Trouble on banks; will your money keep in the bank safe or sink?

 

Will your money keep in the bank safe or sink?

 

After the collapse of America's Silicon Valley bank and Signature bank and after that Europe's big bank Credit Suisse got caught in the big crisis, there was a stir all over the world. The question is whether the crisis started from Silicon Valley Bank and Signature Bank will reach the banks of other countries of the world through Credit Suisse and whether will banks start sinking one after the other.

 

There is also apprehension around the world that the situation will start to arise like the recession of 2008, even then Lehman Brothers were destroyed and this financial crisis brought a huge recession in the whole world. Lakhs of crores of jobs were lost in the storm of recession. Businesses were devastated and banks faced more defaulters. 

This time also an American bank sank first, and many other banks in America are also in trouble. But what is the biggest concern for the common man in this current situation? It is now coming to the mind of the people how safe is their money deposited in the banks. Banks are considered the safest and if we talk about India, crores of people have accounts in banks. 

People blindly deposit money in banks because they think that their money deposited in banks is safe. Especially women, businessmen, salaried people, and the elderly. They invest their hard-earned money in bank savings accounts, current accounts, and instruments like FD, and RD. In our country, keeping money in the bank is the first choice of the people. 

Compared to stocks, mutual funds, or other investment instruments, people invest more money in banks, and FDs so that even if they get fewer returns, the money remains safe. Now the banking crisis that started in America has forced everyone to think about whether their money is safe. 

Although India's banking sector is very strong and the regulatory framework of the Reserve Bank is very strong in this regard, it is believed that the current banking crisis is not likely to have any effect on the banks of India, but it is not that in India. You may remember the Yes Bank, Lakshmi Vilas Bank, and PMC Bank cases.

 

The Yes Bank crisis arose when the RBI asked banks to clean up their bad loans. Then got to know that there is a huge stress on the balance sheet of Yes Bank. Yes, Bank failed to raise capital for its operations and customers started withdrawing money fearing bank collapse. Then the Reserve Bank had to intervene and the management of the bank was changed.

 

Nine banks led by SBI took a 49% stake in Yes Bank and an attempt was made to put the bank back on its feet. Similarly, big corporate loans disbursed by Lakshmi Vilas Bank were rigged and misuse of people's deposits came to light and the bank went down. The Reserve Bank put the banks in meritorious and banned the withdrawal of deposits.

 

Later this bank was merged with the Indian arm of DBS Singapore. The third case is that of PMC Bank, a cooperative bank of Punjab and Maharashtra. PMC Bank did not disclose its bad loans. Defaults were happening on these loans. Along with this, the corporate governance issue also remained in the bank. Eventually, the Reserve Bank had to intervene and the moratorium rule came into force.

 

Overall the depositors got trapped in this bank. These were the cases of banks sinking in India. Now it comes to the point that what will happen if the bank sinks. See, under the Deposit Insurance and Credit Guarantee Corporation in India, your bank deposits up to ₹ 5 lakhs are completely safe. Earlier this amount was ₹ 1 lakh. 

You can withdraw this money within 90 days of implementing the moratorium rule of the Reserve Bank. But if your deposit is more than ₹ 5 lakh then it will be difficult. There is a risk in this money and it is a sure thing that neither the government nor the Reserve Bank will guarantee this money. 

What will you do now? First of all, while choosing a bank, look at some things. Suppose you are going to do tenure in a bank, then investigate the financial condition of this bank. See whether his bad loan is not too much. See also the Management of the bank. There are no issues of corporate governance. 

Secondly, some banks pay more interest on their FDs than others. Before investing money in such banks, an investigation should be done. Avoid greed and trust a solid bank only. Thirdly, do not invest your entire savings in a single bank account. If you are doing FD then invest it in different bank accounts. This may reduce your risk.

 

The fourth thing is to invest money in a mix of private and government banks, that is, choose one or two private and one or two government banks and invest in them. Fifth and last thing, apart from FD, you can also invest in government bonds. Your money is safe even in government bonds and the interest rate is also available around FD.

 

Overall, the lesson is that even though banks are considered the safest place to invest money, it is not that banks do not sink. However, the current crisis is less likely to affect India and the country's banks are in a strong position. Still, the safety of your money should be given top priority.

We hope you like the information. If you have any questions in your mind, please comment on our site www.tradeipohub.co.in. Thanks for reading.