New Delhi, Oct. 1 -- The central bank on Wednesday proposed a new model of deposit insurance, where safer banks will pay less premiums while weaker ones pay relatively more.

The risk-based model would be a departure from the current practice, where banks pay a uniform 12 paise for every Rs.100 of deposits. The shift from the decades-old flat-rate system is designed to incentivize sound financial management, the Reserve Bank of India (RBI) said.

For the regular customer, the core protection for their savings remains unchanged. The deposit insurance cover of Rs.5 lakh per depositor, per bank, which includes both principal and interest, is not affected by this new premium policy. The insurance is provided by the Deposit Insurance and Credi...