How Safe Is Your Money In Indian Banks?

questions to think of while putting your money in a bank.

The recent crisis in the Punjab and Maharashtra cooperative bank and other frauds in the banking sector is a big bump for the whole economy. Along with the depositors, who lost all of their deposits overnight. It’s not for the first time, that something like this happened in the country. Earlier Laxmi Vilas Bank, PNB scam, Gitanjali Group, and the list go on.

Would you like to keep your money with such protectors? Who misuses it?

Let’s have a look, how the guidelines of RBI work.

The prudential regulatory requirement is the same for all commercial banks in the country. The entire deposit of the bank is divided into the following manner:-
  1. 4% has to be kept aside for Cash Reserve Ratio [CRR].
  2. 19.5% as a statutory liquid Ratio [SLR].
  3. 9% as a Capital Adequacy Ratio [CAR].
All these ratios influence the number of deposits a bank can keep with themselves and the amount they can lend out. Also, there are regular internal and external audits to keep the check on banking activities.

What is the basic difference between a cooperative bank and a commercial bank?

  1. Cooperative banks are governed by the Cooperative Societies Act of 1904, while the Commercial Banks are governed by the Banking Regulation Act, 1949.
  2. Where commercial banks are subject to the control of RBI directly, while cooperative banks are not. Cooperative banks, on the other hand, are a cooperative organization.
  3. Cooperative banks offer a slightly higher rate of interest to their depositors then commercial banks. Which lure most of the people to open their account in cooperative banks.
As you can see cooperative banks have dual regulations besides the RBI, they are majorly regulated by the respective state cooperative societies. This dual control leaves some loopholes in the regulatory framework. The recent crisis of PMC Bank is a wakeup call for the RBI to overcome this existing loophole in the banking sector. 

Although it is advisable not to have a cooperative bank account because the chances of money getting crashed in it are more.

insurance deposit limit in Indian banks.

To protect depositor money in the event of bank failure, they are provided with “deposit insurance” as a final safety mechanism. Under this, all banks have this facility where 1 Lakh of the depositor amount is kept safe including both principal and interest. This amount of deposit insurance is very less if we compare this limit with the other nations, like in European banks this limit is EUR 100,000, Canada $100,000, USA $250,000, China 500,000 Yuan, Australia $250,000. India has the lowest deposit insurance coverage in the world. Until 1993, the deposit insurance limit rose regularly but from the past 26 years, there has been no enhancement in it. There is an urgent need to raise this cover limit.

However, there are ways in which you can have higher security by dividing your deposit into different bank accounts and each that account will come under the security of 100,000. But, there is no sense of having multiple accounts for so huge and for so little amount. Hence, this limit needs to be raised to have a better protection facility.

Also Read:
Is India Ready For A Cashless Economy? Pros And Cons


As we can see there is a significant difference between the banking market of India and other nations, as per the figures from Deposit Insurance and Credit Guarantee Corporation (DICGC), no commercial bank has been allowed to go crashed as the central bank and the govt. always make sure that they get acquired before drowning only cooperative banks have failed here.

So, what do you think merging is the solution to cover the failure of a bank?
Do you think mega bank merger will impact you, if so how?

Must Read:
How The Mega Bank Merger Will Impact Indian Economy?


  1. 1. it will effect like changing of cheque books, debit cards, problem in auto-debts transction for some time until the proper merge not maintained
    2.interest rate may affect to small banks
    3. Shareholders's shares may affect once the swap ratio announced by banks

    1. Thanks for adding more consequences.
      Changes in cheque books, cards etc. Still will not be a much challenge.

      Real challenge will be the difference in interest rate especially on loans provided.