RBI’s Board Approved Risk-based Deposit Insurance Framework for Banks

Current Context: On 19 December 2025, the RBI’s Central Board of Directors, chaired by Governor Sanjay Malhotra, approved a risk-based deposit insurance framework during its 620th meeting in Hyderabad.

• This marks a major shift from the flat-rate premium system of 12 paise per ₹100 deposits, in place since 1962 under DICGC.
• Under the new model, premiums will be linked to banks’ risk profiles, rewarding well-managed banks with lower costs and charging higher-risk banks more.
• The flat rate will serve as the ceiling, ensuring weaker institutions are not excessively burdened.
• Deposit insurance coverage remains unchanged at ₹5 lakh per depositor, protecting savings, current, fixed, and recurring deposits.
• The framework aims to reduce moral hazard, eliminate cross-subsidization, and align India’s system with global best practices, with rollout expected from FY 2026-27.

Question:

Q.1 What is the deposit insurance coverage limit retained under the framework approved in the 620th meeting of the Reserve Bank of India Central Board of Directors?

a) ₹2 lakh per depositor
b) ₹3 lakh per depositor
c) ₹5 lakh per depositor
d) ₹10 lakh per depositor

Answer: c) Deposit insurance coverage remains unchanged at ₹5 lakh per depositor, protecting savings, current, fixed, and recurring deposits.