Risk-Based Deposit Insurance: RBI Board Clears New Premium Model
Why in the news
RBI’s board, meeting in Hyderabad, cleared an insurance model where riskier banks pay more than sound ones.
Key facts
- Insurer: DICGC, active since 1962.
- Current rate: 12 paise per ₹100, same for all banks.
- Timeline: notification soon; effective next financial year.
| Flat model | Risk-based model |
|---|---|
| Same charge for all | Charge varies with risk |
| Does not reward safer banks | Eases burden on strong banks |
| Possible cross-subsidy | Premium matches own risk |
Expected gains
- Better governance incentives.
- Efficiency and fairness.
Exam angle
- Deposit insurer: DICGC.
- Current premium: 12 paise per ₹100.