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Check your Bank's financial health

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guest_999
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":https://www.desidime.com/users/...14 "@androgame":https://www.desidime.com/users/...51 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":https://www.desidime.com/users/...51 can you please check why I can't attach original size image.
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Critic Critic
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A good video explaining everything in Hindi about important parameters of a bank’s financial healthh(credit to @bikidas2060 )

Critic Critic
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Good site to check all your bank’s financial parameters as shown in above video.
https://ticker.finolo...n/

Deal Lieutenant Deal Lieutenant
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was thinking too much about withdrawing my deposits from idfc first bank, but stumbled upon videos of their CEO and that guy gave me confidence and today my Rm sent me the quarterly results and so many things has improved as mentioned by their ceo and now their casa is 33% and still going up

Deal Cadet Deal Cadet
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Pls sumone comment about jana small finance bank health!!! I hav around 8 lakh fd till july 2020.. should i kepp or break

Deal Lieutenant Deal Lieutenant
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You can keep bro, promoters cannot runaway because of Lockdown. Feel safe till India is Under Lockdown stuck_out_tongue_winking_eye stuck_out_tongue_winking_eye stuck_out_tongue_winking_eye

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https://timesofindia.indiatimes.com/business/in...

On Saturday, the RBI had announced that it has cancelled the licence of CKP Co-op Bank with effect from April 30 and has asked the registrar of cooperative societies to initiate winding up proceedings and appoint a liquidator for the bank.

This is the first time the central bank is triggering the higher deposit insurance limit, which came into effect after the Union Budget in February 2020.

Community Angel Community Angel
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@guest_999 bhai, please come back.

Critic Critic
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I am back bhai, got some real life issues to sort out so was away. An update for the thread:
https://economictimes.indiatimes.com/industry/b...

Another co-operative bank goes down. Don’t understand why people were even keeping money in such banks after PMC fiasco.

Cool Cool
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How is the condition of idfc bank now as they didn’t decrease interest rates? is my money safe if I keep it below 5 lakh? @guest_999 @rogerthat

Critic Critic
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Till now no new updates but that’s because banks/companies will announce their quarter/annual financial report only in July. At that time we will know how the corona virus situation impacted the banks.

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P.S. for those who may miss, the point of above post is that it is generally not good if a company’s shares are held mostly by promoters & public while fii/dii holding very less shares.

Deal Cadet Deal Cadet
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Yes, but the stats were same for last year also.

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Deal Lieutenant Deal Lieutenant
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Idfc scores are alarming. After seeing Yes bank, risk nai lena.

Critic Critic
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You can take a small risk as all scheduled commercial banks are insured for upto 5 lakhs in a depositor’s/pan name so in worst case scenario your money may get stuck for 3-4 weeks(no comparison with PMC as that was a co-op bank & Yes Bank which was much bigger than IDFC it resulted in ~2-3 weeks of money getting stuck). If you can live with that then you can deposit 1lakh & 1 rupee in IDFC to get 7% interest on entire amount.

Deal Newbie Deal Newbie
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Is IDFC really an unsafe bet? According to the bank’s progress in form of improved CASA ratio and increase in branches all over India, I feel they’re investing on growth and are looking for long term sustainability.

Critic Critic
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I remember Yes Bank also winning some awards in various categories last year(mentioning this as IDFC is advertising its recent FAAA rating by crisil to its fd program which is the highest safety rating in its category). Check share holding pattern of IDFC Bank which currently does not look good.
https://trendlyne.com/equity/share-holding/1786...
For reference FII/DII always know issues in a company much ahead of common people which is what happened in case of Yes Bank where people kept buying share while FII/DII kept reducing their shareholding.

Yes IDFC is an unsafe bet but then so many other banks currently are too. It all depends on how much risk & time you can afford.e.g.if IDFC bank sinks tomorrow you can be almost sure that up to 4-5 lakhs deposit will not be an issue other than waiting for 2-3 weeks to withdraw it all going by Yes Bank experience.

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Deal Subedar Deal Subedar
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I can say one thing confidently.
Modiji won’t let anything wrong happen in markets till diwali.
I’ll clear all my bank accounts in nov first week.
Because after nov, all predictions/assumptions will fail.

।। Auuooom Tat’sat ।।

Critic Critic
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https://timesofindia.indiatimes.com/business/in...

Long time coming, Laxmi Vilas Bank should have been avoided by anyone keeping up with the news after Yes Bank fiasco.

Deal Subedar Deal Subedar
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What about IDFC, should i move the money out ?

Deal Legend Deal Legend
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Dont think so bro. Share price is showing strength. Plus all news are positive as such. Nothing to worry about as of now I think.

Dimers can correct if I am missing something

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Deal Subedar Deal Subedar
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So much love for IDFC, i am slowly moving money out of IDFC to NSC bonds, as interest is almost same but with peace of mind.

Still have substantial amount in IDFC, will monitor and see if change is required

Deal Lieutenant Deal Lieutenant
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NSC bonds? can you explain?

Edit: Oh it is National Saving Certificates right? That is ofcourse a safer investment..But not available online that is the pain..

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Super Stud Super Stud
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Welcome to India 2.0

Few Years Later →
Banks in India

1. Jio Bank of India
2. Adani Finance Bank of India
and few small banks like
SBI and HDFC
rest bank will merge to either Jio or Adani Bank

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