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There is misconception in Twitter that only public and private banks are "Scheduled Commercial Banks" and that only they are covered under the insurance scheme for deposits. People think Small Finance Banks are not safe. Wrong.
Read on to find out if your deposits are safe.
Read on to find out if your deposits are safe.
What is a "Scheduled Commercial Bank (SCB)"?
Banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are called as SCBs.
Banks which are included in the Second Schedule to the Reserve Bank of India Act, 1934 are called as SCBs.
What is special about SCB?
1. They get membership to clearing houses for settlement
2. They can borrow from RBI at bank rates.
Some prudence regulations like:
Cash Reserve Ratio has to be deposited with the RBI
So SCB status has got nothing to do with the Deposit insurance!
1. They get membership to clearing houses for settlement
2. They can borrow from RBI at bank rates.
Some prudence regulations like:
Cash Reserve Ratio has to be deposited with the RBI
So SCB status has got nothing to do with the Deposit insurance!
Which banks in India have the SCB status?
Public Sector Banks
Private Sector Banks
Small Finance Banks
Regional Rural Banks
Foreign Banks in India
Many think SFBs and RRBs are not scheduled banks but they are!
RBI latest list (Oct 2020):
https://m.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3657
Public Sector Banks
Private Sector Banks
Small Finance Banks
Regional Rural Banks
Foreign Banks in India
Many think SFBs and RRBs are not scheduled banks but they are!
RBI latest list (Oct 2020):
https://m.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3657
Some links for the doubtful minds:
AU Small Finance Bank SCB status:
https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11159
Equitas SFB SCB status:
https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10862
So Small Finance Banks are also safe since they have the Scheduled status.
AU Small Finance Bank SCB status:
https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11159
Equitas SFB SCB status:
https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10862
So Small Finance Banks are also safe since they have the Scheduled status.
What is "Deposit Insurance and Credit Guarantee Corporation (DICGC)" scheme for deposits?
The DICGC insures all deposits such as savings, fixed, current, recurring, etc.
The DICGC insures all deposits such as savings, fixed, current, recurring, etc.
How much is the insurance cover?
Each depositor in a bank is insured up to a maximum of 5,00,000 for both principal & interest amount held by him in the same right & same capacity on liquidation / cancellation of bank's licence or on scheme of amalgamation /merger/reconstruction
Each depositor in a bank is insured up to a maximum of 5,00,000 for both principal & interest amount held by him in the same right & same capacity on liquidation / cancellation of bank's licence or on scheme of amalgamation /merger/reconstruction
Which banks are included?
All commercial banks including foreign banks, local area banks & regional rural banks.
All State, Central and Primary cooperative banks (urban cooperative banks) which have amended the local Cooperative Societies Act empowering the RBI
All commercial banks including foreign banks, local area banks & regional rural banks.
All State, Central and Primary cooperative banks (urban cooperative banks) which have amended the local Cooperative Societies Act empowering the RBI
Even customers of PMC Bank will get the deposits subject to the maximum limit of 5 Lakhs and based on the guidelines of the insurance scheme. https://economictimes.indiatimes.com/industry/banking/finance/banking/dicgc-faces-a-claim-of-rs-14000-crore-from-co-operative-banks-including-pmc-rbi/articleshow/72998941.cms?from=mdr
What guidelines?
"The deposits kept in different branches of same bank are aggregated"
"deposits with more than one bank, deposit insurance coverage limit is applied separately for each bank"
Suggest you to go through the FAQ given by RBI:
https://m.rbi.org.in/Scripts/FAQView.aspx?Id=64
"The deposits kept in different branches of same bank are aggregated"
"deposits with more than one bank, deposit insurance coverage limit is applied separately for each bank"
Suggest you to go through the FAQ given by RBI:
https://m.rbi.org.in/Scripts/FAQView.aspx?Id=64
Small Finance Banks are as safe as any other private bank in India
Why?
They have very high Capital Adequacy Ratios. Some have 2x the CAR of public sector banks. Their loan books are very granular in nature unlike PSUs which give bucket loads to corporates.
Why?
They have very high Capital Adequacy Ratios. Some have 2x the CAR of public sector banks. Their loan books are very granular in nature unlike PSUs which give bucket loads to corporates.
Question - SFBs lend to Micro Finance sector & hence, are risky?
Answer - So is Bandhan Bank. Also, not all SFBs. AU has zero exposure. Equitas has only 24% MFI book.
Just because they give out unsecured loans doesn't mean they are risky.
Answer - So is Bandhan Bank. Also, not all SFBs. AU has zero exposure. Equitas has only 24% MFI book.
Just because they give out unsecured loans doesn't mean they are risky.
Small Finance Banks have excellent track record when it comes to asset quality. Go through the historical NPA data. They are much better than Public Sector Banks.
Summary:
1. Small Finance Banks are as safe as any other bank in India if not better
2. Urban Co-op Banks are covered under DICGC but stay away or switch immediately to Scheduled Commercial Banks.
3. Study DICGC guidelines. Open accounts in multiple banks.
1. Small Finance Banks are as safe as any other bank in India if not better
2. Urban Co-op Banks are covered under DICGC but stay away or switch immediately to Scheduled Commercial Banks.
3. Study DICGC guidelines. Open accounts in multiple banks.
4. If you have large sums of money, deposit the excess in these 3 banks which are identified as Domestic Systemically Important Banks (D-SIBs) by RBI.
SBI
HDFC Bank
ICICI Bank
Why? Govt has to bail them out at any cause to keep the economy intact!
https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=50995
SBI
HDFC Bank
ICICI Bank
Why? Govt has to bail them out at any cause to keep the economy intact!
https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=50995
RBI appreciation tweet:
RBI hasn't allowed even a single Scheduled Commercial Bank to go belly up since 1991.
So keep your money with SCBs - particularly - private, public, foreign and small finance banks.
End.
RBI hasn't allowed even a single Scheduled Commercial Bank to go belly up since 1991.
So keep your money with SCBs - particularly - private, public, foreign and small finance banks.
End.
