How to manage your bank deposits in these Economic times

passive income

How safe is our Bank Money?

We all must have heard people saying, “Investing is too risky, I do not even have enough expertise, I would rather keep my money safely in the Bank.” With all these banks like the PMC (Punjab and Maharashtra Co-operative Bank Ltd.), YES Bank and the latest CKP Co-operative Bank Ltd. defaulting, do we still find the Banks to be the safest place to keep our money? Amongst these three, YES Bank is rescued by SBI and LIC,  the other two banks are not supposed to operate any further. Now, what is alarming that the RBI has announced that the bank will not able to return more than 5 lakh rupees to any depositor. It’s the depositor’s own money that they will have to let go because of this unstable economic condition and there isn’t enough  backing up from the government’s side. 

With growing NPAs in the Indian Banking Sector and the RBI disclosing that there was a writing off of loans worth 68,607 crore rupees by the top 50 Indian Banks, we know that the whole of the Indian Banking system is going through a bad phase. Recent mergers of the major banks of the country was one of the reforms by the government to make the Banks stronger by pooling their resources and expertise and also reduce the NPAs (Non-performing Assets). 

What to do about it?

It is not a good idea to keep a lot of money idle in your bank as it is not safe anymore. It is definitely not very easy  to explore all the other options which are both profitable and safe but this is high time we pay heed to this as you never know when your bank might collapse and puts you and your hard earned money in jeopardy. The two main reasons for people keeping money in the bank were that it was safe and highly liquid. Now, in the current scenario, neither is the bank money safe nor is liquid because in case of any default the first thing that the RBI does is put a withdrawal cap for the depositors.

The better idea is to work on your finances and properly allocate your wealth in different asset classes some of which can be equally liquid and also create monthly passive income. The intention is to make sure that not a lot of money is left idle in your bank and to be proactive about it because you may have to pay a huge price for not taking action now. No sailor can survive the storm if he does not do what is required as soon as he senses the storm, taking actions in the middle of the storm hardly helps and this is truly a rough financial weather that we are experiencing. We need to be financially prepared to get through.

How much money should you keep in the bank?

Ideally 3-6 months worth of monthly lifestyle expenditure is good enough to keep in your bank. Do ensure one time expenses such as insurance premiums, education fees and other similar expenses are also accounted in the same. Any more money than that kept in the bank will only do more harm than good.