MUMBAI: The central board of Reserve Bank of India has approved a proposal to move to a risk-based pricing system for deposit insurance, marking a shift from the uniform premium currently charged to banks under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme.Announcing the banking reform measures alongside the monetary policy decision in Oct, RBI governor Sanjay Malhotra said that while the existing system was simple to administer, it did not differentiate between banks based on financial strength. “It is, therefore, proposed to introduce a risk-based premium model which will help better-rated banks to save significantly on the premium paid,” he said.DICGC, set up under the DICGC Act, 1961, has operated the deposit insurance framework since 1962 on a flat-rate basis. At present, banks pay a premium of 12 paise for every Rs 100 of assessable deposits.Under the proposed framework, the current flat premium of 12 paise per Rs 100 of assessable deposits will be replaced with a risk-based structure in which banks with stronger capital adequacy, better asset quality and sound governance will pay lower premia, while weaker banks will pay higher ones.
