Reserve Bank of India (RBI) Approves Risk-Based Pricing for Deposit Insurance

Key facts

• The central board of the Reserve Bank of India (RBI) has approved a proposal to transition to a risk-based pricing system for deposit insurance.
• The new model replaces the uniform premium currently charged to banks under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.
• Under the existing flat-rate system, banks pay a premium of 12 paise for every Rs 100 of assessable deposits.
• The proposed framework will charge lower premia to banks with stronger capital adequacy, better asset quality, and sound governance, while weaker banks will pay higher rates.
• The DICGC, established under the DICGC Act, 1961, has operated the deposit insurance framework on a flat-rate basis since 1962.
• RBI Governor Sanjay Malhotra introduced the reform measures alongside the October monetary policy decision to help better-rated banks save significantly on premium costs.