Summary of this article
RBI board approves risk based deposit insurance framework
Banks premiums linked to capital asset quality metrics
Depositors cover unchanged while pricing shifts
The Central Board of Directors of Reserve Bank of India (RBI) has approved the risk-based deposit insurance scheme for banks. The move was finalised at the 620th meeting of the Central Board of Directors of RBI, in Hyderabad on December 19, 2025. The meeting was presided over by the RBI Governor, Sanjay Malhotra.
The action comes after the RBI's earlier monetary policy announcement in October, which stated plans to alter the present deposit insurance price structure.
What Is Changing In Deposit Insurance Pricing
The provision of deposit insurance in India is managed by the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the Deposit Insurance and Credit Guarantee Corporation Act, 1961. The DICGC started providing deposit insurance coverage for the first time in 1962.
Currently, the premium that is being paid by the banks is 12 paise per Rs 100 (0.12 per cent) of the assessable deposits per annum. The flat rate has to be paid by all the banks, and regardless of their capital strength, assess quality, or governance standards.
In the new framework, the current flat rate will be replaced with a risk-based pricing structure. The banks will pay varying rates of insurance premiums depending on their risk profile. Banks that maintain higher capital adequacy ratios, asset quality, and effective management will incur lower premiums, while those with greater risks will face higher premiums.
RBI has already clarified that though the flat rate system was easier to handle and manage, this system failed to segregate banks based on their financial positions.
What the Central Board Discussed
According to the press release issued after the meeting, the Central Board has discussed the global and domestic economic situation, and other associated challenges. The board has also reviewed the functioning of certain Central Office Departments, and the draft Report on Trend and Progress of Banking in India, 2024-25.
How This Impacts Consumers
The change in deposit insurance pricing has implications for bank depositors, even though the deposit premium to DICGC is paid by banks and not by consumers.
Deposit insurance is intended to safeguard depositors in case of failure of banks. By linking insurance premiums to the risk profile of banks, the framework introduces a mechanism where financial strength and risk management are formally recognised in the cost structure faced by banks.
The coverage under deposit insurance remains the same. The deposits are insured up to Rs 5 lakh per depositor per bank under the DICGC scheme. There are no measures that need to be taken by the depositors.
Though the framework has been approved by the Central Board, further details regarding timelines for implementation, assessment of risk, and premium rates are yet to be clarified. This information will be notified by RBI and DICGC.
