singh, an analyst at Emkay Global Financial Services Ltd., noted in a report that the proposal effectively cuts off the "oxygen" supply of commissions, pushing the sector into uncharted territory. However, he also suggested that final regulations could turn out to be relatively more lenient than the current draft.