The Reserve Bank of India's (RBI) Central Board has endorsed a transition to a risk-based deposit insurance system, where banks' contributions to the insurance pool will fluctuate according to their risk profiles, according to media reports.
Currently, all banks contribute the same insurance premium to the Deposit Insurance and Credit Guarantee Corporation, irrespective of their financial status. However, under the new system, insurance premiums will be tied to each bank's risk profile. Banks deemed financially weaker will incur higher premiums, while stronger banks will benefit from lower premiums.
This change does not directly impact depositors. The insurance protection available to bank depositors continues to be capped at INR500,000 ($6000) per person per bank, which covers funds held in savings, current, fixed and recurring deposit accounts with insured banks.