Bank bounce instead of check bounce is not possible in India
With the cases of bankruptcy and crisis of big banks at the global level, recently there have been statements circulating in the social media that earlier there was a problem of check bounce, now the problem of bank bounce has started. It would not be surprising if a bank filed for bankruptcy or went into crisis due to certain reasons, but this is the queue of banks in crisis. The names of these American and European banks will also be familiar to people. Names that were not heard in life are coming up. Silicon Valley Bank, Signature Bank, Credit Suisse, etc., to name a few, are now victims of the American and global economy, as well as their own mistakes.
From 1929 to 2023
Currently, it is being said that Indian banks will not be affected by these global events, even if they are, it will not be very serious. Well, this belief seems to be true to a certain extent, although it cannot be said with certainty that Indian banks will not be in trouble if the giant American banks are suddenly showing signs of prosperity. Yes, the Reserve Bank of India is very careful, but in many cases even the Reserve Bank cannot do anything. Because the banks have already done the work in such a way that it will not even remain under the control of the Reserve Bank. At present, reports of economic problems prevailing in the leading countries of the world keep coming out. Even if someone covers it, it cannot remain covered for long. From the Great Depression of 1929 to the collapse of Lehman Brothers in 2008, the world has experienced shocks, and now in 2023, the banking crisis has emerged as a major concern. A banking crisis is a failure or failure of the financial system. Crisis of confidence of savers-investors is considered. Seeing and hearing all this, knowing its reasons and knowing where the banks themselves have lost money, we wonder if the money deposited in banks is not safe now? It is still understandable if the banks lend and it sinks, (although that doesn’t work either) but the banks themselves make investments that can be called safe, yet it is natural to feel a shock if their investment sinks.
From the common man to the big businessmen, small and large business enterprises – startups, institutions, etc. – deposits in banks are considered completely safe. Senior citizens spend their retirement years on the basis of bank FDs and their interest. Even so, they have problems with the low returns they get against inflation, and the fear of sinking even the principal makes them shudder. Many such cases have happened in our country. Especially in co-operative banks. Where a small class puts in more money hoping for more returns. After several incidents of failure of co-operative banks, the government has tried to make them safer by making several changes in its policies. The government as well as the Reserve Bank have become more alert and vigilant in this regard. However, a bank is such an institution that if something happens to it, the government has to bail it out, because the people have faith in it. If confidence in banks is lost, the economy will be put at risk. Of course, people are now understanding and maturing about the viability and hollowness of banks, yet the need for banks is inevitable. But now that its alternatives are starting to emerge in this technology-digital age, of course, its widespread acceptance will take time.
Banks of different countries merged
Currently, in view of the global banking crisis, the central banks of various countries are uniting, as it is in the common interest. The US Federal Reserve, the European Central Bank, the central bank of Canada, Japan, England, Switzerland have jointly issued a statement saying that they are ready to take action to maintain market liquidity. A giant bank called UBS is set to acquire Credit Suisse. All these have come forward to preserve mutual interests, but it is difficult to say at this stage how much this will actually mean.
Loss to whom
When banks fail or go bankrupt, not only their savers, FD holders suffer, but their shareholders are also seriously hurt. This is obvious, but the failure of banks causes damage to the country’s taxpayers and the economy as well. In India, the amount of willful defaulters has been reported to have increased in the last one year. A year ago this amount was Rs 75,294 crore, which has now increased to Rs 88,435 crore. These willful defaulters are intentional defaulters, who have the ability to repay the loan money of the banks, but do not intend to repay it. Among the prominent banks that have suffered from this entrapment are HDFC Bank, Bank of Baroda, Punjab National Bank and IDBI.
How much safety and risk?
Financial planners always say that people’s money is not completely risk-free even in banks, meaning that the interest-return on that money is less against inflation. Also the depreciation of the rupee is also applicable to it. This does not mean that money sinks into banks. Its safety is certain, but its returns are not guaranteed, the same applies to shareholders. Thus, banks are always making customers comply with KYC (Know Your Customer), now the time has come that customers also know their bank (Know Your Bank). Understand the working of banks, read their balance sheets, understand how much they have given credit to. Knows even his willful defaulters-understands his bad assets. Of course, not all banks should be viewed with suspicion or distrust, but it is wise to be cautious. Now how much and how the crisis of global banks affects India should be monitored. Indian banks and regulatory bodies should take lessons from this. A