What Indians can learn from the recent bank closures in America

The recent bank closures in America have left many depositors and investors worried and stranded.

SVB Bank and Signature Bank, two prominent banks in America, closed their doors in just three days, causing a lot of chaos and financial distress.

While such closures are not uncommon, they serve as a reminder to the people to be cautious and learn from the situation.
As an Indian, you might wonder what lessons can be learned from this crisis.

Here are three key takeaways from these bank closures and how you can protect your finances.

Deposit your money in multiple banks:

The first thing to learn from the recent bank closures is to spread your money across multiple banks. The government of India insures bank deposits of up to five lakh rupees, which means that if your bank fails, you will only be able to get back up to that amount.

Therefore, it is a wise idea to deposit your money in different banks so that you can have more protection against such risks. By doing so, you can minimize the potential losses that you may face in case of any bank failure.

Check the asset quality of your bank:

The second thing to learn from the recent bank closures is to keep a close eye on the asset quality of your bank. You should check where your bank is using its deposits, whether it is giving loans or investing in securities.

A healthy bank typically gives loans of 80-90% of its deposits and invests the remaining 10-20% in various instruments. You should also check the non-performing assets (NPAs) of the bank, which are the loans that are not being repaid by borrowers.

By monitoring these factors, you can make informed decisions about which bank to choose for your deposits.

Do Not Panic, the Government will step In:

The third and final thing to learn from the recent bank closures is to avoid panicking even if your bank collapses. The government and the Reserve Bank of India (RBI) have mechanisms in place to ensure the stability of the banking system.

If your bank fails, the government and RBI will step in to save it, and you will be allowed to withdraw your money soon.

Therefore, it is important not to panic and withdraw your money from the bank prematurely, which can cause further financial problems for yourself and the bank.

The recent bank closures in America serve as a reminder that financial risks are always there, and it is essential to take appropriate measures to protect yourself from such risks.