The Plight of Bank Deposits


The Plight of Bank Deposits


Today in India every domestic citizen is worried about the way the Government takes on the common man.  Each and every one of the middle and upper middle class is worried about their hard-earned savings in the banks as Fixed Deposits.  There has quite a number messages coming through that these deposits are going to be paved in for the Bankers to save their souls and we shall be redeemed with Bonds for longer and longer years. This is all due to the implementation of a new bill by the Central Government in the Parliament. We need to know the nuances of this bill and how it is going to affect us in the long run. It is the duty of the Government to take us out off such doubts and get us clarified in every way. If you have memories are perfect in 2008 we all know that the American Bank Layman brothers have one fine morning became bankrupt which was also followed by many banks in various parts of the world. This was the reason for the greatest Economic loss in the world and not one, many banks have got affected throughout the globe, To revive these banks the respective governments took charge for the same and one such effect was using the tax earned income from the public to go in for redeeming the Bank’s interest.


At the same it was also discussed in the G20 summit at USA the countries participating in the summit took exemption for the taxes income to retrieve the Banks. They all raised objections and commended this should not happen as the tax payers money has to be used for other productive purposes of the country. The same summit also opined in the summit in 2011 and passed a resolution that the Bank depositors and some portion (major) to be used for the capital accumulation for the banks which had gone bankrupt. This was further accepted in the G20 summit held in Melbourne Australia in the year 2014. Followed by this our Indian Government has brought in the Financial Decisions on the Deposits and Reconstruction of the Deposits. Also prepared a bill for the same and wanted to bring in before Parliament. This bill 52 ND section has clearly says that if a person who has 10 lacks deposits and eventually if the Bank fails the bank can utilise up to 9 lakhs from the depositors money and balance of one lakh is also doubtful of return. Your 3 year deposit could be extended for another 15 to 20 years too. The same can be redeemed as loan bonds and the investors have to wait till situation normalizes in the respective Bank and the time factor is unknown. This has really created in valuable tremors in the investors, specifically for those who have put in their hard-earned money in deposits with the banks and surviving themselves with the monthly interest portions as income to lead their lives. This has been seriously criticized by the popular Economist as a dictatorial move by the Government. Why should this happen? And what are its ramifications? We have to deeply analyse and reverberate accordingly.


The reality is Banks have lent enough and large and very large components of money to various Aristocrats with a mention like Mr.Mallaya and others in the Corporate world.  Sizable portion of these lending by banks have become difficult of recovery and this has gone raising the NPA (Non-Performing Assets) of the Banks.  The recovery has put in a tight corner all the banks. You know one thing, these NPA in all the banks have crossed over 12 lakh crores of rupees.  This amounts 12% of the total Bank Deposits which is considered very huge and unbounded and very doubtful of return. This may go further in an alarming portion in the future and that is the reason Government has started its advance moves against the common man and his deposits. Because of the various protests from various economical forums Government is reviewing its status and redoing the bill to overcome the objections. What will happen to small savers and how do they propose to save their future income in what mode, can they keep at home, not possible and what is the way out and how digitizing India is going to come forward and help all of us. We have been informed during the last year’s budget by Arun Jaitely that all the Senior Citizens deposits in the Bank will fetch 8% interest on their investments and still it is only a dream and on the contrary all Public Sector Banks have reduced the interest to 7% and lessor. Hence the entire citizens in India are having their mind quite upset and waiting every moment what would be the Governments move on this.

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Let us analyse now the situations in other parts of the world during the world economic recessions happened in various other Countries. What happened in Greece the whole people were not able to take out their money from the banks due to recession and their entire savings have gone a begging and the whole country was in chaos and no proper redresser done. Same thing happened in Italy and there were many who had committed suicide on account of their loss. Added to this in Austria all the senior citizen deposits and about 55% of their investments were confiscated to revive the banks and the country’s economy. It is almost like a Bail in system and all economic professors and scientist such acts and opposed vehemently. Insult to Injury what happened in Cyprus in 2013? All those who have invested in the Banks over 1 lakh Euro currencies have been converted as shares (37.5%) and 22.5% as back-end shares and the remaining 30% have to be forfeited by the investor. Like this there is enough deterioration in Banks in various parts of the world and how many of us know all these things. We do not have any systems to inform us and information about this will also be objected by our Governments.


In today’s plight in India to increase the capital reconstruction of our banks we require around 1.33 lakhs Crores of rupees.  In this the government has committed to stick in with 76000 Crores only and what about the balance to set in. Can we cost the investors on account of this and their hard-earned money from various levels? In fact these common men have deposited their savings and this should be treated as a big help for the banks.  Can they be punished on no account of their faults? There is one aspect in our Indian Banking system governed by Reserve Bank of India.  All Banks to save their depositors there is a system called statutory liquidity ratio that is in this, Banks have to keep in 19.5 % of their depositor’s money.  Likewise another portion called Cash Liquidity ration which is accounting for 22.3 % by all the banks, this is with our Reserve Banks to protect the interest of investors. Hence we need not fear of any loss and that is the statement by the Government. At the same time the rule of Bail in has started working in other countries for their survival. Whereas the countries which have opposed the bail in rule are Australia, China, Indonesia, Russia, South Africa, and Brazil. They are all afraid of using and applying the rule. Why should India alone urge into bring in the system of bail in and what is the necessary? The bail in system has come into being only through G20 summits and we should never recognize. Even though the bill is introduced in Parliament to circumvent our interest, Government has to oppose the same vehemently.


Our country is one of those developing country and economically weaker society.  To safe guard our interest there is umpteen methods to solve this problem and we should lay outlines for those structures and not to dig in the common man’s interest and earning. The Big corporates and they have to lend a hand in converting their debts into banks treasure and help the economy to go further and build in the resources.  On the contrary they have to be more responsible towards our Banking Economic structure and see through the hurdles in order to develop themselves and our Country.  This is very vital and the Government should induce and legislate a proper ruling on them and see that they come in handy at the time of crisis.

We all hope to build a better India, and the above are only for informing you what is happening around us and we need to lay our next step cautiously with our ears and eyes open.


T Mohenchander

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