Come April 1, 2026, financially sound banks will see a sharp 33% decline in their deposit insurance premium, bringing it down to 8 paise per Rs 100 of deposits, compared with the current premium of 12 paise per Rs 100.
Going ahead, banks in India will shift from the existing flat-rate system to a risk-based premium model. The Deposit Insurance and Credit Guarantee Corporation (DICGC) is planning a differentiated premium structure that rewards financially strong banks with lower insurance costs. Banks will be classified into four categories—A, B, C, and D—based on their risk profile and supervisory ratings. Category A banks, which demonstrate strong risk management and robust financial health, will see premiums reduced to 8 paise per Rs 100 of deposits, while weaker Category D banks may continue to pay up to the existing ceiling of 12 paise. Category B and C banks will pay 10 paise and 11 paise, respectively.
DICGC may adopt risk based premiums
DICGC, under the DICGC Act, 1961, has been operating the deposit insurance scheme since 1962 on a flat-rate premium basis. While the current system is simple to understand and administer, it does not differentiate between banks based on their soundness. Therefore, a risk-based premium model has been proposed to help stronger banks save significantly on the premium paid. This approach aligns the cost of insurance with the level of risk a bank poses to the deposit insurance fund.
Under a risk-based model, financially stronger, well-managed banks with sound risk management practices pay a lower insurance premium, while riskier banks with weaker balance sheets or higher non-performing assets pay a higher premium. Banks will be rated annually, while the framework will be reviewed at least once in three years.
The Risk‑Based Premium (RBP) framework introduces a two‑tier rating system to determine deposit insurance premiums. Tier 1 applies to scheduled commercial banks (excluding RRBs) and uses a mix of RBI’s supervisory risk ratings, quantitative indicators, and the potential loss their failure could impose on the Deposit Insurance Fund (DIF). For small foreign banks under the Small Bank Variant Model and Small Finance Banks, greater weight is placed on quantitative assessment.
Tier 2 covers RRBs and all cooperative banks, where ratings are based on quantitative metrics and potential DIF loss. Local Area Banks and Payments Banks will continue paying the standard card rate because available data is insufficient to include them in the risk‑based model.
A senior banker said, “The primary goals of implementing risk-based premium are to incentivise sound risk management and reward prudent behaviour with lower costs, reduce moral hazard by discouraging banks from taking excessive risks because they know their deposits are insured, and promote fairness by ensuring that riskier institutions bear higher costs rather than being subsidised by safer ones.”
Cieling eased burden fears
Initially, banks had resisted the idea of a variable deposit premium but agreed once the rates were lowered and a ceiling was set, easing concerns over the potential burden on their balance sheets.
As of September 30, 2025, the number of banks registered with the DICGC stood at 1,957, comprising 124 commercial banks (including 11 small finance banks, six payments banks, 28 regional rural banks, and two local area banks) and 1,833 co-operative banks.
With the current deposit insurance limit of Rs 5 lakh, 97.3% of the total number of deposit accounts (298.9 crore) were fully insured, while 42.1% of the total value of deposits (Rs 253 lakh crore) was insured as of September 30, 2025. The insured deposits ratio (i.e., the ratio of insured deposits to total deposits) was higher for co-operative banks (60.7%), followed by commercial banks (41.2%). Within commercial banks, state-run banks had a higher insured deposit ratio compared with private sector banks. Deposit insurance premium received by the DICGC grew 9.6% year-on-year to Rs 14,382 crore during the first half of FY26, with commercial banks accounting for 94.8% of the total.