What to do when your bank is in danger?
In the recent times of financial breakdowns, it is necessary to follow tips and tricks that will help in managing ones finances if your bank shuts down. People assume that depositing their savings in well-established banks will lead to a safe and secure future. However, it is necessary to take it into account that even banks fails. Hence, it is crucial to know certain other options which are equally safe and would allow a depositor the freedom to access their own money in case the financial system breaks down :-
- Different Banks for the Members of a Family
To avoid having a liquidity crunch or loss of savings, it is advisable to have savings accounts in different banks and depositing the savings across these accounts instead of accumulating it in one account would be safer. This would allow to fall back on some savings even if one of the banks in the sector has closed down. The decision of opening up a bank account should not be dictated by the factor if the bank is private or public.
- Spread the ECS
ECS is an electronic clearing system which is a service that your bank provides when one needs to electronically transfer funds from one bank account to another. The ECS procedure can be spread through different accounts by having a primary and secondary bank account. It is suggested by industry experts that the ECS Mandates run from the primary source while the investments are linked to a separate secondary bank account. This would help in dividing the risk when the bank accounts fail.
- Consider Liquid Funds
For short term investments, it is general consensus that liquid funds such as Certificate of deposits, Commercial papers, T-Bills and Term deposits are a viable option as well for the purpose of short term savings. The Maturity period of such liquid funds generally spans from 3 to 6 months. The aim of liquid funds is to provide a high degree of liquidity and safety to its investors. Hence, liquid funds are an excellent option of parking one’s individual money. They are low risk investments and as compared to bank deposits, they offer a still value of return.
- Bank Smartly
Spreading the money in different bank accounts is also advisable for avoiding crisis situation. On doing so, this would maximise the utilisation of the insurance provided by RBI, the cover of which has been increased to Rs. 5 Lakh. Furthermore, claiming this insurance would be more beneficial if the ownership is diversified.
For example, if one has one fixed deposit of Rs. 14 lakh in their own name and another one of Rs. 5 lakh in the same bank jointly with their spouse as the first holder, both will be separately eligible for the cover.
These tips would result in being extremely useful when the financial mechanisms breaks down and thus it is necessary for everyone to follow these precautionary tips in order to do safe banking.