The Deposit Insurance and Credit Guarantee Corporation (DICGC) has announced the implementation of a Risk-Based Premium (RBP) framework for deposit insurance, which will come into effect from April 1, 2026, with the approval of the Reserve Bank of India (RBI).
At present, all insured banks pay a uniform deposit insurance premium of 12 paise per Rs 100 of assessable deposits, regardless of their financial strength or risk profile. Under the new framework, this flat-rate system will be replaced by a risk-sensitive premium structure, under which premium rates will be linked to the bank’s risk profile and operating track record.
For Regional Rural Banks (RRBs), Rural Cooperative Banks (State Cooperative Banks and District Central Cooperative Banks), and Urban Cooperative Banks (UCBs), DICGC will adopt a Tier-2 risk assessment model.
This model will evaluate banks based on objective quantitative financial indicators, including capital adequacy and quality, asset quality, liquidity, profitability, and the potential loss to the Deposit Insurance Fund (DIF) in the event of bank failure. Corporate governance parameters, such as the presence of mandated key management personnel and professional directors, will also form part of the assessment.
Based on the assessment, banks will be placed in four risk categories, A, B, C, and D, with Category A representing the lowest risk. The applicable premium rates will range from 8 paise to 12 paise per Rs 100 of assessable deposits, with Category A banks paying the lowest premium and Category D banks continuing to pay the existing card rate of 12 paise.
The framework also provides a vintage incentive to reward long-standing and well-managed institutions. For Tier-2 banks, including eligible cooperative banks and RRBs, a 25 percent incentive will be available to banks that have completed 25 years of satisfactory operations without any instance of restructuring or major distress.
However, Urban Cooperative Banks under the Supervisory Action Framework (SAF) or Prompt Corrective Action (PCA) will continue to pay the flat premium of 12 paise. Such banks will be considered for the RBP framework only in the financial year following their exit from SAF or PCA.
DICGC has clarified that risk ratings and premium categories will be communicated confidentially to bank management and must not be disclosed or used for business promotion.
The Risk-Based Premium framework will be reviewed at least once every three years. The move is expected to encourage stronger risk management practices, promote financial discipline, and reward well-governed cooperative banks with lower deposit insurance costs.
