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DICGC will shift to risk-based deposit insurance premiums from April 2026, benefiting large banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank with lower operating expenses.
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Large private sector banks have come into focus in February as investors assess the impact of a forthcoming change in deposit insurance premiums that will take effect from April 1, 2026. The shift is expected to lower costs for stronger banks and lift profitability, prompting renewed attention on earnings outlooks.
What is changing?
The Deposit Insurance and Credit Guarantee Corporation (DICGC)
is replacing a decades-old flat premium structure with a risk-based pricing model for deposit insurance.
Since 1962, all banks have paid a uniform premium of 12 paise per ₹100 of assessable deposits, regardless of their financial health. From April 1, premiums will vary based on each bank’s risk profile.
Banks will be placed into four categories — A, B, C, and D — based on supervisory ratings, capital adequacy, asset quality, liquidity, and profitability. Banks with a long track record of stability may also receive additional “vintage” discounts.
Under the new framework:
Category A: 8 paise (33.3% cut)
Category B: 10 paise (16.7% cut)
Category C: 11 paise (8.3% cut)
Category D: 12 paise (no change)
Why does this matter for large private banks?
Most large private banks are widely expected to fall into A or B categories, which means they will pay materially lower premiums than before.
Analysts estimate that this could reduce operating expenses for big banks by 1.5–3% in FY27, with a potential 1–2% boost to earnings, depending on final ratings and deposit base.
Because deposit insurance costs form a meaningful share of expenses, even small reductions can translate into noticeable profit gains.
How significant are these costs today?
In FY25, DICGC premiums accounted for a notable share of banks’ operating expenses:
HDFC Bank – 4.1%
ICICI Bank – 4%
Axis Bank – 3.3%
Kotak Mahindra Bank – 2.9%
SBI – 4.6%
IDFC First Bank – 1.5%
Bank of Baroda – 5.3%
Canara Bank – 6%
This explains why the cut matters more for larger deposit-heavy lenders.
What about PSU banks?
Public sector banks may also benefit if they secure higher ratings, but analysts say the biggest near-term gains are likely to accrue to well-capitalised private banks with cleaner balance sheets and strong liquidity profiles.
What is DICGC protection?
DICGC insures all bank deposits — savings, fixed, current, and recurring — up to ₹5 lakh per depositor per bank. The premium cut does not change this coverage limit.
(Edited by : Anshul)
First Published:
Feb 9, 2026 10:19 AM
IST
