RBI’s central board approves the risk-based deposit insurance framework for banks

This comes in the wake of RBI Governor Sanjay Malhotra’s observations in his October 2025 ‘Statement on Developmental and Regulatory Policies’ that while the existing system is easy to understand and administer, it does not differentiate between banks based on their soundness. | Photo credit: iStockphoto

This comes in the wake of RBI Governor Sanjay Malhotra’s observations in his October 2025 ‘Statement on Developmental and Regulatory Policies’ that while the existing system is easy to understand and administer, it does not differentiate between banks based on their soundness.

“It is therefore proposed to introduce a risk-based premium model, which will help healthier banks save significantly on the premium paid. A detailed notification will be issued soon, which will be effective from next financial year,” the governor said.

Currently, deposit insurance cover is limited to ₹5 lakh per depositor of each insured bank. The deposit insurance cover has been increased from ₹1 lakh to ₹5 lakh with effect from February 4, 2020. Banks pay a premium of 12 paise per ₹100 of taxable deposits.

Premium difference

As per the amendment to Section 15 (1) of the DICGC (Deposit Insurance and Credit Guarantee Corporation) Act of August 2021, the Corporation may increase the limit of 15 paise per ₹100 of deposits on insurance premiums with prior approval of RBI, taking into account its financial position and the interests of the banking sector in the country as a whole.

According to bankers, healthy banks may be charged a lower deposit insurance premium by DICGC, while the not so healthy banks may still be charged 12 paise/₹100 of deposit.

It is also possible that the not so sound banks may be charged 15 paise/₹100 as deposit.

The DICGC, under the DICGC Act of 1961, has managed the deposit insurance scheme since 1962 on a fixed premium rate basis.

Of the total 293.7 crore insured accounts in the banking system, 97.54 percent were fully protected and the rest partially protected at the end of March 2025.

Further, the share of insured deposits of the total taxable deposits of ₹2,40,95,727 crore stood at 41.52 per cent.

The RBI Central Board, which met in Hyderabad, also discussed the global and domestic economic situation and related challenges.

Further, it reviewed the activities of selected central office departments and the draft report on the trend and progress of banking in India, 2024-2025.

Published on December 19, 2025