Budget 2020: Bank's deposit insurance premia to rise by over Rs 28,000 cr

Bankers say move will not dent their balance sheets significantly, but will take up the matter with RBI, which they say can share some of the burden

The hike in insurance cover for deposits to Rs five lakh from Rs one lakh will entail a rise over Rs 28,000 crore in premium to be paid by banks, according to foreign brokerage Credit-Suisse.

Banks paid a combined insurance premium of Rs 12,043 crore in 2018-19 to the Deposit Insurance and Credit Guarantee Corporation, (DICGC), up from Rs 11,128 crore paid in 2017-18. DICGC is a subsidiary of the Reserve Bank of India.

At present, banks pay 10 paise as premia for per deposit of Rs 100. The last revision in premium was done in 2005. Earlier, bank used to pay eight paise for per deposit of Rs 100, DICGC said.

Bankers said while any rise in premium amount would not significantly dent their balance sheets, they would nevertheless discuss matter with RBI. The banking regulator can share the burden of the increase in the premium on deposits, they added.

DICGC collects insurance premia from insured banks for administration of the deposit insurance system. The premium paid by the insured banks to the Corporation is required to be borne by the banks themselves and is not passed on to the depositors.

The premia to be paid is computed on the basis of their assessable deposits. Insured banks pay advance insurance premia to the Corporation semi-annually, within two months from the beginning of each financial half year, based on their deposits as at the end of previous half year.