Hot Deal Check your Bank's financial health

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Today’s Times of India carry a very good article regarding financial health parameters of a bank & is a must read for anyone not knowing these things earlier(aka most of us).
@rogerthat @androgame

Is your money safe in the bank?
The collapse of Yes Bank has shattered the myth that banks can’t fail. Find out if your bank is safe and what to do if it fails
SANKET DHANORKAR

The recent troubles at Yes Bank meant hardship for customers. Worryingly, more such episodes cannot be ruled out with many banks facing financial stress. “Yes Bank isn’t a first, it would not be the last,” says a note by ASK Wealth Advisors.

However, whenever a bank fails, the RBI steps in to protect customers. Typically, it arranges for a stronger bank to take over the ailing bank. Depositors get their money back. Still, the whole Yes Bank episode should serve as a wake-up call for bank customers.This week, we will outline a safety blueprint by listing out tell-tale signs of an impending crisis. We will walso tell you the steps to take if your bank account is suddenly frozen.

How to bank safely

Let’s start with some precautionary measures that can help avoid a liquidity crunch or loss of savings if your bank fails. Don’t keep all savings tied up in one bank. Maintain savings accounts in at least 2-3 banks and spread the money across these accounts. This should be regardless of whether the bank is public or private. This way, you have multiple options to fall back on in case one account gets frozen. “Ensure different family members bank with different banks. Even if one member’s savings get stuck, others can chip in ,” says Adhil Shetty, CEO, Bank Bazaar.

Further, spread ECS mandates for loans, SIPs and other bill payments across different accounts. Amol Joshi, Founder, PlanRupee Investment Services, recommends letting ECS mandates run from a primary bank account while linking investments to a separate bank account. He suggests using a liquid fund as an alternative to park surplus savings instead of keeping large amounts lying in the bank.

Customer deposits are insured up to ₹1 lakh per bank. This year’s budget has proposed hiking this to ₹5 lakh. However, how much of an investor’s deposits with the bank are insured depends on the ownership of deposits. Make smart use of the available cover by using different combinations. If you put multiple fixed deposits in joint names with your spouse or children, you can get each covered separately if the first named holder in each is different. Keep in mind that the insurance cover is triggered only when the bank undergoes liquidation. If it is merely put under suspension or moratorium, the deposit insurance will not come into play. Your money will remain locked until the suspension is lifted.

Finally, don’t open a fixed deposit in smaller, unstable banks just to get that extra 1-2% return. Before opting for such fixed deposits, evaluate the risks carefully.

If your account is frozen

A moratorium places a complete freeze on most activities of the bank. Section 45 of the Banking Regulation Act, 1949, empowers the RBI to place such a moratorium for up to six months at a time—and can be extended until a more permanent fix for the problem is found. During this period, the customer will only have limited access to funds lying in his account, with some exemptions permitted in extreme cases.

In such situations, those with ECS mandates from the frozen account will be in a fix. The first priority should be to change the mandates tied to the frozen account. However, changing mandates can take some time. If you are unable to shift the bank mandate to another account, use your contingency funds to pay off upcoming EMI instalments or credit card dues.

You may have debit mandates for SIPs and insurance premium. To ensure these go through without a hitch, change the mandate by linking with some other account. Provide alternate account details to service providers to prevent redemptions or dividends from being locked up.

Spot the warning signs

There is no smoke without fire. Several signs can alert you when a bank is in trouble. If the bank has delayed earnings releases or if the auditor has resigned or made an adverse comment, find out why. Watch out for exit of key managerial personnel as it may be a signal that trouble is brewing within the bank. Also monitor any rating downgrades by credit rating agencies.

Beyond this, monitoring some basic operating metrics of a bank can give you a fair idea of its health. All listed banks provide financial statements on their websites, giving a break up of various performance metrics. Asset quality is a key monitorable. If your bank’s net NPAs exceed 5%, it shows bad lending practices. Ensure your bank provisioning coverage ratio does not dip below 65-70%. The bank will struggle to remain solvent if its bad loans have to be written off. Ascertain if the bank is properly capitalised by checking its capital adequacy ratio. A low CAR suggests the bank’s net worth may be eroding. Keep an eye on the Current Account Savings Account (CASA) ratio. A lower CASA ratio indicates the bank relies on costlier institutional borrowings to fund operations. The credit-deposit ratio of a bank is another indicator you can track. A higher credit-deposit ratio suggests an overstretched balance sheet, and may also hint at capital adequacy issues. These are some parameters you should monitor regularly to avoid a shock later.
https://cdn0.desidime.com/attachments/photos/610307/medium/6582844OI1LQ7k.png?1585549511

Direct image link(original large resolution): https://imgur.com/O...7k
@androgame can you please check why I can’t attach original size image.

