The intended financial regulation law proposed in India is raising doubts about the safety of deposits. Presently deposits are insured up to one lakh in all banks taken together. It is believed that one lakh guarantee covers 93% of depositors in the country and hence loss may not significantly touch the population of depositors.
Banks in India have been exposed to large amounts of NPA due to careless lending to big borrowers. The government has time and again infused capital in crores to keep afloat such inefficient banks without assigning liability. How long will this experiment continue with subsidies coming from general public taxes? The lending, sanctioning of enormous amounts is done in a cavalier fashion without due diligence, ensuring collateral guarantees because of political chicanery, pressure, influence, greed and avarice for personal gains. Persons involved in criminal acts to defraud public wealth must be sent to prison for a long time along with politicians.
However, while the regulation proposes measures where none exist today and also quickens settlements, there is no provision to increase the safety threshold limit beyond one lakh in deposits. In such a tragic scenario the depositors will be reduced to penury in losing life savings due to no fault of their own. Banks have sufficient reserves to tide such a scenario if NPAs do not exceed 25% of their assets and it's most unlikely that NPAs will breach this limit according to banking experts.
In this scenario, are postal deposits a better alternative? Exposure to property, jewellery, foreign exchange, etc is not the common man's cup of tea. Looks like there is no other alternative.
Nelson Lopes, Chinchinim
