Summary of this article
RBI risk-based deposit insurance premium likely from April 2026 for banks
Deposit insurance cover unchanged at Rs 5 lakh despite premium model shift
Strong banks may pay lower deposit insurance premium than weaker peers
Move aligns India banking insurance system with global risk-based practices
India’s banking sector could soon move to a risk-based deposit insurance premium system, with the Reserve Bank of India (RBI) planning to implement the change from April 1, 2026, while the insurance cover available to depositors will remain unchanged. The proposal shifts away from the current flat premium model and links what banks pay more closely to their financial strength.
For customers, the safety net stays exactly where it is. The change is largely about how banks contribute to the insurance pool, not about reducing depositor protection.
From Uniform Premiums To Risk-Linked Contributions
Banks currently pay a standard insurance premium of about 12 paise per Rs 100 of insured deposits. That rate applies across the board, whether a bank is financially strong or dealing with balance sheet pressures.
5 February 2026
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Regulators have long debated whether this approach makes sense. A uniform rate means stronger banks effectively help absorb risks created by weaker ones. The proposed shift tries to address that imbalance by aligning premiums more closely with risk indicators such as capital strength, asset quality, earnings stability, liquidity position, and governance standards.
Banks with healthier balance sheets could see some relief in premium costs over time, while those with higher risk exposure may face steeper contributions. The idea isn’t to penalise banks outright but to encourage tighter risk management and more consistent financial discipline.
The move also brings India closer to international regulatory practices, where risk-based deposit insurance pricing is increasingly common, according to a report by Times of India.
No Change In Depositor Safety
Depositors, however, are unlikely to notice any difference in day-to-day banking. The insurance cover remains capped at Rs 5 lakh per depositor per bank, and payout procedures in the event of bank failure are expected to remain unchanged.
Officials are also wary of how risk information is perceived. Banks are unlikely to publicly disclose their specific premium rates or risk classifications, largely to avoid unnecessary concern among customers.
The risk assessment process is expected to rely on supervisory inputs and financial data already monitored by regulators. Reviews may be conducted periodically to ensure premium levels reflect any changes in a bank’s financial health.
Overall, the shift looks more like a technical adjustment than a dramatic overhaul. Depositors retain the same protection, while banks may face stronger incentives to keep their financial fundamentals in check. If executed smoothly, the transition could strengthen the system without creating visible disruption for customers.