134 Comments  |  
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Even i have tried attaching pics with original resolution and size bro but that doesn’t always work. Even the additional html tags don’t work, so only way is to provide image link (like you already did)
Maybe it has been done to reduce load of images

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Seems its time to take out my money from IDFC First bank after seeing these statistics

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ICICI’s rating was downgraded by intl. agency (don’t remember name) last year.

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Entertainer
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I checked my bank balance after reading title. Lagaa ki shaayad YogiJi ne paise bhej diye mujhe bhi MNREGA waale

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Deal Cadet
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SBI mein account hai, agar ye dhuba to desh dhub jayega. 😉

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Timely posted article, With a possibility of deep recession ahead, we need to carefully select our Bank

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no need to worry with large scale Banks only mid and small Private banks or small payment Banks are not safe as per prevalent belief.

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_One_Miller_ wrote:

Now @guest_999 is targeting Analyst Badge for 2020.

Nah! Analyst badge is very far away for someone like me who mostly posts in Dost Dimes section & I am also not very good at maximising deal profits either. Can’t be an entertainer either as not even close to @P_A_N_K_A_J or @BubbleBoyChickenLittle witty posts. Happy with critic smile

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what about small finance banks

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There will always be issues with banks so we should monitor or keep on check our bank regularly.

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how is idfc and rbl bank?

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rocker123 wrote:

Seems its time to take out my money from IDFC First bank after seeing these statistics

same boat !! wc is safest ?

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deadguru wrote:

how is idfc and rbl bank?

Check the imgur pic link in 1st post, IDFC bank figures in 4 out of 8 worst parameters list while RBL bank appears in 2 out of 8 worst parameters list.

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theruler007 wrote:

same boat !! wc is safest ?

Check the pic in first post, all psu banks are backed by govt so no worries there & among pvt banks as expected hfdc,kotak,icici & axis are solid(hdfc & icici are given the same status of too big to fail as sbi so hdfc & icici can also be considered as backed by govt).

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rocker123 wrote:

Seems its time to take out my money from IDFC First bank after seeing these statistics

yeah, scary. that bank is in all the negative lists… my all salary money is going in that account…any immediate danger?
@rogerthat

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karthi4052752 wrote:

yeah, scary. that bank is in all the negative lists… my all salary money is going in that account…any immediate danger?
@rogerthat

Cool, no danger.
BTW how many jobs you are doing ?

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_One_Miller_ wrote:

Cool, no danger.
BTW how many jobs you are doing ?

Even Yes Bank failure only meant people were unable to withdraw more than 50k for ~2-3 weeks & IDFC bank is much smaller in size. Still I personally suggest to keep majority of the money in kotak bank because it is already giving 6% interest on balance amount above 1 lakh(4% on first 1 lakh) while IDFC gives 7% on entire amount if total balance is above 1 lakh so for first 1 lakh difference is 3k while for each next 1 lakh difference is only 1k.

@karthi4052752

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Deal Subedar
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any other bank which give 7% intrest like idfc,how is digibank or fincare bank?

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deadguru wrote:

any other bank which give 7% intrest like idfc,how is digibank or fincare bank?

DBS Digibank gives 4% on first 1 lakh,7% on next 1 lakh & next 3 lakh gets 5% interest so max benefit is for keeping 2 lakhs. No idea about fincare bank & wouldn’t suggest it either as main point in current times is to look for stability of a bank.

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karthi4052752 wrote:

yeah, scary. that bank is in all the negative lists… my all salary money is going in that account…any immediate danger?
@rogerthat

it will be a sudden shock

better leave that ship ASAP

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rogerthat wrote:

no need to worry with large scale Banks only mid and small Private banks or small payment Banks are not safe as per prevalent belief.

Reviews on idfc, since many people had huge amount deposited there dur tp high rate of interest

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abhi.patel0604942 wrote:

Reviews on idfc, since many people had huge amount deposited there dur tp high rate of interest

don’t keep too much, maintain your primary transaction in some big Bank preferably SBI.

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rogerthat wrote:

don’t keep too much, maintain your primary transaction in some big Bank preferably SBI.

+1 but incl sbi,hdfc & icici because all three now officially have “too big to fail” tag from RBI so for all practical purposes these 3 can be considered as govt banks.

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abhi.patel0604942 wrote:

Reviews on idfc, since many people had huge amount deposited there dur tp high rate of interest

Check the imgur pic link in 1st post, IDFC bank figures in 4 out of 8 worst parameters list. May be alright for 1 lakh but not recommended for more than 2 lakh even if up to 5 lakh is now insured in any scheduled commercial bank because insurance kicks in only if bank is officially declared bankrupt by RBI which RBI has never done. RBI instead always merge such banks(like global trust bank in 2002 in OBC) or ask some other bank to buy stake in such bank to keep it afloat(like what sbi did in case of Yes Bank) & in all these cases there will be limits to withdrawal so your money will be safe but it may take from 2-3 weeks to 2-3 months to get all the money out.

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can you please check why I can’t attach original size image.

Edit “medium” in img url to “original”

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