Most people consider their bank fixed deposits extremely safe but some recent events in Cyprus (an euro zone country) bust this myth of safety of bank deposits. The Cyprus government has decided to use the depositors’ money in bank account to pay off its debts. Deposits greater than €100,000 were frozen by the government but deposits of up to €100,000 remain protected. This is because deposits in banks up to €100,000 is insured while above €100,000 are uninsured. So the deposit that is insured would be untouched.
If such a thing can happen in Cyprus, the question is can it happen in India and how safe is your deposit with banks?
Here are some facts about your bank deposits in India:
- In case of bank closure, license cancellation or liquidation etc, you can lose the entire amount deposited except the amount which has deposit insurance
- Your deposits and interests up to 1 lakh with banks is insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is wholly owned subsidiary of the Reserve Bank of India (RBI)
- All kinds of deposits with banks like fixed deposits, recurring deposits, saving and current account deposits are covered (limited to Rs 1 Lakh per customer per bank)
- The DICGC is liable to pay the depositors the claimed amount within two months of claim receipt
- If you have deposits with more than one bank, the cover will be separate for different accounts
- The cost of deposit insurance premium is borne entirely by the insured bank
- Currently all commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks and cooperative bank are insured
- Deposits of foreign governments, deposits of central and state governments, inter-bank deposits, deposits of the state land development banks with the state co-operative bank is not insured
What should you do?
Given the above situation, you should be careful about choosing your bank.
- The public sector banks are the safest as they are backed by government of India. In case there is some problem with the bank, the government would bail it out in most cases. Remember Government can print currency!
- The bigger private banks are also a safe bet. They are generally too big to fail, as failure of a large bank would lead to domino effect taking a lot of smaller banks with it. Remember the bigger banks like Citibank in US were bailed out while the smaller ones were left to survive.
- Usually smaller co-operative banks have higher risk of license cancellation or closure. So if you must bank with them try to keep your deposit within 1 Lakh limit. If you look in the past, RBI has cancelled licenses of several co-operative banks like Bharuch Nagarik Sahakari Bank Ltd, Chatrapur Co-operative Bank Ltd, Nagari Audyogik Sahakari Bank Niyamit, Ghaziabad Urban Cooperative Bank.
So to be on the safer side, you should diversify your deposits in different banks and bank mainly with bigger well known banks.
IDFC Bank is increasing interest rate frequently. I have high amount invested there. Do you think IDFC has any chance to fail or it is almost safe.
I came to know exim bank of India is wholly owned by government of India and offer fixed deposits with higher interest rates. Is it true? Shall I invest 30 lacs in it. How safe it is to proceed?
I am planning to invest 10 lakhs FD in bandhan bank, is it safe to invest ?
yes go ahead
Must I take out my FDs and savings from PNB due to recent news.
There’s no reason to pull your deposits or money out of Punjab National Bank. The bank may have to take a loss, but the government has a stated policy that no public sector bank will fail, so your deposits remain protected.
waiting for your answer
and I need returns without tax deduction. …please suggest will go ahead and invest
Hi Amit,
I need monthly returns so I am planning to invest 10 lakhs.. could you please suggest me where can I invest.. I need no risk.
You can use Use SWP in Debt Funds to generate Regular Income. If not you can evaluate any of the following investments for regular income.
Which bank is safe and provide high interest for senior citizens? I am looking for upto 5 yrs max in fixed deposits shorter term is preferred. Is there a max limit on the amount. Thanks Amit
All government and private banks are safe for fixed deposit. Just be-aware of co-operative banks. You can choose Best Interest Rate on Senior Citizens Bank Fixed Deposits (updated monthly)
go for lic pension plan it will give you highest return upto 18% p.a. depending upon your age and pension option you choose.. buy on line and get additional returns. do not go through agent.
🙂 Never invest in any Pension Plan. Sanjay could you please point to official page showing 18% returns on LIC pension policy!
You can keep 10 lakhs fd with the Repco bank it is owned by the Government of India and will pay you monthly interest also try once and see
How safe is it to do an FD of 5 lac in IDFC bank for 366 days?
totally safe go ahead and do it!
Is solapur janata multistate bank is safe for high amount FD
This is co-operative bank and riskest of all kind of banks. Amount up to Rs 1 lakh is completely safe.
do not put your single paisa in co-op bank..
for the sake of 0.5% higher interest you will loose 99.5% money , please learn from others experience..
deposit insurance is fraud.. so do not depend on it.. people have lost money in so many co-op bank but not even a single person have got Rs.1lakh from the Deposit Insurance..
Is it safe to invest in fixed deposit of Bandhan Bank
I have around 12Lac Rupees, Out of which 9.5 Lac is already with bandhan bank with FD maturity time of somewhere in mid 2018.
1. Is it safe to keep so much money in one bank considering this bank is new?
2. Can i put the remaining 2.5 Lacs too in bandhan bank as it offers better interest rates right now for 2years period?
Bandhan bank is new but it has been given banking licence with lot of deliberations from RBI. Also its closely regulated. Its safe for deposit!
Hi Amit, I have around 85 lacs in FD with bandhan bank, hope it is safe to keep investing further there?
yes
Is it safe to invest Rs Fifteen lacs in Fixed Deposit offered by RBL? How to be sure that the decision does not go wrong?
Yes you can invest. The only thing you should do is monitor RBL closely through news and blogs.
for 0.5 or 1% higher interest do not risk your 99.5 or 99% money.. do not keep all money in RBL.. keep deposit in several banks.. so the loss is less..
Yes v true.. do not keep all eggs in 1 basket
V correct
I want to deposit that amount Rs.in IDFC Bank for 1 Year. is it secured .
yes
i have about 20 lacs worth of FDs in State Bank of Patiala.Is it a safe bet as they are part of the State bank group or do I need to keep my eyes n ears open.What worse can happen with such a bank
SBI is the biggest Indian bank and government cannot afford it to fail, as it would mean collapse of entire economy. So just relax 🙂