The Deposit Insurance and Credit Guarantee Corporation (DICGC), with approval from the Reserve Bank of India (RBI), on Friday advised insured banks on the implementation of the new Risk-Based Premium (RBP) framework. The move follows an announcement made in the RBI’s Statement on Developmental and Regulatory Policies on October 1, 2025.
Under the current system, banks pay a uniform premium of 12 paise per ₹100 of assessable deposits, regardless of their risk profile. While simple to administer, the flat-rate structure does not distinguish between well-managed banks and weaker ones. The DICGC Act, 1961 allows for differential premium rates, and the RBI’s Central Board approved the shift to a risk-based regime on December 19, 2025.
The new framework is designed to incentivise stronger risk management by banks by lowering insurance costs for better-rated institutions, while imposing higher premiums on those with weaker risk profiles.
The RBP framework will operate through two risk assessment models. The Tier 1 model will apply to scheduled commercial banks other than regional rural banks (RRBs) and will be based on supervisory ratings, quantitative assessment using CAMELS parameters, and the potential loss to the Deposit Insurance Fund (DIF in the event of a bank failure). The Tier 2 model, applicable to RRBs and cooperative banks, will rely on quantitative CAMELS-based assessments and estimated losses to the DIF.
The framework allows for a maximum risk-based incentive or disincentive of 33.33% over the existing card rate. In addition, banks will be eligible for a vintage-based incentive—reflecting long-standing contributions to the DIF without major distress or claims—of up to 25%. The effective premium rate will be derived after factoring in both risk and vintage incentives.
The framework also provides for rating overrides in case of adverse material developments after the initial assessment. Banks will be required to maintain strict confidentiality and are prohibited from disclosing their ratings or the premium paid to DICGC.
Local area banks and payments banks will continue to pay the card rate of 12 paise per ₹100 of assessable deposits due to data limitations, while urban cooperative banks under the RBI’s Supervisory Action Framework or Prompt Corrective Action will also pay the flat rate until they exit these regimes.
The risk-based premium framework will be reviewed at least once every three years.
