Letter to BS: Be wary of co-op banks even if they pay better interest rates

This refers to the editorial “How much money will you get if your bank goes bust” (10 February). Tamal Bandyopadhyay gave a good analysis on the insurance cover available to bank deposits vis-s-vis prevailing trends across the globe. With the hike in the insurance cover to Rs 5 lakh, 93 per cent of the depositors are expected to be covered. But, as far as deposits are concerned, only 34 per cent are covered. What measures can the rest 66 per cent deposit holders take to keep their money safe? I can suggest some steps. Keep deposits in the names of family members if you are opting for one bank or open accounts in multiple banks. The chances of multiple banks collapsing at a same time are remote. Next, restrict deposits in individual names to Rs 5 lakh in one bank. As of now the safest banks are the public sector ones. Since majority shareholding is with the government, sovereign guarantee is available. The government will not allow these banks to fail.

Be wary of deposits in co-operative banks even if they pay better interest rates than others. Customers should not be enticed by higher interests and risk their corpus. Even though there is an insurance cover to the extent of Rs 5 lakh, the procedure for getting this amount is a long drawn out and laborious one. It will need ingenuity and knowledge of the rules to ring-fence one’s deposits from erosion if the institution fails.

KV Premraj, Mumbai

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