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Informist, Friday, Feb. 6, 2026

 

--RBI:Banks advised to apply risk-based premium deposit insurance framework 

--RBI: Banks to apply risk-based premium deposit insurance framework Apr 1 

 

MUMBAI – The Deposit Insurance and Credit Guarantee Corp., with approval of the Reserve Bank of India, Friday asked insured banks to implement the risk-based premium framework for deposit insurance.

The framework aims to incentivise sound risk management by banks and reduce premium to be paid by better rated banks, the RBI said in a release. It will be effective from Apr. 1 and will be reviewed at least once in three years.

 

The Deposit Insurance and Credit Guarantee Corp. has been operating the deposit insurance scheme since 1962 on a flat rate premium basis. Currently, banks pay a flat rate premium of 12 paise per INR 100 of assessable deposits. While the existing system is simple to understand and administer, it does not differentiate between banks which manage the risks better, the RBI said.

 

Under the risk-based premium framework, there will be two risk assessment models – Tier 1 model and Tier 2 model. The Tier 1 model will be applicable to scheduled commercial banks other than regional rural banks. It will be based on supervisory ratings, quantitative assessment, and potential loss to Deposit Insurance Fund in case of failure of insured banks, the RBI said.

 

The second model will be applicable for regional rural banks and cooperative banks and is based on quantitative assessment and potential loss to Deposit Insurance Fund in case of failure of insured banks. The maximum risk model incentive under both models will be 33.33% over the card rate.

 

The risk-based framework also provides benefits of vintage, signifying longer contribution to the Deposit Insurance Fund without any major distress or claim payouts. A maximum vintage incentive of up to 25% will be provided.

 

"The framework envisages a rating override policy in case of adverse material information/development, subsequent to the initial risk rating," the RBI said. "The banks will be required to maintain confidentiality of ratings and not to disclose ratings or amount of premium paid to DICGC (Deposit Insurance and Credit Guarantee Corp)."

 

Local area banks and payments banks will continue to pay a flat rate premium of 12 paise per INR 100 of assessable deposits as "there are data point limitations" to bring them into the risk based premium deposit model. All urban cooperative banks under the Supervisory Action Framework or Prompt Corrective Action of the RBI will continue to pay the card rate of 12 paise. Such banks will be considered for the new model from the financial year following the year in which the bank exits the Supervisory Action Framework or Prompt Corrective Action.  End

 

Reported by Shubham Rana

Edited by Ashish Shirke

 

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