RBI has introduced a new risk-based premium system for deposit insurance. Now banks will have to pay premium based on their risk profile. This will increase the profits of low-risk banks and promote better risk management in the banking sector.
New Delhi: The Reserve Bank of India (RBI) has introduced a new risk-based premium system for deposit insurance. According to a report by rating agency ICRA, this new system is expected to increase the profits of well-performing banks. Also, this step will encourage the entire banking sector to adopt better risk management practices.
This new framework was released on February 6, 2026. This will replace the existing system, in which all banks pay a uniform premium of 12 paise for every Rs 100 deposited. In the new system, the premium will be decided by assessing the risk profile of each bank. This rating will be done by Deposit Insurance and Credit Guarantee Corporation (DICGC). This means that banks which are working better and which have less risk will have to pay less premium. At the same time, weaker banks will have to pay higher premium.
ICRA estimates that the return on assets of banks which have a good track record and have not made any claims before, could improve by about 4 basis points. Banks which hold about 80% of the total deposits of the country will get the benefit of this lower premium. This may lead to an average increase of 3 basis points in the entire banking sector. Apart from this, banks which have been contributing to the Deposit Insurance Fund for a long time without any major problem, will also get a special exemption in the name of ‘ Vintage Incentive’.
ICRA has also said that if the deposit insurance limit is increased in future, the premium expenses of banks may increase and this may impact their profits. However, the relaxation given to good banks under the new system will help in reducing this additional burden to some extent. At present, every depositor in a bank gets an insurance cover of up to Rs 5 lakh. The report also says that this new premium structure could also pave the way for increasing this limit in the future.