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Monday, Aug 16, 2004

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Nagging fears over `safety'

Rukmani Vishwanath

Mumbai , Aug. 15

HOW safe is my bank deposit?

This question is gnawing at the minds of depositors across the country today.

The series of skeletons tumbling out of the closets of banks every other day has shaken depositor confidence to thecore.

Over the past couple of years, scandals, scams and `rumours' of financial mismanagement have plagued the banking system, and have spurred a run on the deposits of various banks, including Global Trust Bank, ICICI Bank and a host of urban co-operative banks. The most recent, the CBI raids on the premises of the Executive Director and top officials of Bank of Maharashtra have once against reinforced the circumspection in the minds of depositors about the safety of their money and integrity of their banks.

Recently, Crisil issued a warning to depositors, asking them to be "more cautious". Crisil's study reveals that all types of banks in the country, public, private, foreign and co-operative banks, have faced financial distress.

The latest spate of bank crisis' comes as a blow to senior citizens and the financial risk-averse segment of the society, both of whom considered bank deposits to be the safest refuge for their funds.

Bad enough that they earned a negative return on their savings, but at least they could rest be assured in the thought their money was secure in a bank. That feeling of assurance is fast being replaced with anxiety.

Mr Mahadevan Iyer is a retired gentleman who withdrew all his life-savings from a leading private sector bank and invested it in real estate last year, following rumours of a financial crisis in the bank, which led to a run on its deposits. He said: "The decision was well thought out and not easy to make. But in retrospect I did the right thing. The kind of revelations on bank crisis we hear about these days makes one feel that our money would be just as safe, buried in our backyards or stashed beneath a sack of grains".

Mr A.K. Purwar, Chairman, SBI, advises that depositors must be more discerning before they decide to park their funds.

Mr Purwar said, "Before depositing their money in any bank, regardless of whether it is public sector or private, or foreign bank, depositors must find out what sort of balance sheet it has, asset quality, the kind of risk management systems in place, and whether the bank follows prudential norms."

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