As of March 2026, the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of RBI, provides deposit insurance of up to Rs. Rs.5 lakh per depositor per bank. The bank with which the deposits are amounting to Rs. Pays a fixed premium of Rs. 0.12 per Rs. 100 of assessable deposits. With a uniform premium rate, the existing system treats banks that manage risk better as well as those that are weaker or more risky. However, this is set to change from 1 April 2026. DICGC will implement the Risk Based Premium (RBP) framework, which will encourage sound risk management by banks. In this article, we will understand the Risk Based Premium (RBP) framework and how banks can save on deposit insurance premium under it.
What is risk based premium structure?
Effective from April 1, 2026, DICGC will implement the Risk Based Premium (RBP) framework, which will differentiate banks that manage risks better. The RBP framework provides for different premium rates for different categories of banks paying deposit insurance premium.
The deposit insurance premium rate remains the same on the card Rs. 0.12 per Rs. 100 of Assessable Deposit (AD) per annum. However, the RBP framework encourages sound risk management by banks and allows better managed banks to pay lower premiums than rate cards. Banks can avail rebate on deposit premium in two ways:
- Up to 33% discount depending on the bank’s risk assessment score, and
- Up to 25% off as vintage promotion
Discount based on risk assessment score
DICGC will use an internal rating methodology to allocate risk assessment scores to each bank. Based on the score, each bank will be placed into one of four risk categories: A, B, C, and D. Banks in Category A have the lowest risk and will have to pay a low premium of Rs. 0.08, i.e. 33.33% discount.
Depending on the rating category, the Bank will pay the following concessional premium rates against the basic flat premium rate of Rs. 0.12 per Rs. 100 of Assessable Deposit (AD) per annum.
rating category |
A |
b |
C |
D |
|
Current Premium Card Rate |
0.12 |
0.12 |
0.12 |
0.12 |
|
New Premium Card Rate |
0.08 |
0.10 |
0.11 |
0.12 |
|
card rate discount |
33.33% |
16.67% |
8.33% |
0% |
Comment: Premium rates are in rupee per rupee. every year since 100 BC
The table above shows how an A category bank can enjoy a discount of up to 33.33% on the premium, while a D category bank will not get any discount.
vintage promotion
The RBP framework will also provide a legacy benefit. Vintage signifies the bank’s long premium contribution to the Deposit Insurance Fund (DIF) of DICGC without any major stress event or DICGC claim payment. A bank can earn a vintage incentive of 1% for each completed year. A bank that has been in existence for 25 years or more can avail a maximum legacy discount of 25%, provided it has no record of restructuring or major distress.
Restructuring/major crises include:
- imposition of moratorium
- Board superseded by RBI
- Appointment of Administrator by RBI
- Restrictions on deposit withdrawals by RBI
- Reconstruction plan by RBI
In the event of restructuring or major distress, the old incentive will be calculated from the date of such restructuring or major distress.
The total discount a bank receives on premium will be a function of the rating category discount and vintage incentive. Thus, a bank can get a substantial discount on the annual deposit insurance premium, provided it is rated category A (33.33% discount) and the vintage incentive is 25%.
How will the RBP framework help?
The RBP framework will help banks with strong risk management systems and better track records save significant amount on deposit insurance premiums every year. Premium savings will increase the profitability of the bank. This will encourage weaker banks to strengthen their risk management systems to qualify for rebate on deposit insurance premiums payable. Thus, it will strengthen the entire banking system and improve the resilience of DICGC’s Deposit Insurance Fund.
Will the premium changes due to the RBP framework impact you?
The RBP framework will be effective from April 1, 2026. DICGC will review it at least once in three years. Currently, under the flat rate premium arrangement, the bank pays the premium without any impact on the customers (depositors). After April 1, 2026, even under the RBP framework, banks will continue to pay premiums with no impact on customers (depositors). If the bank gets discounts due to higher class and vintage incentives, the savings will boost the bank’s profits.
Will the RBP framework increase deposit insurance coverage?
At present, DICGC offers deposit insurance of Rs. Rs 5 lakh per customer per bank. The limit was last increased from Rs. 1 lakh to Rs. 5 lakh in 2020. According to the DICGC website, as of March 31, 2025, while 97.6% of bank accounts are fully protected, the deposit insurance ratio is only 41.5%. While the total assessable deposits amount is Rs. 240 lakh crore, insured deposits Rs. Only Rs 100 lakh crore. Therefore, given the low 41.5% deposit insurance ratio, there is scope to increase deposit insurance coverage.
The current flat insurance premium (Rs 0.12/Rs 100 of AD) system treats strong and weak banks equally, irrespective of their financial position. If deposit insurance coverage is increased, it will increase premiums and impact the profitability of banks.
However, under the RBP framework, stronger banks can save a significant amount of premium expense in the form of discounts. In such a scenario, if deposit insurance coverage is increased, the savings on premium under the RBP framework can be redeployed by stronger banks into incremental premiums for higher deposit insurance coverage. Therefore, under the RBP framework, an increase in deposit insurance coverage may not have a significant impact on strong banks. Thus, the RBP framework opens the door to increased deposit insurance coverage, something that depositors with high balances are demanding. It remains to be seen when and what action the Central Government and RBI will take on this.
