RBI report reveals higher IDR in co-op sector amid tighter regulations and deposit growth
India’s financial ecosystem is quietly being reshaped, and this time, it’s the cooperative banks that are in the spotlight. A new report from the Reserve Bank of India (RBI) has revealed that as of March 31, 2025, the insured deposit ratio (IDR) for cooperative banks stood at 61.9%, dramatically outpacing the 40.4% IDR seen across commercial banks.
That gap isn’t just a number—it represents a shifting narrative in how deposit security is being perceived, enforced, and responded to across India’s layered banking system. And it comes at a time when the central bank is tightening its supervisory grip on the cooperative sector.
The Numbers Behind the Shift
According to data from the Deposit Insurance and Credit Guarantee Corporation (DICGC), of the 1,982 banks registered under the deposit insurance framework, a whopping 1,843 are cooperative banks. Only 139 fall under the commercial category, which includes public and private sector banks, small finance banks, payment banks, and regional rural banks.
Here’s where it gets more interesting: among the cooperative group, Urban Cooperative Banks (UCBs) posted the highest insured deposit ratio at 65.1%, trailed closely by District Central Cooperative Banks (DCCBs) at 64.3%. However, State Cooperative Banks (StCBs) were notably lower, with a 42.2% ratio.
What does that mean in rupee terms? Cooperative banks had total insured deposits worth ₹7.73 lakh crore out of an assessable deposit base of ₹12.49 lakh crore—contributing to their robust 61.9% IDR.
Why Co-op Banks Are Suddenly Outperforming
For years, cooperative banks carried a stigma—less digitized, locally concentrated, occasionally under scrutiny for governance lapses. But the latest data suggests these institutions are prioritizing depositor confidence like never before.
“Smaller, community-driven banks have become hypersensitive to trust,” says a Mumbai-based former RBI official who oversaw DICGC operations. “Their core depositors—farmers, local traders, self-help groups—are more risk-averse, and this has driven co-op banks to aggressively expand insurance coverage.”
Moreover, with regulatory crackdowns escalating in FY 2024–25, especially in states like Maharashtra, cooperative institutions were pushed to increase their compliance posture, risk audits, and deposit insurance coverage. The timing isn’t coincidental.
Commercial Banks: The Surprising Laggards
The commercial banking sector, paradoxically, continues to trail in IDR. Despite having more sophisticated systems and capital buffers, many large banks have a lower proportion of insured deposits simply because their clients often hold balances exceeding the DICGC-insured ₹5 lakh cap.
That cap hasn’t changed since its 2020 revision, despite inflation and growing household wealth. The result? A widening gap in perceived deposit safety for average consumers.
“Commercial banks cater to a different depositor profile—high net worth individuals, corporate accounts, institutional funds—so naturally, a lower portion of deposits are covered,” says R. Subramanian, a banking analyst at Mumbai-based EquiVerse Research. “But it does raise eyebrows when co-op banks are now leading on this front.”
Table: Deposit Insurance Snapshot (as of March 31, 2025)
| Bank Type | Total Banks | Insured Deposits (₹ Cr) | Assessable Deposits (₹ Cr) | Insured Deposit Ratio |
|---|---|---|---|---|
| Urban Co-op Banks (UCBs) | ~1,200+ | ₹4,55,000+ | ₹7,00,000+ | 65.1% |
| District Central Co-ops | ~300+ | ₹1,75,000+ | ₹2,70,000+ | 64.3% |
| State Co-op Banks (StCBs) | ~30+ | ₹42,000+ | ₹99,000+ | 42.2% |
| All Co-op Banks | 1,843 | ₹7,72,806 | ₹12,48,879 | 61.9% |
| Commercial Banks | 139 | — | — | 40.4% |
The Maharashtra Factor
Maharashtra remains the epicenter of India’s cooperative banking story. Not only does the state house the highest number of cooperative banks, but it also leads in reported cases of regulatory action—prompting stricter oversight and faster IDR improvements.
The RBI’s scrutiny in the region has intensified post the 2022 collapse of a prominent urban co-op bank, triggering cascading fears. In response, many banks in the state moved swiftly to increase DICGC coverage and reassure depositors.
“We’ve seen a near 15–20% spike in new DICGC insurance premiums being paid in just one year,” said an RBI regional officer based in Pune. “This isn’t just a compliance checkbox anymore—it’s a survival strategy.”
One Bullet List: Key Reasons Behind High IDRs in Co-op Banks
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Localized Risk Awareness: Co-op banks operate in tighter geographic clusters, making risk management more personal.
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Customer Profile: Depositors typically keep balances under ₹5 lakh, allowing for 100% coverage.
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Regulatory Nudges: RBI’s increasing oversight, especially in politically sensitive states, has accelerated reforms.
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Competitive Trust Rebuilding: Past scandals have forced co-ops to re-earn depositor loyalty with better insurance ratios.
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Digital Onboarding: Surprisingly, many co-op banks are now pushing mobile banking and micro-insurance bundling with accounts.
Looking Ahead: Reform or Realignment?
The DICGC framework may soon see further tweaks. Industry insiders suggest the government is evaluating a revision of the ₹5 lakh deposit insurance limit, especially as inflation eats into real savings value. If that happens, commercial banks may catch up.
Meanwhile, cooperative banks—long overshadowed by their national counterparts—are enjoying a rare moment of quantitative dominance. Whether that translates into broader financial resilience remains to be seen.
For now, one thing is clear: in the quiet battle over deposit security, the underdogs are punching well above their weight.
