Several times there are rumours of huge loans granted by a bank becoming bad. While it is difficult to ascertain the truth behind such rumours, a depositor gets disturbed. It is difficult for the government and even the Reserve Bank of India to allay the depositor's fears. What should the depositor do in such a situation?
First, if there is any bad news about a public sector bank there is nothing to fear. As long as long as sovereign guarantee of the government is available, depositors' money is safe. Many private sector banks are too big to fail. In case of small private sector and cooperative banks, it is not prudent to withdraw deposits entirely. Instead, the depositor should reduce her share gradually. This is also necessary from the asset allocation strategy angle.
Dr Kiran P Ranade, Pune
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