Bank deposit insurance cover at five-year low 

The insured deposits ratio (IDR) fell to a five-year low of 41.5% in FY25 as assessable deposits continued to grow faster than insured deposits. 

The value of insured deposits stood at Rs 100.05 lakh crore, covering just less than half of assessable deposits, upto Rs 5 lakh for an account, worth Rs 240.96 lakh crore as of March 2025, according to the latest annual report of the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The huge gap in deposit insurance is because most deposits exceed the coverage limit of `5 lakh, particularly corporate deposits or high net worth individuals, said a banker.

DICGC, a wholly owned subsidiary of the Reserve Bank of India, provides deposit insurance of up to Rs 5 lakh per depositor — covering principal and accrued interest across savings, fixed, current and recurring deposits. The coverage limit was raised from Rs 1 lakh to Rs 5 lakh in February 2020.

The IDR, which is the share of assessable deposits covered under deposit insurance,  was 51% as of September 2020 and has been on a steady decline since then. 

“The ratio had declined from about 50.9% in 2020, reflecting that assessable deposits have been growing at a faster pace vis-à-vis insured deposits,” DICGC noted. 

It added that globally, coverage ratios have stabilised at around 48% in 2024 after years of decline, influenced by depositor behaviour, with less than 5% of jurisdictions raising nominal coverage limits during the year.

The assessable deposits grew 10.3% year-on-year to Rs 240.96 lakh crore, while insured deposits rose only 6.3% to Rs 100.05 lakh crore as of March 2025 leading to the decline in coverage ratio. 

Public sector banks had an IDR of 47.2% for their Rs 126-lakh crore assessable deposits while private banks had a lower 31.4% IDR on deposits worth Rs 81.89 lakh crore. Regional rural banks had the highest coverage at 79.4% for Rs 6.56-lakh crore deposits. For co-operative banks, including urban and state co-operatives, the IDR ratio stood at 62% of their Rs 12.48-lakh crore of assessable deposits in FY25.  

The number of banks registered with DICGC for deposit insurance also declined to 1,982 as on March 31, 2025 from 2,067 at the end of March 2020. “There has been a continuous decline in the number of registered banks since 2001 when it was the highest at 2,728,” DICGC said. 

On the basis of accounts, the number of fully protected accounts stood at 2.86 billion as of March 2025, making up 97.6% of total accounts, slightly lower than 97.8% a year earlier. These are accounts with balances below the Rs 5-lakh coverage limit. 

In its latest monetary policy, the RBI has proposed a flat-rate to a Risk-Based Premium (RBP) framework, effective from the next financial year, under the Deposit Insurance scheme. The DICGC has traditionally charged all banks a uniform premium, currently pegged at 12 paise per Rs 100 of assessable deposits. Under the new RBP model, banks demonstrating greater financial stability and robustness will be rewarded with a significantly lower premium payout. 

The corporation’s total premium collections rose 12% year-on-year to Rs 26,764 crore in FY25, with commercial banks contributing 94.72% and co-operative banks accounting for the remaining 5.28%. DICGC’s claims was only Rs 476 crore to insured depositors of liquidated banks, merged entity banks and those placed under All-Inclusive Direction by RBI. Consequently, the Deposit Insurance Fund as of as on March 31, 2025 stood at Rs 2.28 lakh crore.