Why is it in News?
→ Debate over flat-rate insurance premiums charged by DICGC to banks.
→ Calls for reform towards a risk-based premium structure.
Important Points
- Banks are charged 12 paise per ₹100 of assessable deposits.
- Existing system applies a flat premium irrespective of bank risk.
- Safer banks subsidise riskier banks under current model.
- Proposal suggests adopting a risk-based premium model.
- Risk-based model aligns insurance cost with bank risk profile.
- Encourages better governance and capital adequacy.
- Discourages excessive risk-taking by banks.
- Aims to strengthen financial stability without reducing depositor protection.