Mumbai, Oct 1 (KNN) RBI has called for suggestions from the stakeholders on the report of the DICGC Committee that recommends Differential Premium System for Banks in India.

The Reserve Bank of India (RBI), on Wednesday placed on its website the Report of the Committee on Differential Premium System for Banks in India. The Committee is being chaired by DICGC executive director Jasbir Singh.

The report suggested introduction of differential premium system for banks under which lenders with higher risk have to pay bigger premium to insure deposit of customers. 

Deposit Insurance and Credit Guarantee Corporation (DICGC) provides deposit insurance cover at a flat rate of Rs 1,00,000. 

Under DICGC insurance norms, a maximum of Rs 1 lakh is paid to a depositor in case of failure of banks to repay the deposit. 

The Committee recommended that the differential premium based on risk assessment should be introduced to avoid cross-subsidisation. 

It further said that the number of categories for assigning premium rates should be limited to four or five. 

In India, specified deposits of commercial banks, Regional Rural Banks (RRBS), Local Area Banks (LABs) and co-operative banks are covered under deposit insurance by the Deposit Insurance and Credit Guarantee Corporation (DICGC). The premium is being charged at a flat rate of 10 paisa per Rs 100 per annum.
 
The primary objective of most Differential Premium Systems (DPS) has been to provide incentives to banks to avoid excessive risk taking, minimise moral hazard and introduce more fairness into the premium assessment process.
 
Introducing fairness into the system bolsters industry support for deposit insurance. Keeping this perspective in mind, there has been an increasing recognition among the deposit insurance agencies around the world about the need for introduction of a DPS based on the risk profile of banks.
 
Accordingly, the Committee on Differential Premium System for Banks in India was constituted in March 2015 to make recommendations for the introduction of risk based premium in India. The Committee submitted the Report to the Chairman of the Corporation on September 7, 2015.

The report is also available on DICGC website.
 
Comments and suggestions on the Report may please be forwarded by October 31, 2015 to the Adviser, Deposit Insurance and Credit Guarantee Corporation, Reserve Bank of India or emailed, said RBI. (KNN Bureau)