India’s Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI), will implement a new risk-based premium framework on April 21. Banks will pay rates tied to their risk profiles, a move designed to encourage better risk management and bolster financial stability.

The flat premium of 12 paise per ₹100 of assessable deposits has remained unchanged since DICGC’s establishment in 1962. RBI’s Central Board approved the overhaul on December 19, 2025, introducing a two-tier model. Tier-I covers scheduled commercial banks excluding regional rural banks. Tier-II applies to regional rural banks and cooperative banks.

Under the new system, no bank will exceed the existing 12 paise rate. Stronger institutions with better risk ratings will qualify for reduced premiums. Officials said the structure aims to penalize risky behavior without imposing outright higher costs across the board.

This reform also paves the way for raising the deposit insurance coverage limit, currently ₹5 lakh per depositor per bank. The RBI has signaled an upward revision, though specifics remain pending.

Bankers anticipate challenges in funding operations as premiums fluctuate with risk assessments. Weaker lenders may struggle to raise capital if markets perceive them as higher-risk due to elevated insurance costs. Sound banks, by contrast, stand to benefit from lower expenses, potentially easing their deposit-gathering efforts.

DICGC assesses risk through financial metrics including capital adequacy, asset quality, earnings, and liquidity. The framework draws from international standards adopted by bodies like the U.S. Federal Deposit Insurance Corporation. Indian regulators expect the shift to sharpen banks’ focus on prudent lending and governance.

The change comes amid efforts to strengthen India’s banking system post the 2018-19 non-performing asset crisis. Public sector banks, which hold the bulk of deposits, will face the closest scrutiny under Tier-I. Regional rural banks and cooperatives, often serving underserved areas, fall into Tier-II with tailored evaluations.

Industry experts predict the premium cap will limit immediate shocks. One analyst noted that even high-risk banks avoid penalties beyond current levels, preserving short-term stability. Over time, though, persistent underperformers could see funding costs rise indirectly through reputational hits.

RBI data shows DICGC insured deposits totaling over ₹100 lakh crore across 1,900-plus banks as of late 2025. The corporation has paid out claims worth ₹1,200 crore in payouts since inception, mostly during the 1960s bank failures.

Stakeholders await detailed guidelines on risk scoring and premium calculations, expected before the April rollout. The RBI emphasized that the system incentivizes transparency and accountability, aligning with broader financial sector reforms.