**Executive Summary**
The Deposit Insurance and Credit Guarantee Corporation (DICGC), with approval from the Reserve Bank of India (RBI), has advised insured banks on the implementation of a Risk-Based Premium (RBP) framework, effective April 1, 2026. This framework aims to incentivise sound risk management practices by banks, leading to reduced premium payments for better-rated banks. The framework will be reviewed at least once every three years.
**Key Points / Main Content**
* **Risk Assessment Models:**
* Two risk assessment models will be used: Tier 1 and Tier 2.
* Tier 1 applies to Scheduled Commercial Banks (excluding RRBs), based on supervisory ratings, quantitative assessments (CAMELS parameters), and potential loss to the Deposit Insurance Fund (DIF).
* Tier 2 applies to RRBs and cooperative banks, based on quantitative assessment (CAMELS parameters) and potential loss to the DIF.
* **Financial Implications:**
* The maximum Risk\_model\_incentive will be 33.33% over the card rate.
* A Vintage\_incentive of up to 25% will be provided, based on the bank's contribution to DICGC's Deposit Insurance Fund.
* The effective premium rate is calculated as: Card Rate \* (1 - Risk\_model\_incentive) \* (1 - Vintage\_incentive).
* **Operational Guidelines:**
* The framework includes a rating override policy in case of adverse material information/development after the initial risk rating.
* Banks must maintain confidentiality of their ratings and premium amounts paid to DICGC.
* Local Area Banks (LABs) and Payments Banks (PBs) will continue to pay the premium at the card rate (12 paise per ₹100 of AD per annum).
* All UCBs under RBI's Supervisory Action Framework (SAF)/Prompt Corrective Action (PCA) will continue to pay the card rate of 12 paise and will be considered for RBP from the financial year following the year in which the bank exits SAF/PCA.
**Impact Analysis**
**Banks**
* **Impact:** Banks will have their deposit insurance premiums determined based on their risk profile and vintage. This is designed to incentivize sound risk management.
* **Action Required:** Banks must adhere to the confidentiality requirements regarding their risk ratings and premium amounts.
**DICGC**
* **Impact:** DICGC will be able to differentiate premium rates for different categories of insured banks and manage the Deposit Insurance Fund.
* **Action Required:** DICGC needs to implement and administer the two-tiered risk assessment model for premium determination and monitor the framework's effectiveness.
Key Entities Referenced
Risk Based Premium (RBP) framework: Framework to incentivise sound risk management by banks and reduce premium to be paid by better rated banks.
Deposit Insurance and Credit Guarantee Corporation (DICGC): Entity that has been operating the deposit insurance since 1962, advised insured banks on implementation of RBP.
Reserve Bank of India (RBI): Approved the implementation of RBP. Also regulates DICGC.
DICGC Act, 1961 [Section 15(1)]: Provides for differential premium rates for different categories of insured banks.
Statement on Developmental and Regulatory Policies: Document that announced the implementation of the RBP framework.
प्रेस प्रकाशनी PRESS RELEASE
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
वेबसाइट
:
www.rbi.org.in/hindi
संचार वर्भाग, केंद्रीय कायाालय, शहीद भगत ससिंह मागा, फोटा, म िंबई - 400 001
Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मेल/email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502
February 06, 2026
Risk-based Premium Framework for Deposit Insurance in India
In pursuance of the announcement made in the Statement on Developmental and
Regulatory Policies dated October 01, 2025, Deposit Insurance and Credit
Guarantee Corporation (DICGC), with approval of Reserve Bank of India (RBI), has
today advised the insured banks on implementation of Risk Based Premium (RBP)
framework. The framework aims to incentivise sound risk management by banks and
reduce premium to be paid by better rated banks.
Background: DICGC has been operating the deposit insurance since 1962 on a flat
rate premium system [presently 12 paise per ₹100 of assessable deposits (AD)]. Flat
rate premium system is simple to understand and administer but does not
differentiate banks which manage the risks better. DICGC Act, 1961 [Section 15(1)]
provides for differential premium rates for different categories of insured banks. The
proposal to introduce RBP for deposit insurance has been approved by the Central
Board of RBI on December 19, 2025.
Salient features of the RBP framework are as under:
• There shall be two risk assessment models – Tier 1 Model and Tier 2 Model.
Tier 1 Model is applicable to Scheduled Commercial Banks other than
Regional Rural Banks (RRBs), and based on supervisory ratings, quantitative
assessment (CAMELS parameters) and potential loss to Deposit Insurance
Fund (DIF) in case of failure of insured banks.
• Tier 2 Model, applicable to RRBs and cooperative banks is based on
quantitative assessment (CAMELS parameters) and potential loss to DIF in
case of failure of insured banks.
• The maximum Risk_model_incentive shall be 33.33% over the card rate.
• Additionally, the RBP framework also provides benefits of vintage (signifying
longer contribution to DICGC’s Deposit Insurance Fund without any major
distress or claim payouts from DICGC). Maximum Vintage_incentive of upto
25% shall be provided.
• The effective rate of premium therefore will be calculated, as under:
• The framework envisages a rating override policy in case of adverse material
information/development, subsequent to the initial risk rating.
• The banks will be required to maintain confidentiality of ratings and not to
disclose ratings or amount of premium paid to DICGC.2
• Local Area Bank (LABs) and Payments Banks (PBs) will continue to pay the
premium at card rate (i.e., 12 paise per ₹100 of AD per annum) as there are
data point limitations to bring them into a RBP model (they account for less
than 1% of the premium collected).
• All UCBs under the Supervisory Action Framework (SAF)/Prompt Corrective
Action (PCA) of RBI will continue to pay the card rate of 12 paise and will be
considered for RBP from the financial year following the year in which the
bank exits SAF/PCA.
• The RBP framework shall be effective from April 1, 2026 and will be reviewed
at least once in three years.
(Brij Raj)
Press Release: 2025-2026/2067 Chief General Manager