Despite assurances, fear is mounting among depositors here of the safety of their deposits in certain private banks. This has led to heavy withdrawals. The pressure was more on the ATMs as the banks had Dasara holidays followed by Sunday.
The scare is more among the small depositors. They were withdrawing their money in a hurry, creating cash shortages at some of the ATMs. However, they need to look for alternative investment sources as they cannot keep the cash in their homes safely for long.
Some depositors who were the early ones to withdraw their money have invested their money elsewhere, like in reputed mutual funds and other investments they consider safe.
The assurance by Finance Minister Chidambaram and Reserve Bank of India Governor D Subbarao that their money was safe in the banks is having some soothing effect and is winning the confidence of depositors in the nationalised banks. Some depositors have moved their funds from the private banks to the PSU banks.
Following the downturn of the economy in the US and the collapse of certain major operators in the US financial market, depositors were scared that this could reflect on the Indian banks as well.
About a week ago rumours spread over the health of the a large private sector bank and some other private banks. E-mails went passing around asking friends and relatives to withdraw their money kept in some of the private banks. The pressure thus began to increase on the local branches of the private banks.
“Should I transfer all my money in my bank acco-unt because of the fear here that all banks are losing hea-vily due to the falling mar-kets,” such e-mails are being sent by worried depositors of a few banks in the private sector.
Messages also went round even among NRI friends and relatives. They were suggested to ensure the safety of their money, if any, in private banks in India.
This added further credence to the rumours that all was not well in some of the private banks, resulting in immediate withdrawals by their relatives in India.
Calls from worried NRIs to their parents or other close relatives to know of the health of the banks where they have kept money is continuing. The NRIs are calling up their relatives to know if they have to withdraw their deposits.
Meanwhile, a private sector bank has initiated damage control by sending letters and SMS messages to its depositors to ignore the rumours as the bank was well capitalised. A somewhat relieved depositor told Business Standard today he had received a letter of assurance from a bank.
According to a depositor who had withdrawn his money from the bank, they are allowed only one withdrawal and they are being charged heavily for the withdrawals.
Whether the efforts of a bank management to soothe the nerves of its depositors over the safety of their money would help retain their confidence is to be seen only on Monday when the banks reopen after the Dasara holidays.
