Is My Bank Safe?

By Author: Anderson Wilson
Total Articles: 17
Comment this article

The recent crash of banks across the world has put fear in everyone's minds, including us Indians. A few questions that have been running across people's thoughts include - What will happen to banks in India? Will they crash? Can they crash? How can I sleep peacefully if I doubt my bank's stability?

Though we can still vividly recall our grandparents discussing banks as being the safest place to keep your money in, suddenly the whole idea seems outdated, just as some of their ideologies! So orthodox, so risk averse! Why can't they realize that we are the "X" or the "Y" or "Z" generation that will take India to being a superpower?!

Orthodox, risk averse... do these words mean anything with respect to banking? One need not think long and hard to realize that these are precisely the two words which have ensured that the Indian banking system and Indian banks have survived the global crisis and continue to do so.

What does this mean?

The Indian banking system has mostly evolved from business families or groups of business families coming together to start a bank. Indian businesses have historically been ...
... risk averse and very calculated in their business dealings. The same philosophy thus was passed on to the banks which they founded and in turn it defined the Indian Banking System, a system that did not want to grow by leaps and bounds, but instead in a steady, phased manner. This meant that there was never too much pressure on increasing business at the cost of taking unwarranted risks.

This philosophy is also the reason why it used to take months and sometimes years together to get a loan from an Indian bank. A common phenomenon was the bank employee delaying loans so that they were not burdened with collecting/following up on defaulting! Risk Averse? Definitely!

An orthodox management style meant that the banks were not very keen on innovating. Thus, we rarely got to see any innovative product or exotic financial tool in the banking sector. This in turn meant that what was available for dealing was simple. Run of the mill, proven products which almost everyone understood. At least in that context we could call ourselves financially literate in comparison to our counterparts from other parts of the world who could not comprehend complex financial products like balloon loans, exotic "F&Os" etc. and made a mess of their finances due to their lack of awareness.

The central bank, the Reserve Bank of India too has also evolved in the same manner. It has been more cautious and conservative in its approach towards banking. This approach has meant that the Rules and Regulations framed by the "RBI" have been very stringent and have not had many loopholes. The Central bank has also consistently tackled pressure from private businesses and the political system.

The observations above indicate that although our orthodox, risk averse system may be tough on the "Twitter age" generation in its slow pace, it is robust and strong and looks to overcome and survive any crisis. We can indeed sleep safe with the satisfaction that our banks are safe. Yes, your Indian bank (not The Indian Bank) is safe!!

Get more information on Loan Rates