BANKING & FINANCE
Insurance
DICGC Transitions to Risk-Linked Premium Model for Banks
The Deposit Insurance and Credit Guarantee Corporation (DICGC) has received regulatory nod to shift from a flat premium rate to a Risk-Based Premium (RBP) system starting April 1, 2026.
Under the current regime, all banks pay a standardized premium of 12 paise per 100 rupees of assessable deposits, regardless of their financial health.
The new framework classifies banks into Tier 1 (Scheduled Commercial Banks, excluding RRBs) and Tier 2 (RRBs and Cooperative Banks) using CAMELS parameters and potential loss assessments.
Banks maintaining high stability can earn incentives up to 33.33% over the card rate, plus an additional 25% vintage incentive for consistent, distress-free performance.
Significance: This move discourages moral hazard by penalizing riskier banks with higher premiums and rewarding financially sound institutions, aligning India with global deposit insurance standards.
Under the current regime, all banks pay a standardized premium of 12 paise per 100 rupees of assessable deposits, regardless of their financial health.
The new framework classifies banks into Tier 1 (Scheduled Commercial Banks, excluding RRBs) and Tier 2 (RRBs and Cooperative Banks) using CAMELS parameters and potential loss assessments.
Banks maintaining high stability can earn incentives up to 33.33% over the card rate, plus an additional 25% vintage incentive for consistent, distress-free performance.
Significance: This move discourages moral hazard by penalizing riskier banks with higher premiums and rewarding financially sound institutions, aligning India with global deposit insurance standards.
Key Facts / Static GK
DICGC Establishment: July 15, 1978 (under the DICGC Act, 1961)
Headquarters: Mumbai, Maharashtra
Chairman: Currently a Deputy Governor of the RBI (Michael Debabrata Patra)
Maximum Insurance Limit: Rs 5 lakh per depositor per bank
Headquarters: Mumbai, Maharashtra
Chairman: Currently a Deputy Governor of the RBI (Michael Debabrata Patra)
Maximum Insurance Limit: Rs 5 lakh per depositor per bank
Practice Quiz — 5 March 2026
Q1. Which of the following statements regarding the new Risk-Based Premium (RBP) framework is incorrect?
Answer: (C) The framework introduces a uniform risk-based incentive of 50% for all high-performing banks. — Statement C is incorrect because the maximum risk-based incentive is capped at 33.33%, not 50%. Additionally, a vintage incentive of up to 25% is provided for long-term distress-free contributions.
Q2. Under the new SEBI framework, what is the revised minimum equity allocation required for Dividend Yield and Value funds?
Answer: (D) 80% — SEBI has increased the minimum equity allocation for Dividend Yield Funds, Value Funds, and Contra Funds to 80%, compared to the earlier requirement of 65%.
Q3. What is the primary objective of the Bilateral Swap Arrangement (BSA) between India and Japan?
Answer: (B) To provide a financial safety net and enhance bilateral financial cooperation. — The BSA is a two-way currency swap framework designed to strengthen financial safety nets, promote regional/global stability, and enhance bilateral financial cooperation by allowing local currency exchange for US Dollars during liquidity stress.
Q4. The LKR 3 billion Blue Bond issued by DFCC Bank Plc will primarily fund which of the following activities?
Answer: (B) Sustainable fisheries and marine conservation projects. — Blue Bonds are specialized financial instruments designed to fund marine conservation, sustainable fisheries, ocean-based economic development, and clean water projects.
Q5. Regarding the Delhi Lakhpati Bitiya Yojana, which of the following eligibility criteria is mentioned?
Answer: (D) The benefit is limited to a maximum of two living girl children per family. — According to the scheme details, it is limited to two living girl children per family. Other criteria include an income limit of Rs 1.20 lakh, being born in Delhi, and a minimum of three years of residence in Delhi.
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