RBI to replace flat-rate deposit insurance premium with a risk-based framework

The Reserve Bank of India (RBI) has said it will replace the flat-rate deposit insurance premium with a risk-based framework from April this year. RBI announced that the framework, which replaces the flat-rate premium system in place since 1962, will be reviewed at least once every three years. Currently, banks pay a uniform premium of 12 paise per Rs 100 of assessable deposits. Under the new framework, banks will be classified into four risk categoriesA, B, C and D with category A representing the lowest risk. Premium rates will range from 8 paise to 12 paise per Rs 100 of assessable deposits, offering a discount of up to 33.3% to the strongest banks. RBI noted that the risk categorisation will be based on the latest available audited financial year-end data and supervisory ratings. Banks will be required to pay the insurance premium in advance for the first half of FY27 by May 31, based on assessable deposits as of March 31.

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