Bank Safety Rules: Do you know that if for some reason the bank goes bankrupt or closes down, then what will happen to your money? How much money will you get? Does the account holder get more money in case of sinking if the money is kept in big banks?
Bank Safety Rules: There are about 97619 banks in the country. Among these, the maximum are 96000 rural cooperative banks and 1485 urban government banks. Apart from this, there are 12 public sector banks, 22 private sector banks, 44 foreign banks and 56 regional rural banks in the country. But most people prefer to keep their deposits in big banks, especially government banks. By the way, if we talk about the largest bank in the country, then it is HDFC Bank, after that comes ICICI Bank, at number three is the country’s largest government bank SBI.
Most people open accounts and make fixed deposits (FD) in big banks only, these figures are well known. If we count the big banks, then there are about 80 banks in the country. While the total number of banks in the country is about 96000, the question arises whether small banks are not safe? Why do investors choose big banks only? Are big banks safer than small banks? Is keeping money in small banks not free from danger?
Reasons for bank bankruptcy
Actually, in today’s time almost everyone has their own bank account. People keep their hard earned money in these bank accounts and the bank gives interest on this deposited money. When money is deposited in the bank, people also remain worry free. But do you know that if the bank ever goes bankrupt or closes due to any reason, then what will happen to your money? How much money will you get? Does the account holder get more money in case of sinking if money is kept in big banks? Is there a separate law on bankruptcy for small banks and investors get less money?
Let us now know, when does a bank go bankrupt? When the liability of a bank exceeds its assets and it is not able to deal with this crisis, it becomes bankrupt (default). In other words, when the bank’s earnings fall far short of its expenses and it continues to suffer losses and fails to recover from this crisis, then such a bank is considered a bankrupt and the regulators decide to close it. The most important situation in which a bank goes bankrupt is the non-recovery of loans.
In simple words, when a bank has more liabilities than its assets and investors start withdrawing their money, the financial condition of the bank keeps deteriorating. It is also unable to fulfill its responsibilities towards the customers. In this situation, the bank is declared bankrupt. This is called the bank going bankrupt.
It is worth noting that banks run on the money of the customers. Banks give interest to the customers on their deposits and earn money by investing that money in loans and bonds with high interest rates. But when the customer’s trust in the bank starts to waver, they start withdrawing money from the bank. In this situation, a situation of bank run arises in front of the bank, that is, at this time the bank has to sell its invested securities, bonds to return the money of the customers. Due to this, the financial crisis in the bank starts deepening and it reaches the point of sinking.
How much money will be received if the bank sinks?
If the bank in which you have an account is closed or sinks for some reason, then in this situation you get a maximum of Rs 5 lakh under the rules, even if you have more amount deposited in your bank account. This process is the same in almost all government and private banks.
In India too, in case of bank sinking, the facility of deposit insurance for customers has been going on since the 60s. In the country, the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the Reserve Bank provides insurance cover on the deposits of customers under this rule. In India, before 4 February 2020, the deposit insurance on bank deposits used to be only Rs 1 lakh.
But in the year 2020, this rule was changed and the deposit insurance cover has been increased from one lakh to five lakh rupees. That is, the amount of up to Rs 5 lakh of the customers having an account in a sinking bank remains insured. On the date the license of the bank is canceled or the closure of the bank is announced, the maximum amount that a customer can get from the deposit and interest in his account on that date is Rs 5 lakh.
Insured amount is received in 90 days
The Deposit Insurance system includes all types of deposits including savings account, current account, recurring account, in which insurance cover is given on the amount deposited. The special thing is that under this rule, if a bank sinks, the account holders get the money under insurance within 90 days. Under the rule, the troubled bank is handed over to the Insurance Corporation in the first 45 days. The process is completed within 90 days without waiting for the resolution.
Let us tell you, in the last few years, the financial health of Yes Bank, Laxmi Niwas Bank and PMC Bank had deteriorated. But they were rescued with the efforts of the government. Therefore, customers should not need to worry with the government, because the government saves the sinking banks. Also, RBI keeps a close eye on the banks. Because RBI keeps a close eye on the loans and transactions of every bank.
In such a situation, before any bank sinks, it takes a tough decision to secure the earnings of the common people. Apart from this, if the bank is about to sink, then DICGC takes the responsibility of giving people their money. In return, it takes a premium from the banks.
Now let’s know how will you get the money?
For example, let’s assume that the bank in which your money is deposited sinks, then what will happen to your money? The bank gives Rs 5 lakh on one account, but if you have accounts in different branches of the same bank, then how much money will you get? Under this scheme, all the commercial banks of India (foreign banks, rural banks, cooperative banks) have been included. That is, insurance of Rs 5 lakh is guaranteed in them. But cooperative societies are out of this scope. But the maximum amount of insurance available under DICGC will be Rs 5 lakh.
If you have opened accounts in many branches of the same bank in your name, then all the accounts will be considered as one. All these amounts will be added and if the sum is less than 5 lakhs, then the amount deposited will be given. If the amount deposited is more than 5 lakhs, then only 5 lakhs will be given. No matter how much your deposit amount is.
What are the rules on FD and other schemes?
If you have made an FD in a bank and have invested money in savings account or recurring account or any other, then by adding all the amounts, you will be given a maximum amount of 5 lakh rupees. If after adding all the amounts, the amount is 5 lakh rupees or less, then the amount deposited will be given. But if the amount is more than 5 lakh rupees, then you will have to bear a loss.
What if you have an account in two different banks?
For information, it is also important to know these things. If you have opened an account in two different banks and both the banks collapse, then in this situation, you can get an amount of 5 lakh rupees each from both the banks. Keep in mind that the maximum limit of insurance is Rs 5 lakh. If the deposited amount is less than Rs 5 lakh, then only the amount deposited will be available.
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