Are your Bank Fixed Deposits Safe??

These days, we are receiving lot of queries regarding FRDI (Financial Resolution and Deposit Insurance) Bill 2017.

Everybody is asking "Are my Bank Fixed Deposits safe or not?"

Well the answer is Yes and No both. Why are we saying so?

Are your bank Fixed Deposits safe?

Answer is Yes they are safe, If you know your bank well and how well they are managing your money. 

Answer is No they are not safe, if your bank is not managing your money well.

Now you will say Banks do not manage my money, I just deposit it in FDs and they give me  GUARANTEED interest every month or quarter or year. So, friends there is no such guarantee a bank can give you. Only Rs. 1 Lakh deposit is insured. It is all in your mind that it is guaranteed, the herd mentality has forced you to think like that. I am not at all suggesting your money is not safe in banks but if your bank is not managing your money well then it is not safe. 

Now, how you will come to know that whether your bank is managing it well or not. Just look at their NPAs and you will come to know. Are these numbers rising at quarter on quarter basis? Are they making more and more provisions for fresh NPAs? How is their Capital Adequacy Ratio? Are they well capitalized? 

Now you will say we are not experts to do all these things. There are experts available in society, approach them. It is your hard earned money, you will have to know where it is invested and how well it has been managed.

We should not blame our government for this bill. Actually these PSU Banks have forced our governments to act like this (it does not matter whether it is BJP or Congress). A strong government will always take such tough decisions for long term benefits and protection of money. We just can't live in denial for all the time. 

This particular bill will force us to ask some difficult questions to our banks. If our governments are running in deficits then how will they be able to bail out these banks every time. Somebody will have to fix this problem once and for all. And this is our chance to do that. Government is giving more power to bank through "Bail In" clause. As spider-man's uncle said "With more power comes more responsibility". And if these banks will not behave responsibly they will loose their market share to more powerful but more responsible Bank or any other institutions who will manage your money well.

So, start asking your relationship managers and branch managers some difficult questions. Your money will always be safe in strong banks or strong institutions (with no or at least low NPAs).

We will try and bring more details in coming blogs. Until then Happy Questioning !!!

JAI HIND !!!