DICGC Introduces Risk-Based Premium for Banks

Press Release: 2025-2026/2067, Dated: 06.02.2026

The Deposit Insurance and Credit Guarantee Corporation (DICGC), with the approval of the Reserve Bank of India (RBI), has introduced a Risk-Based Premium (RBP) framework for deposit insurance.

The new framework is aimed at:

• Incentivising sound risk management by banks
• Reducing the premium burden for better-rated institutions
• Strengthening the long-term sustainability of the Deposit Insurance Fund (DIF)

1. Shift from Flat-Rate to Risk-Based Premium System

Under the revised framework:

• The existing flat-rate premium system has been replaced
• Deposit insurance premiums will now be differential, based on each bank’s risk profile

The assessment is anchored on:

• Quantitative risk assessment models
• Supervisory ratings
• Potential loss to the Deposit Insurance Fund in the event of bank failure

2. Key Features of the Risk-Based Premium Framework

The framework incorporates:

• A risk-based scoring model
• Vintage-based incentives for consistent performance
• Differentiation based on the nature and riskiness of banking institutions

These features are designed to reward sustained prudential behaviour while maintaining systemic stability.

3. Risk Assessment Models Under the Framework

3.1 Tier 1 Model – Scheduled Commercial Banks

The Tier 1 Model applies to:

• Scheduled Commercial Banks, excluding Regional Rural Banks (RRBs)

The assessment considers:

• Supervisory ratings
• Financial indicators under the CAMELS framework
  (Capital adequacy, Asset quality, Management, Earnings, Liquidity, Sensitivity to risk)
• Estimated potential loss to the Deposit Insurance Fund if the bank were to fail

3.2 Tier 2 Model – RRBs and Cooperative Banks

The Tier 2 Model applies to:

• Regional Rural Banks
• Cooperative Banks

The assessment is based on:

• Financial indicators under CAMELS
• Potential loss to the Deposit Insurance Fund

This model reflects the distinct operating and risk characteristics of these institutions.

4. Risk-Based Incentives and Premium Cap

Based on the risk assessment outcome:

• Eligible banks may receive a risk-based incentive in the form of a reduced premium
• The incentive is capped at a maximum of 33.33% of the standard (card) premium rate

This cap ensures that incentives remain meaningful while protecting the financial integrity of the deposit insurance system.

5. Regulatory Objective

The Risk-Based Premium framework seeks to:

• Align deposit insurance pricing with actual risk
• Encourage banks to strengthen governance and risk controls
• Promote financial discipline across the banking sector
• Enhance resilience of the deposit insurance mechanism

6. Key Takeaway

The introduction of the Risk-Based Premium framework marks a significant reform in India’s deposit insurance regime, shifting from a uniform approach to a risk-sensitive, incentive-driven system that rewards prudent banking behaviour while safeguarding depositor interests.

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